Klöckner & Co - Roadshow Presentation October 2009
1. Roadshow DZBank
October 20, 2009
Klöckner & Co SE
The Leading Independent Multi Metal Distributor
Dr. Thilo Theilen
Head of Investor Relations
2. 2
Disclaimer
This presentation contains forward-looking statements. These statements use words like “believes”, “assumes”,
“expects” or similar formulations. Various known and unknown risks, uncertainties and other factors could lead to
material differences between the actual future results, financial situation, development or performance of our
company and those either expressed or implied by these statements. These factors include, among other things:
Downturns in the business cycle of the industries in which we compete;
Increases in the prices of our raw materials, especially if we are unable to pass these costs along to customers;
Fluctuation in international currency exchange rates as well as changes in the general economic climate
and other factors identified in this presentation.
In view of these uncertainties, we caution you not to place undue reliance on these forward-looking statements. We
assume no liability whatsoever to update these forward-looking statements or to conform them to future events or
developments.
This presentation is not an offer for sale or a solicitation of an offer to purchase any securities of Klöckner & Co SE
or any of its affiliates ("Klöckner & Co").
Securities of Klöckner & Co, including, but not limited to, rights, shares and bonds, may not be offered or sold in the
United States or to or for the account or benefit of U.S. persons (as such term is defined in Regulation S under the
U.S. Securities Act of 1933, as amended (the "Securities Act")) unless registered under the Securities Act or
pursuant to an exemption from such registration.
4. 4
Distributor in the sweet spot
Local customersGlobal suppliers
Suppliers Sourcing
Products
and services
Logistics/
Distribution
Customers
Global Sourcing
in competitive
sizes
Strategic
partnerships
Frame contracts
Leverage one
supplier against
the other
No speculative
trading
One-stop-shop
with wide product
range of high-
quality products
Value added
processing
services
Quality assurance
Efficient inventory
management
Local presence
Tailor-made
logistics including
on-time delivery
within 24 hours
~185,000
customers
No customer with
more than 1% of
sales
Average order
size up to €2,000
Wide range of
industries and
markets
Service more
important than
price
Purchase volume
p.a. of >5 million
tons
Diversified set of
worldwide approx.
70 suppliers
Klöckner & Co’s value chain
5. 5
Klöckner & Co at a glance
Klöckner & Co
Leading producer-independent steel and metal distributor in the European and North American
markets combined
Network with around 250 distribution locations in Europe and North America
Sales split by markets
As of December 2008
Sales split by product
As of December 2008
Sales split by industry
As of December 2008
Eastern Europe;
1%
USA; 19%
The Netherlands;
6%
Spain; 8%
UK; 9%
Switzerland;
13%
France/Belgium;
21%
Germany/Austria;
23%
Construction; 42%
Industrial machinery
and equipment;
24%
On-sellers; 10%
Appliances/
durable goods
manufacturers; 7%
Automotive;
6%
Other; 11%
Tubes; 10%
Quality
steel/stainless
steel; 9%
Aluminum;
6%
Other; 12%
Long products/
sectional steel;
32%
Flat products; 31%
7. 7
Prices for carbon and stainless steel products have improved in the US and Europe
Distribution stocking levels at record lows in the US and in Europe, with demand stabilizing
Utilization rates in the US and Europe have increased due to a stronger apparent demand
Steel inventories in the US at all time lows and
back to H1 2008 levels in terms of months of sales
Source: SBB
Steel prices are recovering
Source: Metals Service Center Institute
5500
6500
7500
8500
9500
10500
11500
12500
13500
Jan08
Mar09
May08
Jul08
Sep08
Nov08
Jan09
Mar09
May09
Jul09
Inventories(Tto)
1,5
2,0
2,5
3,0
3,5
4,0
Monthsofshipments
Inventories Months
200
300
400
500
600
700
800
900
1000
1100
1200
Jan06
Apr06
Jul06
Oct07
Jan07
Apr07
Jul07
Oct07
Jan08
Apr08
July08
Oct08
Jan09
Apr09
Jul09
Oct09
Steelprices(€/t)
HRC-Europe HRC-US
Mediumsections-Europe Beams-US
Steelprices(€/tforEurope;$/tforUS)Stocks on all time lows, prices have picked up in last months
9. 9
After managing the crisis back on track with Wave 3
Crisis management Managing growth again
Cost cutting
NWC-/ debt-reduction
Safeguard financing
Waves 1 and 2
Wave 3
Efficiency program Continuous improvement
Acquisition strategy
Organic growth
Growth capital
10. 10
October 08 Summer 09
Wave 1
Wave 2
Approx. half of targeted €100m net savings in 2009 (incl. STAR) already realized
¹ Company estimates
€100m net savings targeted in 2009, thereof €35-40m fixed costs¹
1,500 headcount reduction targeted (15% of total workforce) and almost fully achieved²
Safeguard liquidity / net working capital management: net working capital decreased from €1.7bn
(Q3/2008) to €779m (Q2/2009)
Safeguard financing: €300m syndicated loan and €505m ABS facilities now without performance
covenants
Capex cut < €25m, so far €9.9m as of Q2/2009
Acquisitions suspended
March 09
Wave 3
² As of July 30, 2009
Cost cutting: Cost oriented programs implemented
11. 11
Cost cutting: Structural improvements will be maintained
Sales
NWC as %
of sales
100
100
Volume
Net cost
base
European sourcing and distribution optimization
expected to lead to sustained lower inventories
Initiated fixed cost savings expected to be
maintained
Sustainable improvements increase competitiveness in next upturn
12. 12
€35-40m fixed cost savings in 2009, annualized fixed cost savings of €50-60m
Cost cutting: Saving target >€100m for 2009
€100m
net savings
target 2009
Personnel
50%
Shipping
20%
Operating
supplies/ tools
15%
Repair/
maintenance
10%
Other
5%
Reduction of >1,500 jobs or >15% of total workforce
13. 13
NWC-/debt-reduction: Fast adaptation to current situation
Destocking
Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009
NWC
€bn
Net debt Stock to shipment
Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009
€bn
0.69
1.07
0.57
0.32
0.12
0.90
Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009
Stock levels of KCO in million to
0.89
1.32 1.25
1.011.21
0.75
Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009
Stock to quarterly shipment ratioTurnover in million to
1.07
1.76
1.35
1.15
1.72
1.05
0.70 0.75
0.93
0.71
0.87 0.83
1.40
1.65
1.01
1.72
1.41
0.78
-43% -55%
-89%
14. 14
SalesSourcing Warehousing / Distribution
Centralization of sourcing
function
Supplier concentration
Third country sourcing
Warehouse network
optimization (incl. site closure)
Concentration of stock in
single locations
Optimization of internal and
external logistics
Customer segmentation by
size and trade
Profitability oriented pricing
and service offering
Reigniting dormant accounts
Product Portfolio / Service Offering
Product portfolio optimization (profitability / capital
requirements)
Increasing share of value added services
Sharing of products within Group
Eliminating slow/no movers
Processes / IT Systems (Enabler)
Standardizing processes
Introduction of standardized SAP suit and data
model (article codes, inventory management, etc.)
Shared services
Activity based costing (ProDacapo)
Efficiency program: Ongoing improvement
15. 15
Financial structure
Bank debt
Securitized
debt
Capital markets
debt
AcquisitionsNWC
43%
26%
31%
€325m
Convertible
Bond 2007
€400m
Bilateral
Facilities
€505m
ABS
€300m
Syndicated
Loan
€98m
Convertible
Bond 2009
Funds for future growth
> €1,200m
predominantly
for organic
growth
Strong financial power for organic growth
€1,205m
16. 16
Summer 09
Wave 3
Pro-active market initiatives to leverage improved competitive position
Market / customer segmentation
- Focus on under-penetrated regions / customer segments
- Leverage existing product / service offering and competitive strength
- Increase share of wallet with current accounts
- Improve / adjust sales force management and incentivation
Product portfolio management
- Improve product mix by expanding higher margin business
- Drive value added services
Pricing strategy
- Adjust pricing to segment / product approach
Wave 2
Wave 1
Organic growth: Driving market share
17. 17
Financial structure
Bank debt
Securitized
debt
Capital markets
debt
AcquisitionsNWC
43%
26%
31%
€325m
Convertible
Bond 2007
€400m
Bilateral
Facilities
€505m
ABS
€300m
Syndicated
Loan
€98m
Convertible
Bond 2009
Funds for future growth
€193m
Rights
Issue
€938m
Equity
pre Rights Issue
> €600m
predominantly
for growth
through
acquisitions
€1,131m €616m
Strong financial power for growth through acquisitions
Equity
18. 18
Achieve profitable growth
Strengthen purchasing power vs. suppliers for core group
products
Strengthen country specific market positions
Expand footprint outside construction industry
Focus on geographical core markets in EU, NA and EEC to
leverage existing network
Western
Europe
NAFTA
Steel ProducerSteel Distributor
Steel Distributor
Top
6 -20
Top 5
65%17%
18%
Others
Top 5
31%
69%
Steel Producer
Others
Top 5
39%
61%
OthersOthersTop
6 -20
Top 5
18%
32%
50%
Significant acquisition potential in fragmented markets
Source: Company data, Eurometal, broker research
Consolidation among steel producers is well ahead
of highly fragmented distribution sector
M&A strategy
Profitability above group average
Strong synergy potential in purchasing, admin and
warehousing with low integration risk
EV/EBITDA multiple between 4x and 6x EBITDA
EPS-accretive from year one
Target selection criteria
Track record of 18 successful acquisitions since IPO shows ability to integrate
companies and extract synergies
19. 19
Leading producer-independent multi-metal distributor
Source: Public information Note: Average exchange rate $/€ 2008: 0.683
1 Includes complete Steel Solutions and Services 2 Mill-tied distributors
Largest independent multi-metal distributor
Independence provides:
- Sourcing flexibility
- Ability to obtain steel at market prices, even in tight
markets
- Better ability to react to changes in supply and
demand, as products are sourced from a variety of
suppliers
- Mill-tied distributors competing against customers of
the mills
2008 European competitive landscape
Europe:
~3,000 market participants
Sales 2008 in €bn
0
4
8
12
16
AM3S TKM Klöckner
& Co
Reliance
Steel
Ryerson McJunkin
Redman
1,2 2
Mill-tied distributors¹
Other independent
distributors²
62%
38%
Source: Eurometal (2009), public information, based on turnover in tons
1 Top 3 mill-tied distributors ArcelorMittal/ ThyssenKrupp/ Corus
² Klöckner & Co is largest independent distributor
2008 North American competitive landscape
North America:
~1,200 market participants
Mill-tied distributors
Rank Company Mkt. Share
1 Reliance Steel 5.7%
2 Ryerson Inc 3.5%
3 McJunkin Red Man 2.6%
4 Samuel, Son & Co. 2.1%
…
10 Klöckner-Namasco 1.2%
11 A.M. Castle & Co 0.9%
…
Top 15 combined 28.2%
Other
independent
distributors
Top 15
28.2%
63.7%
8.1%
Source: Metal Center News (Sept. 2009), Purchasing Magazine (April 2009), based on sales
15.8
10.4
3.6
6.7 6.0
2.9
20. 20
€141m
€567m
€231m
€108m
Acquisitions1
Acquired sales1,2
€5mMultitubesJan 2008
€226mTemtcoMar 2008
€9mLehner & TonossiSep 2007
€231m2 acquisitions2008
€14mInterpipeSep 2007
€7mScanSteelSep 2007
€36mMetalsnabAug 2007
€108m4 acquisitions2006
€567m12 acquisitions2007
€35mTournierJan 2007
€14mTeulingApr 2007
€360mPrimary SteelApr 2007
€17mEdelstahlserviceApr 2007
€15mMax CarlApr 2007
€11mZweygartApr 2007
€23mPremier SteelMay 2007
€26mWestokJun 2007
Sales (FY)²Acquired¹ CompanyCountry
¹ As of announcement
² Figures refer to the latest fiscal years, prior to the acquisitions of the companies
2
4
12
2
2005 2006 2007 2008
Successful acquisition-led growth track record
23. 23
Selected income statement data
Years ended December 31 Six months ended June 30
(€m) 2006 2007 2008 2008 H1 2009 H1
Sales 5,532 6,274 6,750 3,582 2,054
Volume (Ttons) 6,127 6,478 5,974 3,475 2,121
Other operating income 94 97 371 21 25
Change in inventory 1
0 4 11 -3 -11
Cost of materials -4,325 -5,058 -5,394 -2,777 -1,804
Personnel expenses -478 -509 -546 -264 -228
Other operating expenses -428 -438 -592 -238 -199
Income from investments 0 1 0 0 0
EBITDA 395 371 600 321 -163
Depreciation, amortisation and impairments -58 -64 -67 -31 -34
EBIT 337 307 533 290 -197
Financial result -64 -97 -70 -33 -31
Income before taxes 273 210 463 257 -228
Income taxes -38 -54 -79 -79 53
Net income2
235 156 384 178 -175
1 Change in inventory represents the difference in amount of work in progress and finished goods at period end compared to the beginning of the period, adjusted for currency effects. Most of our
inventory consists of merchandise, changes of which are not reflected in this item, but included in cost of materials
2 Gross of minority interests
24. 24
Organic volume development in
North America -37.7%
Includes acquisition-related
sales of €8m for Q2/2009 in
North America
Comments
Segment performance Q2 2009
(€m) Europe
North
America
HQ/
Consol.
Total
Volume (Ttons)
Q2 2009 815 238 - 1,053
Q2 2008 1,223 532 - 1,755
Δ % -33.3 -55.1 - -39.9
Sales
Q2 2009 798 161 - 959
Q2 2008 1,523 399 - 1,922
Δ % -47.6 -59.7 - -50.1
EBITDA
Q2 2009 3 -25 -8 -31
% margin 0.3 -15.8 - -3.2
Q2 2008 150 67 -5 212
% margin 9.9 16.7 - 11.0
Δ % EBITDA -98.3 -138.2 - -114.6
25. 25
690
571
322
118
Q3/2008 Q4/2008 Q1/2009 Q2/2009
1.7
1.4
1.0
0.8
Q3/2008 Q4/2008 Q1/2009 Q2/2009
Weak operating cash flow in H1 2009 offset by release of
working capital
Strong cash flow generation led to fall in net debt to €118m end of June 2009
2006 2007 2008 2008 H1 2009 H1
Operating CF 354 328 386 317 -170
Changes in net working capital -195 -105 -87 -274 639
Others -28 -114 -112 -40 -1
Cash flow from operating activities 132 109 187 3 468
Inflow from disposals of fixed assets/
others
102 38 388 8 6
Outflow from investm ents in fixed assets/
others
-92 -417 -316 -282 -8
Cash flow from investing activities 10 -378 72 -274 -2
Proceeds from capital increase 98 62 0 0 26
Changes in financial liabilities -136 357 -46 296 -149
Net interest paym ents -46 -78 -38 -16 -22
Cash flow from financing activities¹ -90 295 -123 242 -145
Total cash flow 52 25 136 -29 321
Cash flow statement over time (€m)
1 Includes dividend payments
Working capital over time
-18%
-29%
€bn
-22%
Net debt over time
-17%
-44%
€m
-63%
26. 26
€43m
€227m
€72m
€325m
€26m
€351m
2009 2010 2011 2012 2013 2014
ABS Syndicated loan Convertible 2007¹ Convertible 2009¹Drawn amount
Facility Committed FY 2008 H1 2009
Bilateral Facilities 400 65 66
ABS 505 213 69
Syndicated Loan 300 298 227
Total Senior Debt 1,205 576 362
Convertible 2007¹ 325 280 289
Convertible 2009¹ 98 0 72
Finance leases 11 12 11
Total Debt 1,639 867 733
Cash 297 616
Total Net debt 571 118
Net debt and liquidity overview
Current maturity profile of drawn amountsOverview of net indebtedness (€m)
Additional flexibility through renegotiated covenants, which
are now free of performance measures
1 Drawn amount excludes equity component
30. 30
Factors impacting EBITDA Q2 2009
Impact Amount (€m) Comments
Windfall losses* -40 to -60
Declining prices affected almost
all products
Effect difficult to quantify due to
strong dynamics and very limited
purchases
Volume losses* -100 to -120
Impact of poor economic
environment
Special expense effects* 40 to 50
Mainly driven by price related
releases of inventory devaluation
reserves at quarter end
Acquisitions / divestitures -16
Mainly affected by divestiture of
KVT and Canada
One-offs 1 Sale of property in France
Exchange rate effects -2
* Company estimates
31. 31
* Net debt / equity
€1,128m
min €500m
max 150%
Q21
Minimum Equity Covenants Maximum Gearing*
Existing covenants on Syndicated Loan and European ABS
Non performance related covenants leaves us with lots of headroom
Q21:
1 Pro-forma figures after rights issue
Equity ratio currently at 38% Gearing currently at -6.4%
€0 0%
32. 32
Selected balance sheet data
Years ended December 31 Six months ended June 30
(€m) 2006 2007 2008¹ 2008 H1 2009 H1
Non-current assets 579 735 812 794 775
Intangible assets 32 198 236 227 222
Property, plant, equipment 501 482 479 473 465
Current assets 1,972 2,231 2,272 2,826 1,983
Inventories 841 956 1,001 1,199 604
Trade receivables 933 930 799 1,236 591
Cash and cash equivalent² 130 154 297 124 616
Total assets 2,552 2,966 3,084 3,620 2,759
Non-current liabilities 744 1,152 1,177 1,377 1,108
Provision for pensions and similar obligations 193 188 180 183 183
Other provisions (including deferred tax liabilities) 126 142 124 142 259
Financial liabilities 416 813 813 1,043 626
Current liabilities 1,009 969 826 1,380 713
Other provisions (including deferred tax liabilities) 186 144 285 168 115
Financial liabilities 65 73 48 151 100
Other liabilities 89 92 82 102 74
Trade payables 639 610 392 858 417
Total liabilities 1,752 2,121 2,002 2,757 1,821
Equity (including minority interests) 799 845 1,081 863 938
¹ Comparative amounts for 2008 restated due to initial application of IFRIC 14
² Cash and cash equivalents include cash, cash equivalents and marketable securities and, for the year ended December 31, 2008, EUR 3.1m in restricted cash and, for the six months ended June 30,
2009, EUR 0.7m in restricted cash. In 2007, EUR 3.5m of additional cash, and in the six months ended June 30, 2008, EUR 2.1m of additional cash as held in our Canadian subsidiary Namasco
Limited (shown separately as assets held for sale). As of June 30, 2008, additional EUR 5.1m cash was held for sale in our Swiss subsidiary KVT
33. 33
Cash flow statement
Years ended December 31 (€m) 2006 2007 2008¹ H1 2008¹ H1 2009
Net income 235 156 384 178 -174
Income taxes (benefit) 38 54 79 79 -54
Financial result 64 97 70 34 31
Depreciation and amortization 57 64 67 31 34
Other non-cash expenses and income -0 -3 63 -1 -4
Gain on disposal of subsidiaries and other non-current assets -40 -40 -277 -3 -4
Operating cash flow 354 328 386 317 -170
Changes in provisions 9 -46 -1 36 -26
Changes in other assets and liabilities
Inventories -160 -71 -6 -224 404
Trade receivables -134 29 143 -297 213
Other assets -1 -18 -43 -73 39
Trade payables 99 -64 -224 247 22
Other liabilities 10 -1 25 38 -24
Income taxes paid -46 -49 -93 -41 10
Cash flow from operating activities 132 109 187 3 468
Proceeds from the sale of non-current assets and assets held for sale 102 38 12 8 6
Proceeds from the disposal of consolidated subsidiaries 0 0 376 0 0
Payments for intangible assets, property, plant and equipment -48 -61 -48 -22 -10
Acquisition of subsidiaries -44 -356 -264 -260 0
Margin deposits for derivative transactions 0 0 -3 0 2
Cash flow from investing activities 10 -378 72 -274 -2
Capital increase 98 62 0 0 26
Dividends 0 -37 -37 -37 0
Minority interest -6 -10 -2 -1 0
Borrowings 222 1,270 425 346 114
Repayment of financial liabilities -358 -913 -471 -50 -263
Interest paid -50 -82 -45 -19 -26
Interest received 4 4 7 3 4
Cash flow from financing activities -90 295 -123 242 -145
Changes in cash and cash equivalents 52 25 136 -29 321
¹ Comparative amounts for 2008 restated due to initial application of IFRIC 14
34. 34
Current shareholder structure
Source: Survey Thomson Financial (as of July 2009)
Identified institutional investors
account for 64%
UK based investors dominate
(Franklin remains Klöckner biggest
investor with 8.91% of the total
shares outstanding)
Top 10 shareholdings represent
around 29%
Retail shareholders represent 28%
100% free float
CommentsGeographical breakdown of identified institutional investors
Germany
27%
United Kingdom
32%
US
16%
9%
Rest of
Europe
4%
Switzerland
France
11%
1%
Rest of the World
35. 35
Our symbol
the ears
attentive to customer needs
the eyes
looking forward to new developments
the nose
sniffing out opportunities
to improve performance
the ball
symbolic of our role to fetch
and carry for our customers
the legs
always moving fast to keep up with
the demands of the customers
