Klöckner & Co SE is a leading multi-metal distributor that presented its financial results and growth strategy through 2020. In Q3 2010, sales increased year-over-year while earnings improved. The company aims to accelerate external growth, boost organic growth, optimize business processes, and strengthen management development. By 2020, Klöckner & Co seeks to become the first truly global multi-metal distributor through international expansion, notably in emerging markets.
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Klöckner & Co - Roadshow Presentation November 2010
1. Klö k & C SEKlöckner & Co SE
A Leading Multi Metal Distributor
RoadshowGisbert Rühl
CEO/CFO
November 2010
CEO/CFO
2. Ein- bis zweizeiliger Folientitel00 Disclaimer
This presentation contains forward-looking statements. The statements use words like “believe”, “assume”,
“expect” or similar formulations. Various known and unknown risks, uncertainties and other factors could
lead to material differences between the actual results financial situation development or performance oflead to material differences between the actual results, financial situation, development or performance of
our company and those either expressed or implied in these statements. The factors include, among other
things:
• Downturns in the business cycle of the industries we compete in;
• Increases in our raw material prices, especially if we are unable to pass these costs
along to customers;
• Fluctuations in international currency exchange rates as well as changes in the general
economic climateeconomic 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 have them
f fconform with 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").
Klöckner & Co securities including but not limited to rights shares and bonds may not be offered or soldKlöckner & Co securities, 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. citizens (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 have an exemption from such registration.
2
9. 01 Strong balance sheet
Q3 2010 Comments
€3,315m
• Equity ratio of 36.6%
836
1,215
Non-current
assets
Equity
• Net debt €233m
• Gearing* at 19%
• NWC increased by €18m to €1,090m qoq
842Inventories
821
84
1,224
Trade receivables
Other
Non-current
liabilities
84
732
876
current assets
Liquidity
Current
liabilities
* Gearing = Net debt/Equity attributable to shareholders of
Klöckner & Co SE
9
11. 01 Outlook
► Fourth quarter
• Volumes expected to be slightly below Q3Volumes expected to be slightly below Q3
• Prices seem to be bottoming out
• EBITDA expected to be below Q3
► Full year
• >25% sales growth resulting from acquisitions and normalization of customers’ stock>25% sales growth resulting from acquisitions and normalization of customers stock
levels
• More than €200m EBITDA (>4% EBITDA-margin) driven by economic recovery,
s ccessf ll integrated acq isitions and s stained cost c tting meas ressuccessfully integrated acquisitions and sustained cost cutting measures
• Resumption of dividend payment
11
13. 02 More focused and extended growth necessary
• Four years after the IPO a strategy realignment and a target setting for the coming 10 years
until 2020 is necessary because:until 2020 is necessary because:
• Sustained shift in market environment through global economic and financial crisis:
• Long lasting recovery of steel consumption with significant overcapacity in industrial
countries
• Strong recovery and dynamic growth in emerging markets
• Our so far mainly unspecified consolidation strategy needs more focusy p gy
• Organic growth needs more momentum
• Earnings volatility and exposure to steel price development have to be reduced
Klöckner & Co 2020: Globalizing and Overcoming Fragmentation
13
14. 02 Status quo analysis requires fine-tuning of growth strategy
Growth
through Larger acquisitions have been successful but more focus necessary going forward
Organic
growth
g
acquisitions
Activities initiated but more momentum and capex needed
Well on track but earnings and cash flow volatility still too high
Business
optimization
growth
optimization
Personnel &
Management
development
Promising management changes on the top level in country organizations and strong
holding management but personnel and management development barely exists
development
Financing
g g p g p y
Successful growth financing established allowing for significant internal and external growth
securing a solid balance sheet
14
15. 02 Strategy re-focused along four lines of attack
• Continued growth outside the construction industry to better balance customer portfolio
• EBITDA-margin should be above current average at attractive multiples with transactions that are
External accretive from day one
• Targets should be more sizeable than in the past especially in the US
• Expansion of SSC business
• Entry in emerging markets
External
growth
strategy
• From “distribute into growing market” to “push to gain customers and market share”
• Improve sales performance through sales excellence program
• Expanding the share mainly in the area of higher margin products
Organic
growth
t t
• Realizing further scale benefits in purchasing and product management
• Further optimization of inventory management
• Stronger focus on value added services for industrial customer segments
• Filling white spots in existing countries
strategy
Business • Further optimization of inventory management
• Closer integration of country operations
• Implementation of industry leading systems and processes
• Establish management competency model and management pool
Business
optimization
Personnel &
g p y g p
• Develop a training and performance management
• Assure attractive and consistent compensation and bonus systems
• Improve employer branding
Personnel &
Management
development
15
16. 02 Ambitious targets for global growth
Get Ready Accelerate Sustain Momentum
15-20 Mio. to*
8-10 Mio. to*
5 Mio. to*
• Preparing organization for
high growth
• Sustain growth momentum
• Manage size and global
• Gaining growth momentum
• Expand business around new
2010 2015 2020
g g
• Internationalize management
• Expanding footprint to
emerging markets
• Implement industry leading
g g
footprint
p
anchor points especially in
emerging markets
p y g
processes
16
* Sales volumes
17. 02 Benefits of scale as precondition to exploit margin potential
• At least 6% EBITDA margin-potential in metal distribution
• Strict capital return requirements of at least 15% ROCE
Gearing target < 75%
Strict capital return requirements of at least 15% ROCE
Equity ratio > 30%
15% ROCE
19.0
24.7
17.1
25.7
15% ROCE
2009
~ 10
2005 2006 2007 2008 2010e
-12.6
17
18. 02 Current geographic sales split and target 2020
30%20-30%
85%
60%40-60%
15%
20-30%
15%
85%
0%
North America Europe Emerging Markets
current current current2020 2020 2020
CAGR 2010 20 15% CAGR 2010 20 8% CAGR 2010 20
0%
18
CAGR 2010-20: ~15% CAGR 2010-20: ~8% CAGR 2010-20: na
19. 02 Klöckner & Co 2020
Globalization Being the first global multi metal distributorGlobalization Being the first global multi metal distributor
Growth Being the fastest growing multi metal distributor
Business
optimization
Having leading edge processes and systems
Management
& employees
Having best in class management and employees
& employees
19
23. 03 Balance sheet as of September 30, 2010
(€m)
Sep. 30,
2010
Dec. 31,
2009 Comments
Non-current assets 836 712
Inventories 842 571
Shareholders’ equity:
• Decreased from 41% to
37% mainly due to BSS
Trade receivables 821 464
Cash & Cash equivalents 732 827
Other assets 84 139
y
• Would be at 47% if
cash were used for
debt reduction
Financial debt:
Total assets 3,315 2,713
Equity 1,215 1,123
Total non-current liabilities 1 224 927
Financial debt:
• Gearing at 19%
• Net debt position due to
purchase price
Total non current liabilities 1,224 927
thereof financial liabilities 884 619
Total current liabilities 876 663
thereof trade payables 573 398
payment for BSS, Bläsi
AG and Angeles
Welding and NWC
build-up
thereof trade payables 573 398
Total equity and liabilities 3,315 2,713
Net working capital 1,090 637
N t fi i l d bt 233 150
p
NWC:
• Swing mainly driven by
BSS consolidation and
pickup in business
23
Net financial debt 233 -150 pickup in business
24. 03 Statement of cash flow 9M
(€m) 9M 2010 9M 2009
Comments
• NWC changes due to
built up of inventories
Operating CF 188 -161
Changes in net working capital -300 703
p
and receivables
• Investing CF impacted
by acquisitions of BSS,
Bläsi and Angeles
Others 31 -1
Cash flow from operating activities -81 541
Inflow from disposals of fixed assets/others 2 7
Bläsi and Angeles
Outflow for acquisitions -134 -1
Outflow for investments in fixed assets/others -16 -12
Cash flow from investing activities -148 -6
E it t f tibl b d 0 26Equity component of convertible bond 0 26
Issuance of shares 0 195
Changes in financial liabilities 227 -161
N t i t t t 38 25Net interest payments -38 -25
Repayments of shareholder loan BSS -58 0
Cash flow from financing activities 131 35
T t l h fl 98 570
24
Total cash flow -98 570
25. 03 Segment performance Q3 2010
(€m) Europe
North
America
HQ/
Consol. Total
Volume (Ttons)
Q3 2010 1,084 284 1,368
Q3 2009 784 249 - 1 033
Comments
• Excl. BSS volume
increase in Europe wasQ3 2009 784 249 - 1,033
Δ % 38.5 13.9 32.5
Sales
increase in Europe was
9.6% and total volume
increase was 10.6%
• Without BSS total sales
% Q QQ3 2010 1,169 232 1,401
Q3 2009 775 159 - 934
Δ % 50.7 46.7 50.0
were 32.9% Q3 vs. Q3
EBITDA
Q3 2010 60 5 -4 61
% margin 5.2 2.1 4.3g
Q3 2009 4 10 -3 11
% margin 0.5 6.4 - -1.2
Δ % EBITDA 1 454 7 52 1 438 7
25
Δ % EBITDA 1,454.7 -52.1 438.7
26. 03 Distributor in the sweet spot
Suppliers Sourcing
Products
and services
Logistics/
Distribution
Customers
and services Distribution
• Purchase
volume p.a. of
>5 million tons
• Global Sourcing
in competitive
sizes
• One-stop-shop
with wide product
range of high
• Efficient
inventory
management
• ~178,000
customers
• No customer with>5 million tons
• Diversified set of
suppliers
worldwide
approx 70
sizes
• Strategic
partnerships
• Frame contracts
range of high-
quality products
• Value added
processing
services
management
• Local presence
• Tailor-made
logistics
i l di i
• No customer with
more than 1% of
sales
• Average order
size of €2,000
approx. 70
• Leverage one
supplier against
the other
• No speculative
services
• Quality
assurance
including on-time
delivery within 24
hours
,
• Wide range of
industries and
markets
• Service more
i t t th
Klöckner & Co’s value chainGlobal suppliers
trading important than
price
Local customers
26
27. 03 Klöckner & Co at a glance
Sales by industryKlöckner & Co
• Leading producer-independent steel and metal
distributor in the European and North American markets
combined
• Net ork ith aro nd 250 distrib tion locations in E rope• Network with around 250 distribution locations in Europe
and North America
Sales by marketsSales by product
Including Becker Stahl-Service Group pro-forma figures (year ending September)
27
g p p g (y g p )
28. 03 Current shareholder structure
Geographical breakdown of identified institutional investors
Comments
• Identified institutional investors account for 53%
• German investors dominate
• Top 10 shareholdings represent around 26%Top 10 shareholdings represent around 26%
• Retail shareholders represent 28%
• 100% free float
28
29. 03 Our Symbol
the ears the eyesthe ears
attentive to customer needs
the eyes
looking forward to new developments
the nosethe nose
sniffing out opportunities
to improve performance
the ball
symbolic of our role to fetchsymbolic of our role to fetch
and carry for our customers
the legsthe legs
always moving fast to keep up with
the demands of the customers
29