A Leading Multi Metal Distributor

Transcription

1 Klöckner & Co A Leading Multi Metal Distributor Roadshow September 2007 Gisbert Rühl CFO

2 Agenda 1. Overview, market and strategy 2. Financials and outlook Appendix 2

3 Klöckner & Co at a glance Producer Products: Services: Distributor Customer Construction: Structural Steelwork Building and civil engineering Klöckner & Co highlights Leading producerindependent steel and metal distributor in the European and North American markets combined Distribution network with approx. 250 warehouses in Europe and North America About 10,000 employees Key financials FY 2006 Sales: 5,532 million EBITDA: 395 million Machinery/ Mechanical Engineering Others: Automotive Metal products/ goods, installation Durable goods etc. 3

4 Distributor in the sweet spot Suppliers Sourcing Products and services Logistics/ Distribution Customers Purchase volume p.a. of 6 million tons Diversified set of worldwide ca. 70 suppliers Examples: Global Sourcing in competitive sizes Strategic partnerships Frame contracts Leverage one supplier against the other No speculative trading Onestopshop with wide product range of highquality products Value added processing services Quality assurance Efficient inventory management Local presence Tailormade logistics including ontime delivery within 24 hours > 200,000 customers No customer with more than 1% of sales Average order size of 2,000 Wide range of industries and markets Service more important than price Global suppliers Klöckner & Co s value chain Local customers 4

5 Global reach with broad product and customer diversification About 250 locations (August 2007) LT CDN IRL GB F NL B D CH A CZ PL RO CN USA E BU CDN USA 5 Locations 28 Locations D F CH E 25 Locations 76 Locations 31 Locations 48 Locations GB IRL NL Eastern Europe 24 Locations 1 Location 7 Locations 11 Locations 5

6 Global reach with broad product and customer diversification Customer diversification (2006) Sales split by industry Sales split by markets Sales split by product Other 35% 5% 20% Machinery/ Manufacturing Construction 40% Automotive USA (incl. Primary Canada 17%) Eastern 5% Europe 10% Netherlands 6% GB Spain 1% 9% 10% 15% Switzerland 23% 21% Germany/ Austria France/ Belgium Other Products Aluminum 8% Special and 10% Quality Steel 9% Tubes 14% 31% 28% Steelflat Products Steellong Products 6

7 Strong position in Europe; Acquisition of Primary significantly improved position in NA Other milltied distributors ~ 15 25% ~ 45 55% Structure: Size in value: Companies: Other independents Europe (2006) 11% ArcelorMittal (Distribution approx. 5%) 8% 7% 4% 67% through distribution, service centers ~ 70 90bn ~3,000 few milltied, most independent Source: EuroMetal, company reports, own estimates ThyssenKrupp Klöckner & Co Corus 72.5% Other Structure: Size in value: Companies: North America (2006) Ryerson 4.7% 4.5% Reliance Steel 2.5% Source: Purchasing Magazine (May 2007) ThyssenKrupp Materials NA 2.1% 1.8% Samuel, Son & Co 1.8% Russel Metals O'Neal Steel Metals Namasco USA with Primary Macapprox. 1.4% Steel McJunkin Worthington Steel PNA Group Namasco (Klöckner & Co) AM Castle Carpenter Technology Olympic Steel 1.4% 1.4% 1.3% 1.3% 1.2% 1.0% 0.9% 0.9% 0.8% 5060% through distribution, service centers ~ 100bn ~1,300 only independent distributors 7

8 Industry trends supporting Klöckner s strategy Globalization and consolidation Large costs savings Higher and more flexible capacity utilization Much better supply discipline and higher pricing power creating an improved balance between supply and demand Stable global demand growth Far quicker destocking High capacity utilisation of steel mills Positive impact on distribution industry Ongoing consolidation favoring large scale distributors Higher prices with much shorter downturns support more stable earnings and cash flows for distributors 8

9 Profitable growth Profitable growth through valueadded distribution and services within multi metals to companies in Europe and North America Grow more than the market Continuous business optimization 1 Acquisitions driving market consolidation 2 Organic growth and expansion into new markets 3 STAR Program: Purchasing Distribution network 9

10 1 Acquisitions driving market consolidation Acquisitions Next steps Country Acquired Aug 2007 June 2007 Company Metalsnab Westok Sales 36 million 26 million Further acquisitions in core markets at attractive valuations: Leverage existing structure with small and midsize bolton acquisitions Large scale acquisitions when appropriate May 2007 April 2007 April 2007 April 2007 April 2007 Premier Steel Zweygart Max Carl Edelstahlservice Primary Steel 23 million 11 million 15 million 17 million 360 million Strategy Focus on targets at attractive valuations in 3 directions Expansion in new regions Extension of product portfolio Extension of customer base April 2007 Teuling 14 million Benefits Jan ytd Tournier 9 acquisitions 4 acquisitions 2 acquisitions 35 million 537 million 108 million 141 million Significant synergies Streamlining operations, processes and sales force Integration of STAR Economies of scale Stronger purchasing power 10

11 2 Organic growth and expansion into new markets Status quo Growth above GDP in core markets partly as a result of the outstanding development of the construction and machinery/mechanical engineering industries and steel prices Eastern European facilities established in Poland, Czech Republic, Romania and Baltic States Acquisition of Metalsnab in Bulgaria Evaluation of market entry in Slovakia, Turkey an Russia Next steps Expansion of strong market positions in core markets: Selective extension of product range Increase valueadded services through investments in new processing capacity Opening of new branches in Eastern Europe Evaluating of market entry in other countries like Slovakia, Turkey and Russia Strategy Leveraging existing distribution network Benefits Sustainable profitable growth 11

12 3 STAR: Status quo H and next steps Status quo Next steps Purchasing Additional frame contracts with main suppliers Extended global sourcing for third party countries Implementation of new organization in Germany almost completed Implementation of a software supporting stock management Establish European sourcing (STAR Phase II) Increase sourcing from worldclass suppliers with structural cost advantages Implement unified article codes Distribution Improved performance as a result of restructured distribution network (warehouses): Q1 2007: Concentration of warehouse structure in the Iowa region in US Q1 2007: Restructuring of service center business in Switzerland Start of rollout of the optimization tool Prodacapo (activity based costing) in Spain, UK and Eastern European Countries Continuous improvement of distribution network throughout the Group with support of the optimizationtool Prodacapo Ongoing rollout throughout European countries Restructuring of warehouse structure in Spain Finalize implementation of SAP throughout the European organization (France, Switzerland) and interface SAP with Prodacapo 12

13 3 STAR: Phase I finalized in 2008, further potential in phase II Overall targets: Phase I ( ) Central purchasing on country level, especially in Germany Improvement of distribution network Improvement of inventory management Upside potential 2006: ~ 20 million 2007: ~ 40 million 2008: ~ 20 million ~ 80 million Phase II (2008 onwards) Overall targets: European Sourcing Ongoing improvement of distribution network 13

14 Agenda 1. Overview, market and strategy 2. Financials and outlook Appendix 14

15 Summary income statement Q2/H ( m) Q Q Ä% H H Ä% Sales 1,650 1, , Gross profit % margin EBITDA % margin EBIT Financial result Income before taxes Income taxes Minority interests Net income EPS

16 Segment performance H ( m) Sales Sales H H Ä % EBITDA EBITDA H H Ä % Comments Europe North America 2, , Sales for H in Europe including about 9 million from Aesga (E) 4 million from Gauss (CH) 21 million from Tournier (F) 5 million from Teuling (NL) 3 million from Edelstahlservice (D) 1.5 million together from Max Carl and Zweygart (D) 8 million from Westok (UK) HQ / Consol Sales for H in North America including about 26 million from Action Steel 54 million from Primary 2.5 million from Premier Total 3,199 2,

17 Balance sheet H ( m) Longterm assets Inventories Trade receivables Cash & Cash equivalents Other assets Total assets Equity Total longterm liabilities thereof financial liabilities Total shortterm liabilities thereof trade payables Other liabilities June 30, ,095 1, , , , December 31, , , Comments Financial debt as of June 30, 2007: Syndicated loan: 517million ABS: 339 million Bank borrowings: 190 million Increased net financial debt due to acquisitions and higher NWC Equity: Decrease driven by increase of stake in Swiss Holding and dividend distribution Further, equity ratio decreased due to higher assets from 31% to 22% Total equity and liabilities Net working capital Net financial debt 3,234 1, ,552 1, Net Working Capital: Increase driven by sales, higher price levels and acquisitions 17

18 Statement of cash flow ( m) H H Comments Operating CF Changes in net working capital Others Cash flow from operating activities Inflow from disposals of fixed assets/others Outflow from investments in fixed assets Strong business development reflected in positive cash flow deriving from operational activities and increased NWC requirements Cash flow from investing activities Proceeds from capital increase Changes in financial liabilities Net interest payments Dividends Investing cash flow in H mainly impacted by cash outflow due to the various acquisitions and increased stake in our Swiss Holding Cash flow from financing activities Total cash flow

19 General financial targets and limits Underlying sales growth General target/limit > 10% p.a Actual H % Underlying EBITDA margin > 6% 6.1% Leverage (Net financial debt/ebitda LTM) < 3.0x 2.4x Gearing (Net financial debt/equity) < 150% 139% Challenging financial targets throughout the cycle 19

20 New holding facility and convertible bond increase scope for further acquisitions ( m) Old debt structure Change in debt structure New debt structure ABS Europe ABS USA Total Syndicated loan Bilateral credit agreements Total senior bank facilities Convertible bond High yield bond Total facilities 1, ,785 20

21 Outlook / guidance 2007 Basic assumptions for 2007 Positive prospects for the steel industry Economic growth in relevant markets of about 1.8% to 5% in 2007 Stable and increasing demand especially in the construction and machinery industries Price development stable or better Outlook / guidance At least 15% top line growth mainly driven by acquisitions EBITDA approximately on reported 2006 level Dividend continuity: 30% payout ratio after deduction of extraordinary income Again strong results in

22 Financial calendar 2007 and contact details Financial calendar 2007 September 19: November 14: Analysts and Investors Meeting Q3 Interim Report Contact details Investor Relations Claudia Nickolaus, Head of IR Phone: Fax: Internet: 22

23 Agenda 1. Overview, market and strategy 2. Financials and outlook Appendix 23

24 Appendix Table of contents Quarterly/FY results 2006/2005 Steel cycle and EBITDA/cash flow relationship Convertible bonds terms and conditions IPO on 28 June 2006 followed by free float increase 24

25 Quarterly results and FY results 2006/2005 ( m) Q Q Q Q Q Q FY 2006 FY 2005* Sales 1,650 1,550 1,398 1,394 1,418 1,323 5,532 4,964 Gross profit , % margin EBITDA % margin EBIT Financial result Income before taxes Income taxes Minority interests Net income Earnings per share in * Proforma consolidated figures for FY 2005, without release of negative goodwill of 139 million and without transaction costs of 39 million, without restructuring expenses of 17 million (incurred Q4) and without activity disposal of 1,9 million (incurred Q4). 25

26 Steel cycle and EBITDA/cash flow relationship ( m) 1 Margin Windfall profits Margin Theoretical relationship* 2 Steel price Cost of material Cash flow *Assuming stable inventory volumes Sales EBITDA Windfall losses Comments Klöckner & Co buys and sells products at spot prices generally Sales increase as a function of the steel price inflation environment Cost of material are based on an average cost method for inventory and therefore lag the steel price increase This time lag creates accounting windfall profits (windfall losses in a decreasing steel price environment) inflating (deflating) EBITDA Assuming stable inventory volume cash flow is impacted by higher NWC needs The windfall profits (losses) are mirrored by inventory book value increases (decreases) 26

27 Convertible bonds terms and conditions Size: 325 million Shares underlying: approx. 4 million Denomination: 50,000 Maturity date: July 27, 2012 (5 years) Coupon: 1.50% p.a. Reference price: Conversion price: (35% above reference price) Conversion ratio: shares per bond Conversion right: September 6, 2007 until July 18, 2012 Early redemption at the option of the issuer: from August 15, 2010 onwards only possible if share price exceeds approx. 105 (= 130% of the conversion price) Listed on the Freiverkehr segment of the Frankfurt Stock Exchange (Open Market) 27

28 IPO on 28 June 2006 followed by free float increase April 2007 selldown 100% January 2007 selldown 15.5 % 84.5% Current shareholder structure October 2006 selldown 45% 55% PostIPO 65% 35% Mainly large European institutional investors Increasing share of US investors Growing share of retail investors Free float LGB/Management Issue price: Offer Size: Placement: 16 per share IPO Highlights 264 million; of which Klöckner received 104 million gross proceeds from the capital increase 16.5 million shares (in total 46.5 million shares); thereof: 6.5 million new shares from a capital increase 10 million from the selling shareholder Lindsay Goldberg & Bessemer (via Multi Metal Investment S.à.r.l.) 28

29 Our symbol the ears attentive to customer needs the eyes looking forward to new developments the nose sniffling 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 29

30 Disclaimer This presentation contains forwardlooking 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 forwardlooking statements. We assume no liability whatsoever to update these forwardlooking statements or to conform them to future events or developments. 30