klöckner & co - capital goods & steel conference 2012
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Klöckner & Co SE A Leading Multi Metal Distributor
Commerzbank Capital Goods & Steel Conference Head of Investor
Relations & Corporate Communications
Dr. Thilo Theilen
August 2012
Disclaimer
This presentation contains forward-looking statements which reflect the current views of the management of Klöckner & Co SE with respect to future events. They generally are designated by the words “expect”, “assume”, “presume”, “intend”, “estimate”, “strive for”, “aim for”, “plan”, “will”, “strive”, “outlook” and comparable expressions and generally contain information that relates to expectations or goals for economic conditions, sales proceeds or other yardsticks for the success of the enterprise. Forward-looking statements are based on currently valid plans, estimates and expectations. You therefore should view them with caution. Such statements are subject to risks and factors of uncertainty, most of which are difficult to assess and which generally are outside of the control of Klöckner & Co SE. The relevant factors include the effects of significant strategic and operational initiatives, including the acquisition or disposition of companies. If these or other risks and factors of uncertainty occur or if the assumptions on which the statements are based turn out to be incorrect, the actual results of Klöckner & Co SE can deviate significantly from those that are expressed or implied in these statements. Klöckner & Co SE cannot give any guarantee that the expectations or goals will be attained. Klöckner & Co SE – notwithstanding existing obligations under laws pertaining to capital markets – rejects any responsibility for updating the forward-looking statements through taking into consideration new information or future events or other things.
In addition to the key data prepared in accordance with International Financial Reporting Standards, Klöckner & Co SE is presenting non-GAAP key data such as EBITDA, EBIT, Net Working Capital and net financial liabilities that are not a component of the accounting regulations. These key data are to be viewed as supplementary to, but not as a substitute for data prepared in accordance with International Financial Reporting Standards. Non-GAAP key data are not subject to IFRS or any other generally applicable accounting regulations. Other companies may base these concepts upon other definitions.
2
Overview Q2 and update on restructuring 01
Financials Q2 2012
Outlook
Appendix
02
03
04
Agenda
3
Overview Q2 2012
• Turnover increased by 5.7% yoy driven by acquisitions and organic growth in USA and sequentially flat (+0.4% vs Q1)
• European turnover down -7.9% yoy also due to exiting low margin business whereas Americas up 34.2% yoy (organically up 10.0%)
• Sales increased by 4.2% yoy and by 0.9% sequentially
• EBITDA at €50m met guidance of €50-60m before restructuring despite worsening market environment (rep. EBITDA €33m incl. €17m for restructuring expenses mainly in Spain)
• Achievement of last years’ EBITDA in current fiscal year mainly due to worsening situation in Europe rather unlikely
• Scope of restructuring measures significantly expanded, initial measures almost concluded
• Expansion into US-automotive sector by building a Steel-Service-Center on the site of ThyssenKrupp plant in Alabama
• External CFO appointed to start latest Jan 1, 2013
4
01
• Steel demand currently around 25% below peak and not expected to recover shortly
• Overcapacity persisting also on distribution level until shakeout wave
• Early anticipation with assumed demand -5% in January created headroom for restructuring ahead of others
• Restructuring to adopt to current level of activity to avoid losses and position ourselves for a potential recovery
• Facing a phase with meager profitability, but balance sheet’s good shape should not be at risk
5
Europe USA
• Further market growth, albeit currently with reduced pace
• Successful integration of Macsteel enables us to outgrow the market
• Nevertheless, margins currently affected by price erosion in carbon also due to high USD and import situation
• Despite recent slowdown in economic development further market recovery most likely in the US
• We further outgrow the market by increasing contractual business to create a solid base for future uptick
• Key market for future growth also with organic measures due to the superior structural attractiveness of the US steel distribution and service center market
Restruc-turing
Growth
Global market assessment and our reaction 01
Europe/Macsteel • Europe: expense reductions • US: realizing synergies w/
Macsteel
• Cuts in administration costs and sales overheads
• Reduction of low-margin commodity business
• Expanding higher value-added activities
€70m
520 out of 700 already
€13m
General measures
Intensified measures in specific countries 01
From Q2 2012 on Step 1
September 2011
Spain + EEC France • Additional structural measures in
Spain • Withdrawal from EEC
• Realignment of France organization including structural measures
• Spain: • Closure of 11 sites • New network structure
and logistics concept
• EEC: • Full exit of EEC
• Closure of ~10 sites • Unified sales department in
each region • Logistics optimization • New network structure
€20m
600
€17m for Spain in Q2 + €15-20m for France in Q3
Focusing on structural changes
+
6
*Excluding potential disposal effects of EEC and Spanish properties
Step 2
Scope
Measures
EBITDA impact
Employee reduction
One-offs* booked in EBITDA
5
10
15
20
25
Despite difficult market environment fundamental values exist 01
7
Yield (CB 2007 until 9/8/2011, CB 2014 from 9/9/2011 on)
1,407
1,652 1,720
1,407
1,006
779
702 637
868
1,072 1,090
1,017
1,163
1,713 1,692
1,534 1,656 1,685
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
NWC Market cap Net debt
~700 current
1,507
1,692
747
571
345
704
1,041
1,187
1,456
965 1,107
1,397
1,573
2,055
929 990 1,087
799
573 471 580 582
322 118 -139
904
1,072
690
-150 150
233 137 227
600
571
~400
Yield in %
500
1,000
1,500
2,000
NWC – net debt vs. market capitalization and CB yields (€m)
~340
€m
245
Overview Q2 and update on restructuring 01
Financials Q2 2012
Outlook
Appendix
02
03
04
Agenda
8
Financials Q2 2012 02
EBITDA
Sales
Gross profit
Turnover
1,763 Tto
+5.7%
Q2 2011 Q2 2012
1,863 Tto €1,885m €1,964m
+4.2%
Q2 2012 Q2 2011
€62m
-18.5%
Q2 2012 Q2 2011 €50m*
€337m €340m
+0.7%
Q2 2012 Q2 2011
9
*adjusted EBITDA Restructuring costs
Financials H1 2012 02
EBITDA
Sales
Gross profit
Turnover
3,260 Tto
+14.1% 3,720 Tto
€3,472m
€3,909m +12.6%
€166m €98m*
-41.0% €691m €683m
-1.0%
10
H1 2011 H1 2012 H1 2012 H1 2011
H1 2012 H1 2011 H1 2012 H1 2011
*adjusted EBITDA Restructuring costs
EBITDA (€m) / EBITDA-margin (%)
Gross profit and EBITDA 02
Gross profit (€m) / Gross-margin (%)
• Gross profit-margin on the level of Q1 adjusted for restructuring costs, despite competitive environment in Europe
• EBITDA in Q2 decreased qoq also due to restructuring of €17m
• EBITDA adjusted for restructuring €50m
11
Before restructuring costs
344
17.5
331
294 275
353 337 318 307
344
340
23.4
21.0 20.6
22.3
17.9 16.8 17.6 17.7 17.3
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
50
2.6
100
61 48
104
62
37
14
45
33
7.1
4.3 3.6
6.6
3.3
1.9
0.8
2.3
1.7
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
-4%p
236 232 228 297
520
634 602
722 727
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Segment performance Q2 2012 02
Turnover (Tto) Sales (€m) EBITDA (€m)
Turnover (Tto) Sales (€m) EBITDA (€m)
Eur
ope
Am
eric
as
-9.4%
* Without acquisitions in 2011 ** Restructuring costs of €3m in Q1 and €17m in Q2
12
+39.7%/+16.1%*
1,162 1,084 1,029
1,164 1,192 1,067
990 1,105 1,097
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
1,180 1,169 1,104 1,290
1,365 1,251
1,137 1,223
1,237
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
93
60
45
81
50
24
12 20**
36**
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
286 284 289 334
571 698 646
752 766
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
13
5 7
30
23
15 13
29
21
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
-7.9%
+34.2%/+10.0%*
19
Net income and EPS 02
• Net income adjusted for restructuring and impairments still slightly positive with €3m
• Net income includes €17m restructuring already within EBITDA, €30m impairments partly offset by €6m income from adjustment of Frefer put liability and €10m ppa effects
• Taxes negatively impacted due to non-recognition of tax assets on losses incurred in Q2
Comments
13
EPS basic (€)*
Net income (€m)
* adjusted for capital increase ** Before restructuring expenses and impairments
0.69
0.21 0.25
0.65
0.07
-0.11 -0.27
-0.10
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
47
15 17
44
5
-12 -27 -10
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
(€m) H1 2012 Q2 2012
Stock write-downs – 4 – 4
Personnel expenses – 10 – 7
Other restructuring expenses – 6 – 6
EBITDA impact – 20 – 17 Impairments Eastern Europe and Spain – 9 – 9
Restructuring expenses total – 29 – 26
• Goodwill impairment in Brazil of €21m due to ongoing weaker macro environment
3**
Q2
0.03**
Q2 2012
-0.38
-38
2012 Q2
NWC and net debt almost stable sequentially 02
Cash flow reconciliation in Q2 2012 (€m)
14
60,0
EBITDA Change in
NWC Taxes Other
CF from operating activities Capex Free CF
Development of net financial debt in Q2 2012 (€m)
* exchange rate effects, interest
Q1
CF from operating activities Capex Other* Q2
33
5 -7
-1
30
-8
22
- 573
+30 -8
-31
- 582
Strong balance sheet 02
*Gearing = Net debt/Equity attributable to shareholders of Klöckner & Co SE less goodwill from business combinations subsequent to May 28, 2010
**Total capital = net debt plus equity (w/o minorities)
Comments
• Equity ratio of 37%
• Net debt of €582m
• Gearing* at 36%
• Net debt to total capital** at 25%
• NWC increased by €151m to €1,685m ytd
• NWC/sales at new normal ~21%
50%
25.2%
29.7%
23.3%
2.1%
19.7%
Balance sheet total June 30, 2012: €4,938m
36.5%
30.2%
33.3%
Non - current assets 1,244
Inventories 1,465
Trade receivables 1,153
Other current assets 102
Liquidity 974
Equity 1,804
Non - current Liabilities 1,491
Current liabilities 1,643
100%
0%
15
Balanced maturity profile despite repayment of Convertible in July 2012 02
Facility (€m) Committed Drawn amount
June 30, 2012* December 31, 2011*
Bilateral Facilities1) 615 200 126
Other Bonds 14 14 20
ABS2) 519 193 175
Syndicated Loan 500 226 226
Promissory Note 343 345 349
Total Senior Debt 1,991 978 896
Convertible 20073) 4) 325 329 319
Convertible 20093) 98 86 86
Convertible 20103) 186 163 157
Total Debt 2,600 1,556 1,458
Cash 4) 974 987
Net Debt 582 471
€m June 30, 2012
Adjusted equity 1,635
Net debt 582
Gearing5) 36%
Maturity profile of committed facilities and drawn amounts (€m)
Committed facilities
Drawn amounts
6444)
124
1,035
296
501 3944)
95
447
266 382
2012 2013 2014 2015 Thereafter
16
*Including interest 1) Including finance lease 2) On April 25th, 2012 the European ABS was extendend until May 2014 and the volume reduced by €60 million to € 360 million 3) Drawn amount excludes equity component 4) Repayment of convertible bond of €325 million in July 2012 out of cash 5) Net debt/Equity attributable to shareholders of Klöckner & Co SE less goodwill from business combinations subsequent to May 28, 2010
Overview Q2 and update on restructuring 01
Financials Q2 2012
Outlook
Appendix
02
03
04
Agenda
17
Outlook
• Macro assumptions • In Europe, our base assumption continues to be business as it is for the remainder of the year • In the US, recent macro news point to a slowdown in H2
• Q3 2012
• Turnover in Q3 expected to be slightly down vs Q2 • EBITDA in Q3 expected to be €25-35m before restructuring costs
• FY 2012
• Turnover and sales still expected to increase year on year despite challenging market environment
• Achievement of prior year EBITDA not anymore realistic given H2 EBITDA bef. restructuring expected to be below the €98m in H1
03
18
Overview Q2 and update on restructuring 01
Financials Q2 2012
Outlook
Appendix
02
03
04
Agenda
19
Appendix 04
20
Financial calendar 2012/2013
November 7, 2012 Q3 interim report 2012
March 6, 2013 Annual Financial Statements 2012
May 8, 2013 Q1 interim report 2013
May 24, 2013 Annual General Meeting 2013
August 7, 2013 Q2 interim report 2013
November 6, 2013 Q3 interim report 2013
Contact details Investor Relations Dr. Thilo Theilen, Head of Investor Relations & Corporate Communications
Phone: +49 203 307 2050
Fax: +49 203 307 5025
E-mail: [email protected]
Internet: www.kloeckner.de
Quarterly results and FY results 2007-2012 04
21
(€m) Q2 2012
Q1 2012
Q4 2011
Q3 2011
Q2 2011
Q1 2011
Q4 2010
Q3 2010
Q2 2010
FY 2011
FY 2010
FY 2009
FY 2008
FY 2007
Turnover (Tto) 1,863 1,857 1,636 1,765 1,763 1,498 1,318 1,368 1,448 6,661 5,314 4,119 5,974 6,478
Sales 1,964 1,945 1,739 1,885 1,885 1,587 1,332 1,401 1,416 7,095 5,198 3,860 6,750 6,274
Gross profit 340 344 307 318 337 353 275 294 331 1,315 1,136 645 1,366 1,221
% margin 17.3 17.7 17.6 16.8 17.9 22.3 20.6 21.0 23.4 18.5 21.9 16.7 20.2 19.5
EBITDA 33 45 14 37 62 104 48 61 100 217 238 -68 601 371
% margin 1.7 2.3 0.8 1.9 3.3 6.6 3.6 4.3 7.1 3.1 4.6 -1.8 8.9 5.9
EBIT -23 18 -18 8 36 86 24 39 78 111 152 -178 533 307
Financial result -18 -24 -21 -22 -21 -19 -19 -16 -17 -84 -67 -62 -70 -97
Income before taxes -41 -6 -39 -15 15 66 5 22 61 27 84 -240 463 210
Income taxes 3 -4 12 3 -9 -22 12 -7 -14 -17 -4 54 -79 -54
Net income -38 -10 -27 -12 5 44 17 15 47 10 80 -186 384 156
Minority interests 0 0 -1 -1 0 1 1 1 1 -1 3 3 -14 23
Net income KlöCo -38 -10 -27 -11 5 43 16 14 46 12 78 -188 398 133
EPS basic (€) -0.38 -0.10 -0.27 -0.11 0.07 0.65 0.25 0.21 0.69 0.14 1.17 -3.61 8.56 2.87
EPS diluted (€) -0.38 -0.10 -0.27 -0.11 0.07 0.60 0.25 0.21 0.69 0.14 1.17 -3.61 8.11 2.87
Strong Growth: 24 acquisitions since the IPO 04
22
Acquisitions1) Acquired sales1),2)
€141m
€567m
€108m
2 4
12
2
2005 2006 2007 2008 2009 2010
4
€231m
€712m
2011
2
€1.15bn
¹ Date of announcement 2 Sales in the year prior to acquisitions
Country Acquired 1) Company Sales (FY)2)
GER Mar 2010 Becker Stahl-Service €600m
CH Jan 2010 Bläsi €32m
2010 4 acquisitions €712m
US Mar 2008 Temtco €226m
UK Jan 2008 Multitubes €5m
2008 2 acquisitions €231m
CH Sep 2007 Lehner & Tonossi €9m
UK Sep 2007 Interpipe €14m
US Sep 2007 ScanSteel €7m
BG Aug 2007 Metalsnab €36m
UK Jun 2007 Westok €26m
US May 2007 Premier Steel €23m
GER Apr 2007 Zweygart €11m
GER Apr 2007 Max Carl €15m
GER Apr 2007 Edelstahlservice €17m
US Apr 2007 Primary Steel €360m
NL Apr 2007 Teuling €14m
F Jan 2007 Tournier €35m
2007 12 acquisitions €567m 2006 4 acquisitions €108m
USA Dec 2010 Lake Steel €50m
USA Sep 2010 Angeles Welding €30m
Brazil May 2011 Frefer €150m
USA April 2011 Macsteel €1bn
2011 2 acquisitions €1,150m
Comments
Balance sheet as of June 30, 2012 04
23
(€m) June 30, 2012 December 31, 2011
Non-current assets 1,244 1,295
Inventories 1,465 1,362
Trade receivables 1,153 922
Cash & Cash equivalents 974 987
Other assets 102 140
Total assets 4,938 4,706
Equity 1,804 1,843
Total non-current liabilities 1,491 1,526
thereof financial liabilities 1,054 1,068
Total current liabilities 1,643 1,337
thereof trade payables 933 750
Total equity and liabilities 4,938 4,706
Net working capital 1,685 1,534
Net financial debt 582 471
Shareholders’ equity: • Stable at 37%
Financial debt: • Gearing at 36% • Gross debt of €1.6bn and
cash position of €1.0bn result in a net debt position of €582m
NWC: • Increase mainly due to
seasonal effects
Profit & loss Q2 2012 vs. Q2 2011 04
(€m) Q2 2012 Q2 2011 Δ in %*
Sales 1,964 1,885 +4.2
Gross profit 340 337 +0.7
Personnel costs -162 -146 -10.9
Other operating expenses -152 -141 -8.4
EBITDA 33 62 -46.2
Depreciation, Amortization, Impairments -56 -26 -117.0
EBIT -23 36 -165.6
Financial result -18 -21 +16.3
EBT -41 15 -379.0
Taxes 3 -9 +132.2
Net income -38 5 -800.9
Minorities 0 0
Net income attributable to KCO shareholders -38 5 -786.9
24
* earnings impact
04
Segment performance Q2 2012 04
25
(€m) Europe Americas HQ/Consol. Total
Turnover (Tto)
Q2 2012 1.097 766 1.863
Q2 2011 1.192 571 1.763
Δ % -7,9 34,2 5,7
Sales
Q2 2012 1.237 727 1.964
Q2 2011 1.365 520 1.885
Δ % -9,4 39,7 4,2
EBITDA
Q2 2012 19 21 -7 33
% margin 1,5 2,9 1,7
Q2 2011 50 23 -11 62
% margin 3,6 4,4 3,3
Δ % EBITDA -61,6 -8,2 -46,2
• Excl. MSCUSA and Frefer turnover increase in Americas was 10.0% and sales increase was 16.1% yoy
• Without acquisitions total turnover decreased by 4.0% and total sales by 4.8% yoy
Comments
Acquisitions shift exposure towards more promising regions and products 04
24% Long productsQuality steel/Stainless steel 8%
Aluminium 7%
Tubes 6%
42% Flat productsOthers 13%
Sales by product
28% USAFrance/Belgium 16%
Switzerland 13%
UK 6%
28% Germany/EECSpain 4%
Sales by markets
Netherlands 3%Brazil 1%
China <1%
26
Machinery and mechanical 24% engineering
Miscellaneous 11%
Local dealers 10%
Household appliances/Consumer goods 7%
37% Construction industry
Automotive industry 11%
Sales by industry
As of December 2011
04
Current shareholder structure 04
27
Geographical breakdown of identified institutional investors
Comments
• Identified institutional investors account for 47%
• German investors incl. retail dominate
• Top 10 shareholdings represent around 31%
• Retail shareholders represent 34% • 100% freefloat
As of June 2012
Other World 7%
US 30%
Other EU 17%
Switzerland 5%
France 9%
Germany 28%
UK 4%
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
28