Klöckner & Co - Roadshow Presentation February 2009

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  • Klckner & Co SE

    A Leading Multi Metal Distributor

    February 2009

    Gisbert RhlCFO

  • 2Agenda

    2.

    Preliminary results FY 2008

    Appendix

    3.

    Market update

    4.

    Strategy update

    5.

    General targets and outlook

    1.

    Overview

  • 3Klckner & Co at a glanceKlckner & Co

    z Leading producer-independent steel and metal distributor in the European and North American markets combined

    z Network with more than 260 distribution locations in Europe and North America

    z More than 10,000 employees

    GB

    24%

    21%

    14%

    7%

    5%

    9%

    20%Germany

    France Spain

    Nether-lands

    Switzerland

    Sales split by markets

    As of September 2008

    Steel-flat Products

    Steel-long Products

    Special and

    Quality Steel

    Aluminum

    Other Products

    31%

    31%

    10%

    9%

    6%

    13%

    Sales split by product

    As of September 2008

    Other

    Machinery/Manufacturing

    Auto-

    motive*

    42%

    25%

    6%

    27%

    Sales split by industry

    As of December 2007

    Construction USA

    Tubes

    *

    Since

    deconsolidation

    of Namasco Ltd.

  • 4Distributor in the sweet spot

    Local customersGlobal suppliers

    Suppliers Sourcing Products and servicesLogistics/

    Distribution Customers

    z Global Sourcing in competitive sizes

    z Strategic partnerships

    z Frame contractsz Leverage one

    supplier against the other

    z No speculative trading

    z One-stop-shop with wide product range of high-quality products

    z Value added processing services

    z Quality assurance

    z Efficient inventory management

    z Local presencez Tailor-made

    logistics including on-time delivery within 24 hours

    z > 210,000 customers

    z No customer with more than 1% of sales

    z Average order size of 2,500

    z Wide range of industries and markets

    z Service more important than price

    z Purchase volume p.a. of >6 million tons

    z Diversified set of worldwide approx. 70 suppliers

    Klckner & Cos value chain

  • 5z Volume related increase and windfall profits result in strong EBITDA but high level of capital employed because of value and volume of stock

    How the business model of Klckner & Co works in

    High profitability in upturn due to windfall profits and volume increaseStrong cash flow generation in downturn due to working capital release

    An upturn with price and volume increases

    EBITDAStock turnover

    cycle

    of ~80 days

    EBITDA

    Windfall

    profits

    Volume

    z Windfall losses and write-offs but strong cash flow generation to reduce net debt

    A downturn with price and volume declines

    Net working

    capital

    Stock turnover

    cycle

    of ~80 days

    Net working

    capital

    Cash flow

  • 6Longterm

    financial development

    1

    1999 to 2005 unaudited

    pro-forma

    figures, Cash flow

    adjusted

    for

    M&A-activities; 2

    preliminary

    results

    Sales in

    bn1

    EBITDA in

    million1

    Year

    FCF in

    million1

    201 65 211 69 112 80 147 126 86

    4.5

    5.3

    4.2 4.0 3.8

    4.85.0

    1999 2000 2001 2002 2003 2004 2005

    151 220 150 156 140 349 197

    Even in heavy

    downturn

    markets

    with

    massive price

    declines

    still positive EBITDA and FCF

    5.5

    2006

    395

    6.3

    2007

    371

    6.7

    20082600

  • 7Agenda

    2.

    Preliminary results FY 2008

    Appendix

    3.

    Market update

    4.

    Strategy update

    5.

    General targets and outlook

    1.

    Overview

  • 8Revenue and EBITDA above 2007 but outlook unclear

    Preliminary results FY 2008

    z Revenues 6% up to 6.7bn

    z EBITDA increased by approx. 60% to 595m

    z Operating EBITDA increased by approx. 25% to 415m, negatively impacted by year-end inventory write-downs of approx. 60m

    z Significant reduction of net debt to 570m, almost halved since Q2 2008

    z Q4 with operating EBITDA almost balanced out before write-downs despite strong volume and price decline

    z Tonnage decreased by 8% to approx. 6m tons in 2008, mainly driven by shortfall in Q4 and deconsolidation of Namasco Ltd.

    z Immediate action program in response to current economic developments extended

  • 9Agenda

    2.

    Preliminary results FY 2008

    Appendix

    3.

    Market update

    4.

    Strategy update

    5.

    General targets and outlook

    1.

    Overview

  • 10

    z Prices could come close to bottoming out after sharp decline in Q4 2008z Significant global production cuts and destocking could leave the market short in Q2

    if demand recoversz If demand stays weak falling raw material contract prices could again pressure prices

    in H2z Government stimulus programs are expected to support steel demand but with

    limited effect in 2009

    Ongoing demand risks are dominating steel market outlook

    e

    EU domestic prices in EUR/t (Source: SBB)

    300

    400

    500

    600

    700

    800

    900

    1000

    Jan 0

    6Ma

    r 06

    May 0

    6Ju

    l 06

    Sep 0

    6No

    v 06

    Jan 0

    7Ma

    r 07

    May 0

    6Ju

    l 07

    Sep 0

    7No

    v 07

    Jan 0

    8Ma

    r 08

    May 0

    8Ju

    ly 08

    Sep 0

    8No

    v 08

    Jan 0

    9

    HRC Sections

    NA domestic prices FOB US Midwest mill in US$/to (Source: SBB)

    300

    400

    500

    600

    700

    800

    900

    1000

    1100

    1200

    1300

    Jan 0

    6Ma

    r 06

    May 0

    6Ju

    l 06

    Sep 0

    6No

    v 06

    Jan 0

    7Ma

    r 07

    May 0

    7Ju

    l 07

    Sep 0

    7No

    v 07

    Jan 0

    8Ma

    r 08

    May 0

    8Ju

    l 08

    Sep 0

    8No

    v 08

    Jan 0

    9

    WF Beams HRC

  • 11

    Government stimulus programs in major markets

    USA: $790bn

    z Focus on national infrastructure $500bn, i.e. $60bn over 10 years for transportation infrastructure

    z 6% of national GDP*

    Programs will support steel demand

    China: $600bn

    z End of 2008-2010z Predominantly infrastructure and social

    projects

    z 18% of national GDP*

    European Union: 200bn

    z Support of employment and infrastructure investments

    z 1.5% of national GDP*

    Germany: 50bn

    z 2009/2010z Thereof 14-18bn in infrastructure and

    reconstruction of schools and universities

    z 2% of national GDP*

    *based on GDP 2007Source: Reuters/ Bloomberg January

  • 12

    Agenda

    2.

    Preliminary results FY 2008

    Appendix

    3.

    Market update

    4.

    Strategy update

    5.

    General targets and outlook

    1.

    Overview

  • 13

    Three scenarios for 2009

    z On the following three slides we provide a framework of how our business can be impacted by volume and price declines in general

    z Three different scenarios are shown:

    z A: -8% in volumes, 2%-points gross margin contraction

    z B: -12% in volumes, 2.5%-points gross margin contraction

    z C: -15% in volumes, 3%-points gross margin contraction

    z The scenarios do not necessarily reflect management's expectation about future development

    z Scenarios are not adjusted for further necessary cost cutting initiatives to be implemented in case of scenario B and C

    z Since the visibility for 2009 is limited we cannot provide guidance at this point in time

    The scenarios cannot be taken as a guidance

  • 14

    Scenario A (-8% volume and 2%p gross margin contraction)*

    OperationalEBITDA 2008

    Windfalls expected

    (20-60 M40)

    OperationalEBITDA w/o

    windfalls

    2% margincontraction

    8% volumereduction

    8% volumereduction -

    variable costs

    AcquisitionsLTM

    STAR and costreductions

    EBITDAscenario A

    EBITDA

    415 -40 375 -120-110 +20

    +50225

    Leverage

    Net Debt

    +10

    Net debt YE2008

    13% NWCreduction

    Total cash floww/o change

    NWC

    Cash out cartelpenalty

    Net debtscenario A

    570 -160-120

    390

    Leverage YE2008

    Leveragescenario A

    1.41.7

    100

    * 2008 based

    on preliminary

    figures, windfall

    profits

    estimated, all figures

    in

    million

  • 15

    Scenario B (-12% volume and 2.5%p gross margin contraction)*

    OperationalEBITDA 2008

    Windfalls expected

    (20-60 M40)

    OperationalEBITDA w/o

    windfalls

    2.5% margincontraction

    12% volumereduction

    12% volumereduction -

    variable costs

    AcquisitionsLTM

    STAR and costreductions

    EBITDAscenario B

    EBITDA

    415 -40 375 -150

    -160 +30 155

    +X**

    Leverage

    Net Debt

    +10

    Net debt YE2008

    17% NWCreduction

    Total cash floww/o change

    NWC

    Cash out cartelpenalty

    Net debtscenario B

    570 -220 -80-X**

    370

    -X**

    Leverage YE2008

    Leveragescenario B

    1.4

  • 16

    Scenario C (-15% volume and 3%p gross margin contraction)*

    OperationalEBITDA 2008

    Windfalls expected

    (20-60 M40)

    OperationalEBITDA starting

    point w/owindfalls

    3% margincontraction

    1