Klöckner & Co - Roadshow Presentation January 31, 2007

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Transcript of Klöckner & Co - Roadshow Presentation January 31, 2007

  1. 1. Klckner & Co - A Leading Multi Metal Distributor - Roadshow Presentation January 31, 2007 Dr. Thomas Ludwig Gisbert Rhl CEO CFO
  2. 2. 2 Klckner & Co at a glance Klckner & Co highlights Leading producer-independent steel and metal distributor in the European and North American markets combined Distribution network with approx. 240 warehouses in Europe and North America About 10,000 employees Key pre-announced financials FY 2006 - Sales: 5,500 million - EBITDA: 395 million DistributorProducer Customer Products: Services: Construction: Structural Steelwork Building and civil engineering Machinery/ Mechanical Engineering Others: Automotive Metal products/ goods, installation Durable goods etc. Overview
  3. 3. 3 Distributor in the sweet spot Suppliers Sourcing Products and services Logistics/ Distribution Customers Sourcing in competitive sizes Strategic partnerships Frame contracts Global sourcing 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 More than 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 Purchase volume p.a. of 6 million tones Diversified set of worldwide ca. 70 suppliers Examples: Klckner & Cos value chain Overview
  4. 4. 4 Attractive product offerings combined with value added services Overview Broad range of products Value added Services Long products Sectional steel/Tubes Blanking/ Flame & Plasma cuttingCut and slit from coilStainless and aluminumFlat steel Cut to length/ Mitre cut/Bending Shot blasting/Priming/ Conservation
  5. 5. 5 Global reach with broad product and customer diversification Germany/ Austria 24% France/ Belgium 19% Switzerland 14% Spain 10% UK 9% Nether- lands 6% Eastern Europe 1% USA 10% Canada 7% Steel-flat Products 30% Steel-long Products 32% Tubes 9% Special Steel/ Quality Steel 9% Aluminum 6% Other Products 14% Construction 41% Machinery/ Manufacturing 15% Automotive 7% Appliances 7% Other 30% USA CAD USA CAN G 25 Locations F 80 Locations CH 33 Locations E 46 Locations UK 24 Locations IE 1 Location NL 7 Locations Eastern Europe 4 Locations CAN 5 Locations USA 18 Locations Total 243 Locations Locations Country headquarters Overview Sales split by markets (2005) Sales split by product (2005) Sales split by industry (2005) IE
  6. 6. 6 OwnershipCorporatedevelopmentNew ownership and management have repositioned Klckner & Co WestLB becomes majority shareholder of Klckner & Co, together with HSH Nordbank Period marked by shareholder conflicts Dr. Thomas Ludwig rejoins as CEO Gisbert Rhl joins as CFO Refocus on operational excellence and growth Overview E.ON sells Klckner & Co to the Balli Group WestLB/HSH sell Klckner & Co to Lindsay Goldberg & Bessemer (LGB) IPO June 28, 2006 2001 2003 2004 2005 20062002 Search for new ownership
  7. 7. 7 Klckner & Co is the leading independent distributor in the European and North American markets combined In Europe Klckner Co is by far the largest independent distributor In North America Klckner & Co has leading market shares in selected regions In Europe, the largest distributors are tied to a steel producer while in North America the players are independent (excl. ThyssenKrupp) 4.96 4.66 4.10 2.15 1.77 1.47 1.45 1.37 1.29 1.16 0 1 2 3 4 5 6 Klckner&Co Ryerson RelianceSteel RusselMetals SamuelSon,&Co. InterferStahl WorthingtonSteel O'NealSteel MetalsUSA MacSteel ServiceCenters Sales(bn)Competitive landscape - independent metals distributors Top Independent Distributors in Europe & North America1, 2 Comments Source: Purchasing Magazine (2006); Company information 1) 2005 USD/ EUR exchange rate 0.8051, European Central Bank 2) Proforma for recent M&A activity Market
  8. 8. 8 Regional landscape Europe (2005) North America (2005) Arcelor Mittal AM3S 12% (Sales Distribution 3.2m = 5%) ThyssenKrupp 8% Corus 6.5% Klckner & Co 5.9% Other Mill-Tied Distributors ~15- 25% Other Independents ~45-55% Klckner & Co 6% Corus 4% Source: EuroMetal, Company reports, Klckner & Co Other 72.5% Ryerson 5.0% Reliance Steel 4.4% Samuel, Son & Co. 2.3% ThyssenKrupp Materials NA 2.0% Russel Metals 1.9% Worthington Steel 1.6% Metals USA 1.3% Carpenter Technology 1.1% PNA Group 1.1% McJunkin 1.2% O'Neal Steel 1.4% MacSteel Service Centers 1.5% Olympic Steel 0.8% AM Castle 0.7% Klckner & Co 1 1.0% 1) Operates as Namasco in North America Source: Purchasing Magazine (May 2006) Market Structure: 67% through distribution, service centers Size in value: ~6580bn Companies: ~3,000 few mill-tied, most independent Structure: 50-60% through distribution, service centers Size in value: ~68-92bn Companies: ~1,300 only independent distributors Only independent in top tier
  9. 9. 9 Steel industry trends Industry trends supporting Klckners strategy Globalization and consolidation resulted in large costs savings, higher and more flexible capacity utilization, much better supply discipline and higher pricing power, which will prevent the margin destroying behaviour from the past Capacity and export containment in China under the drive of central government Higher material costs especially of iron ore and decreasingly relevant fixed costs have flattened the global steel cost curve in favour of developed-market steel producers Stable global demand growth leads to far quicker destocking and eroded global overcapacity On-going consolidation favouring large scale distributors Higher prices with much shorter downturns support more stable earnings and cash flows for distributors Market
  10. 10. 10 Demand and price development Demand Main steel-using sectors of the industry like construction, mechanical engineering and metal works retained a positive outlook especially in Germany Softer development of automotive and appliances expected Prices Flat products: Price weakness has bottomed out. In Q1 07 prices are expected to be stable or slightly increasing because stocks have not been overbuilt and steady demand has continued. Pressure from third party import has soften because of increasing prices in China Long products: Recovery expected due to short winter slowdown Europe Market Demand Non residential constructions markets remain strong, capital goods are steady at high levels, automotive week Prices Flat products: Destocking and production cuts are moving in the right direction and will continue throughout Q1 07 Import pipeline beginning to ease because of narrowed steel price premium and the weak dollar Long products: Price are bouncing back after seasonal downturn as inventory levels are stable North America
  11. 11. 11 Profitable growth Strategy Profitable growth through value- added 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 - Inventory management
  12. 12. 12 Acquisitions driving market consolidation Status Quo 1 Next steps 01/2007: Tournier 35 million sales; 41 employees 10/2006: Action Steel 55 million sales; 110 employees 10/2006: Gauss 10 million sales; 40 employees 07/2006: Aesga 18 million sales; 40 employees 02/2006: Targe 25 million sales; 50 employees 10/2005: Alu Menziken Service 33 million sales; 70 employees 07/2005: Reynolds 108 million sales; 150 employees Further acquisitions in core markets at attractive valuations: Leverage existing structure with 10 to 12 smaller (local) bolt on acquisitions in 2007 Medium and large scale acquisitions when appropriate Include attractive industries, e.g. oil and gas Focus on targets in key markets at attractive valuations Strategy Benefits Significant synergy opportunities Streamlining operations, processes and sales force Integration of STAR Economies of scale Stronger purchasing power Strategy Attractive valuations Proven acquisition integration capability
  13. 13. 13 Organic growth and expansion into new markets2 Status Quo Strong growth in core markets above GDP partly as a result of the outstanding development of the construction and machinery industries Eastern European facilities established in Poland, Czech Republic, Romania and Baltic States Next steps Expansion of strong market positions in core markets: Selective extension of product range through development of specific products and customer specific solutions Increase value added services through investments in new processing capacity Extension of customer base through development of product management for specific customer groups Further geographic expansion in Eastern Europe by leveraging the existing network Strategy Leveraging existing distribution network Strategy Benefits Sustainable profitable growth
  14. 14. 14 Purchasing Status Quo Close-down of warehouses in Northern Germany (3 0) Reduction number of warehouses in the Lyon area in France (8 4) Improvement warehouse structure in the Iowa- region in US (3 1) Restructuring of service center business in Switzerland (3 1) 3 Next steps Business optimisation through STAR Program Upside potential from STAR Program approx. 40 60 million until 2007 and a total of approx. 80 million until 2008 Distribution Status Quo Next steps Continuous improvement of distribution network throughout the Group with support of the optimization-tool Prodacapo (activity based costing) Ongoing improvement in France and UK Project to restructure Spanish distribution network started Finalize