Klöckner & Co SE Press Conference Presentation Q2 2016 results

Q2 2016 Results

Press Conference

August 4, 2016

Gisbert Rühl | CEO

No.2 Q2 2016 Results | Press Conference | Klöckner & Co SE

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”, “endeavor”, “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.

No.3

1. Highlights and update on strategy

2. Financials

3. Outlook

4. Appendix

Agenda

Q2 2016 Results | Press Conference | Klöckner & Co SE

No.4

Highlights Q2 201601

• EBITDA of €72m well above initial guidance range of €50m to €60m

• Gross margin significantly up by 4.6%p to 23.8% after 19.2%*) in Q2 2015

• Sales decreased yoy by 10.4% to €1.5bn due to lower price level and site closures in Europe

• Digitalization strategy further advanced

Digital pricing tools helped to benefit stronger than initially expected from rising prices

Webshops and contract portals with further increasing sales

Share of sales generated via digital channels reached 10%

• “One Europe” in order to integrate European distribution activities initiated – expected additional

incremental EBITDA contribution of €30m until 2019, thereof €10m already next year

• Positive outlook for Q3 despite current consolidation of steel prices – guidance of a significantly higher

EBITDA yoy in a range of between €65m and €75m

• Well on track to strongly improved FY EBITDA compared to previous years figure before restructuring and

return to positive net income


* Q2 2015: Before restructuring cost.


Significant increase of EBITDA in Q2 201601

EBITDA impact: Q2 yoy

Market-related

GP effect of €47m

• Results favored by positive market effects on

EBITDA of overall €47m in Q2 and €53m in H1

Positive price effect of €38m in Q2 and €44m

in H1 supported by increased use of digital

pricing tools

Positive volume effect of €9m solely in Q2

• KCO WIN+ program with EBITDA contribution of

€7m in Q2 and totally €11m in H1

Effect mainly in Europe through KCO WIN+

related restructuring and optimization

measures

Overall incremental effect of around €20m

this year and additional €10m in 2017

expected

38

9

36

Q2 2015

(bef. restr.)

Volume

Effect

Restructuring

Costs

52

Q2 2015

7

Q2 2016KCO

WIN+

Effect

-18

OPEXPrice

Effect

-17

88

11

44

H1 2015 Restructuring

Costs

52

H1 2015

(bef. restr.)

46

9

KCO

WIN+

Effect

Volume

Effect

Price

Effect

OPEX

-21

H1 2016

-7

72

Market-related

GP effect of €53m

EBITDA impact: H1 yoy


Implementation of digitalization strategy is progressing further01

• Strengthening of ties to Contorion via financial investment

• Marketing for Klöckner version of SAGE ERP System has started

• User can order steel and manage their orders directly out of the ERP System

Digital

Partnerships

• Former Rocket Internet manager Franziska Leonhardt hired as COO of

kloeckner.i and kloeckner.v starting in September

• Excellent addition to management team due to in-depth expertise in launching

and scaling digital business models

Internal

Organization

• Intensified use of digital tools to support salesforce in optimizing prices

• As a consequence stronger than expected benefits from rising prices in Q2

• Further development and refining of pricing tools intended

Digital Tools

• Webshops and contract portals with further increasing sales

• Overall already around 10% of Group sales achieved via digital channels in Q2

• Well on track to achieve ambitious digitalization targets

Digital Sales


For Klöckner & Co digital transformation is more than online retail01

• Shift of business design from linear value-chains to interactive platforms

• The development of platforms will be driven through increasing connectiveness, decentralization of production, and the enormous progress in artificial intelligence

• Interactions will be facilitated and orchestrated by platforms which create value not through physical resources but through leveraging data

• Precondition is an open, plug-and-play infrastructure and a clear governance for the platform

No.8

01 “One Europe”: Integration of European distribution activities to increase profitability


• Additional synergies in procurement

• Improved best practice sharing

• Centrally steered implementation of digitalization and higher value-add strategy

• Cross-border optimized logistics

2017

2018 €15m

Total annual impact of

up to €30m from 2019

onwards

2019 €5m

€10m

Centralized organization will facilitate:

• One CEO and uniform management for both cross border regions in Europe

• A Europe-wide cross functional approach for higher value-add, digitalization, procurement, finance and logistics

Organizational structureStarting position

• Restructuring in Europe on a country-by-country basis successfully completed

• Additional improvement potential with one common approach for country organizations in Belgium, Germany, UK, France, the Netherlands, Austria and Spain

No.9


2. Financials

3. Outlook

4. Appendix

Agenda



Shipments and sales02

• Shipments stable yoy despite KCO WIN+ effects

• Qoq seasonal increase in both segments

• Sales decreased yoy signifcantly more pronounced

than shipments due to lower average sales prices

• Increase qoq due to price recovery and higher

volumes

1,556

Q4

2015

1,535

1,690

Q3

2014

1,555

Q4

2014

1,661

Q1

2015

1,6451,636

Q3

2015

Q2

2014

Q1

2016

Q2

2015

1,643

Q2

2016

1,720

Q2

2015

Q1

2016

1,597

1,693

Q2

2016

1,517

Q1

2015

Q3

2015

Q4

2014

1,577

Q3

2014

1,6751,6971,680

1,386

Q4

2015

1,456

Q2

2014

-0.1%

+5.6%

-10.4%

+9.5%

Shipments (Tto) Sales (€m)


Gross profit and EBITDA02

* Before restructuring cost.

** 2014 amounts restated due to the initial application of IFRIC 21 (Levies).

72

11

30

10

33

61

Q4

2014

Q3

2014

Q2

2014

58

Q2

2016

Q1

2016

16

Q4

2015

Q3

2015

Q2

2015

36

Q1

2015

4.8

1.20.7

1.92.1

0.6

2.1

3.63.5

325

Q2

2016

362

Q4

2015

297

Q3

2015

311

Q2

2015

325

Q1

2016

304

Q3

2014

309

Q4

2014

310

Q1

2015

Q2

2014

325

22.020.4

19.419.2

18.219.619.419.3

23.8

• Continued margin improvement from 18.2% in

Q1 2015 to 23.8% in Q2 2016

• EBITDA in Q2 improved yoy by €36m and qoq by €56m

• EBITDA margin recovered by 2.7%p to 4.8% yoy and qoq by

3.6%p

Gross profit* (€m) / Gross margin* (%) EBITDA*,** (€m) / EBITDA margin*,** (%)


Segment performance Q202

• Europe

• EBITDA up from €29m before restructuring by €20m

to €49m

• Significant positive price effect (€17m)

• KCO WIN+ contributes €5m to EBITDA improvement

CommentsEurope (€m)

Americas (€m)

13

Q2 2016

Actual

30

Net f/x

Effect

0

OPEX

-10

KCO

WIN+

Effect

2

Price

Effect

21

Volume

Effect

4

Q2 2015

Actual

5

17

549

Q2 2016

Actual

Net f/x

Effect

-23

Q2 2015

Actual

(reported)

-1

OPEX

-6

KCO

WIN+

Effect

Price

Effect

Volume

Effect

Q2 2015

Actual

(before

restruct.)

29

Restruct.

2015

52

• Americas

• EBITDA up by €17m to €30m

• Similar to Europe strong positive price effect (€21m)


Cash flow and net debt development02

36

• Limited seasonal NWC build-up of €33m

• “Other” includes changes in other provisions and other

operating assets/liabilities as well as non-cash items

22

-972

-33

EBITDA

Q2 2016

Change

in NWC

Free cash

flow Q2

2016

4

-4

TaxesInterest

-18

Other Cash

flow from

operating

activities

-4

Capex

CommentsCash flow reconciliation in Q2 2016 (€m)

• Net financial debt mainly increased due to payments

under derivative financial instruments used as hedges

for intercompany debt

Net financial debt 06/2016 vs. 03/2016 (€m)

22

Hedging

Derivatives Other

3

Net Debt

Q2 2016

435

-55

F/X

-4

Capex

-18

CF from

operating

activities

Net Debt

Q1 2016

383

,-4


Maturity profile June 2016 – renewal of ABS Europe executed 02

Facility Committed (€m)Drawn amount (€m, IFRS*)

Q2 2016 FY 2015

Syndicated Loan 360 50 0

ABS Europe 300 127 91

ABS/ABL USA 495 188 184

Promissory Notes 1) 0 0 135

Convertible 2010 2) 0 0 25

Bilateral Facilities 3) 313 137 115

Total Debt 1,468 502 550

Cash 67 165

Net Debt 435 385

€m Q2 2016

Adjusted equity 1,018

Net debt 435

Gearing 4)43%

Maturity profile of committed facilities & drawn amounts (€m)

Left side: committed facilities Right side: drawn amounts (nominal amounts)

ABS/ABL USA BilateralsSyndicated Loan ABS Europe

*Including interest accrued, excluding deferred transaction costs

1) Repaid on 20.04.2016 from existing cash reserves.

2) Original principal €186m, thereof €161m repaid on 22.12.2015 (investor put), € 25m repaid

on 12.01.2016 (issuer clean-up of all bonds that remained outstanding after investor put).

3) Including finance lease.

4) Net debt/Equity attributable to shareholders of Klöckner & Co SE less goodwill from business

combinations subsequent to May 23, 2013.

5055181866181919

61

237

1

1

15

15

18

189

620

305

73

191

496

126

300

495

188

Renewal executed

in July 2016

2016 2017 2018 2019 2020 2021 Thereafter

No.15


2. Financials

3. Outlook

4. Appendix

Agenda


No.16

Shipbuilding


Segment specific business outlook 201603

Energy

industry

Real steel

demand

Europe

~ +3%

Construction

industry

Manufacturing,

machinery and

mechanical

engineering, etc.

Automotive

industry

US

~ -3%


Outlook 03

Q3 2016

• Sales expected to be sequentially down

• Significantly higher operating EBITDA anticipated yoy in a range between €65m and €75m

FY 2016

• Lower sales anticipated due to continued exit of low margin business and on average lower sales prices

• EBITDA expected to rise significantly compared to previous years figure adjusted for restructuring

expenses

• Positive net income supported by lower financing expenses and the expected absence of further

goodwill impairments

No.18


2. Financials

3. Outlook

4. Appendix

Agenda



Quarterly and FY results04

(€m)Q2

2016

Q1

2016

Q4

2015

Q3

2015

Q2

2015

Q1

2015

Q4

2014*

Q3

2014*

Q2

2014*

FY

2015

FY

2014

FY

2013

FY

2012**

Shipments (Tto) 1,643 1,556 1,535 1,636 1,645 1,661 1,555 1,690 1,720 6,476 6,598 6,445 7,068

Sales 1,517 1,386 1,456 1,597 1,693 1,697 1,577 1,675 1,680 6,444 6,504 6,378 7,388

Gross profit 362 304 297 311 320 310 309 325 325 1,237 1,261 1,188 1,288

% margin 23.8 22.0 20.4 19.4 18.9 18.2 19.6 19.4 19.3 19.2 19.4 18.6 17.4

EBITDA rep. 72 16 2 28 -17 10 33 61 58 24 191 124 60

% margin 4.8 1.2 0.2 1.8 -1.0 0.6 2.1 3.6 3.5 0.4 2.9 2.0 0.8

EBIT 49 -8 -297 5 -44 -15 8 38 36 -350 98 -6 -105

Financial result -7 -8 -12 -12 -13 -12 -13 -14 -16 -49 -59 -73 -80

Income before taxes 42 -16 -309 -7 -56 -27 -4 24 19 -399 39 -79 -185

Income taxes -9 2 45 -2 1 6 1 -8 -7 50 -17 -12 -18

Net income 33 -14 -263 -9 -55 -22 -4 16 12 -349 22 -90 -203

Minority interests 1 0 -1 0 -1 0 -1 0 0 -2 0 -6 -3

Net income KlöCo 32 -14 -263 -9 -54 -21 -4 16 12 -347 22 -85 -200

EPS basic (€) 0.32 -0.14 -2.63 -0.09 -0.54 -0.22 -0.04 0.16 0.12 -3.48 0.22 -0.85 -2.00

EPS diluted (€) 0.32 -0.14 -2.63 -0.09 -0.54 -0.22 -0.04 0.16 0.12 -3.48 0.22 -0.85 -2.00

* Restated due to initial application of IFRIC 21.

** Restated due to initial application IAS 19 revised 2011.


Segment performance04

* 2014 amounts restated due to the initial application of IFRIC 21 (Levies).

931

Q2

2015

970

Q1

2015

979

Q4

2014

893

Q3

2014

957

Q2

2014

987

Q2

2016

950

Q1

2016

903

Q4

2015

891

Q3

2015

963

Q1

2016

870

Q4

2015

919

Q3

2015

986

Q2

2015

1,054

Q1

2015

1,025

Q4

2014

973

Q3

2014

1,040

Q2

2014

1,072

Q2

2016

12

2933

49

11

21

34

Q2

2016

Q1

2016

Q4

2015

Q3

2015

Q2

2015

Q1

2015

7

Q4

2014

18

Q3

2014

Q2

2014

Q2

2016

693

Q1

2016

652

Q4

2015

644

Q3

2015

705

Q2

2015

675

Q1

2015

682

Q4

2014

662

Q3

2014

733

Q2

2014

733

Q2

2016

554

Q1

2016

516

Q4

2015

537

Q3

2015

611

Q2

2015

639

Q1

2015

672

Q4

2014

604

Q3

2014

634

Q2

2014

608

30

11

14

20

30

Q4

2015

3

Q3

2015

Q2

2015

13

Q1

2015

7

Q4

2014

Q3

2014

Q2

2016

Q1

2016

Q2

2014

29

-2.1%

+2.7%

-8.6.%

-13.3%

Euro

pe

Am

ericas

Restructuring costs (€m)** Q2 2015 Q3 2015 Q4 2015

Europe 52 2 2

Americas 2

Shipments (Tto) Sales (€m) EBITDA* before restructuring (€m)

Shipments (Tto) Sales (€m) EBITDA* before restructuring (€m)

** €4m are reported in HQ in Q4 2015.


Strong balance sheet04

• Equity ratio further healthy at 37%

• Net debt of €435m

• Gearing* at 43%

• NWC increased from €1,128m to €1,168m

* Gearing = Net debt/Equity attributable to shareholders of

Klöckner & Co SE less goodwill from business

combinations subsequent to May 23, 2013.

Comments

Assets Equity & liabilities

39% 39%

656 815

961 939

945 926

114

June

30, 2016

2,842

6795

Dec 31, 2015

2,841

165Liquidity

Other current assets

Trade receivables

Inventories

Non-current assets

354

489 586

340 420

545497

290

2,841

1,113

Other liabilities

Trade payables

Pensions

Financial liabilities

Equity

June 30, 2016

2,842

1,049

Dec 31, 2015

39% 37%


Sales by markets, products and industries04

As of December 31, 2015.

Sales by markets Sales by industry

Sales by product

5%UK

<1%Brazil/China

11%France/Belgium

16%Switzerland

24%Germany

38%USA

3%Netherlands

2%Spain

6%Tubes

7%Aluminum

9%Quality steel/

Stainless steel

22%Long products

43%Flat products

13%Others

12%Automotive

industry

5%Miscellaneous6%

Local dealers

33%Machinery/mechanical

engineering

37%Construction

industry

7%Household appl./Consumer goods


Current shareholder structure04

Geographical breakdown of identified

institutional investors• Identified institutional investors account for 72%

• German investors incl. retail dominate

• Top 10 shareholdings represent around 52%

• Retail shareholders represent 21%

Comments

As of July 2016.

6% Rest of EU

35% US

3% Rest of world

3% Switzerland

4% UK

3% France

46% Germany

Financial calendar

Christian Pokropp

Head of Investor Relations & Corporate Communications

Phone: +49 203 307 2050

Fax: +49 203 307 5025

Email: [email protected]

Internet: www.kloeckner.com

November 3, 2016 Q3 interim report 2016

March 1, 2017 Annual Financial Statements 2016

April 26, 2017 Q1 interim report 2017

May 12, 2017 Annual General Meeting 2017, Düsseldorf

July 26, 2017 Q2 interim report 2017

October 25, 2017 Q3 interim report 2017

Contact details

Klöckner & Co SE Press Conference Presentation Q2 2016 results

Investor Relations

Transcript of Klöckner & Co SE Press Conference Presentation Q2 2016 results