3. 3
Klöckner & Co at a glance
Klöckner & 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 financials FY 2006
- Sales: €5,532 million
- EBITDA: €395 million
- Net indebtedness €365 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
4. 4
Distributor in the sweet spot
Suppliers Sourcing
Products
and services
Logistics/
Distribution
Customers
• Global Sourcing
in competitive
sizes
• Strategic
partnerships
• Frame contracts
• 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:
Klöckner & Co’s value chain
Overview
Global suppliers Local customers
5. 5
Global reach with broad product and customer diversification
Germany/
Austria 23%
France/
Belgium
21%
Switzerland 15%
Spain 10%
UK 9%
Nether-
lands 6%
Eastern
Europe 1%
USA 10%
Canada 5%
Steel-flat
Products
28%
Steel-long
Products 31%Tubes 9%
Special Steel/
Quality Steel
10%
Aluminum 8%
Other Products 14%
Construc-
tion 40%
Machinery/
Manufacturing 20%
Auto-
motive 5%
Metal
Products
20%
Other 15%
USA
CAD
USA
CAN
G 25 Locations
F 76 Locations
CH 31 Locations
E 48 Locations
UK 24 Locations
IE 1 Location
NL 7 Locations
Eastern Europe 4 Locations
CAN 5 Locations
USA 17 Locations
Total 238 Locations
Locations (Dec. 31, 2006)
Country headquarters
Sales split by markets (2006)
Sales split by product (2006)
Sales split by industry (2006)
IE
Overview
6. 6
Strong position in Europe;
significantly improved position in NA after acquisition of Primary
Europe (2005) North America (2005)
Arcelor Mittal AM3S 12%
(Sales Distribution €3.2m = 5%)
ThyssenKrupp 8%
Corus 6.5%
Klöckner & Co 5.9%
Other Mill-Tied
Distributors ~15-
25%
Other
Independents
~45-55%
Klöckner & Co 6%
Corus 4%
Source: EuroMetal, Company reports, Klöckner & 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%
Klöckner & 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: ~€65–80bn
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
7. 7
Broad coverage of the US market
and much stronger platform for further bolt-on acquisitions
Geographical Scope
Primary outlet
Primary Sales office
Oakland
Houston
Missouri
Chicago
Tampa
Charlotte
Arizona
Arkansas
Iowa
Alabama Georgia
South
Carolina
North Carolina
Indiana
Maryland
Maine
Connecticut
Florida
Louisiana
Illinois
Texas
California
Dubuque
Louisville
Indianapolis
Atlanta
B´ham
Charleston
Dallas
Austin
New Orleans
Jacksonville
Orlando
Pompano
Phoenix
Santa Fee Springs
Tulare
West Memphis
Savannah
Portland
Middletown
New Castle
Namasco Gen. line
Namasco Processing
• Sales:
2006: $467 million
• Leading market position
in plate distribution
• Wide range of offered
services
• Broad geographic
coverage with seven
locations
Key Facts
Primary Steel
8. 8
Investment highlights
• The plate market is attractive and has a good perspective
• Pricing has been relatively stable and less volatile than other segments (also supported by high supply
side concentration)
• Low dependency on individual market segments
• Good growth perspective for main segments heavy equipment, oil & gas, transportation and railcar,
shipbuilding, etc.
• Primary is a well respected and well managed major player in plate distribution segment
• Good quality based market reputation
• Decent profitability and relatively good operational performance also supported by PE environment
• Strong management team with good acquisition track record
• A combined Primary and Namasco company would create a leading position in plate distribution
• Estimated total market share of 10% in plate segment
• Broad geographic coverage
• Wide range of offered services
• Complementary sales coverage combined with strong product overlap offers synergy potential
• Namasco’s market coverage hugely enlarged
• More than doubled purchasing power helps to counterweight the strong supplier consolidation (top 3
account for more than 90% of market)
• Additional (typical) synergies in admin, finance, IT, etc.
Growth in an
attractive
market segment
Acquire
respected and
well managed
business
Synergies
Leading position
in plate segment
Primary Steel
9. 9
High added value, low customer concentration
with broad industry split and complementary product mix
Product Mix (2006, $ mio.) (1)
0
50
100
150
200
250
Strip
Mill
As
Rolled
FR Pipe Merch.
Bar
Beams /
struc.
Tube others
Primary Namasco
Customer concentration
Customer 1 Shipbuilding 4,2%
Customer 2 Power Generation 3,1%
Customer 3 Oil & Gas 1,9%
Customer 4 Transp. Equipment 2,1%
Customer 5 Service Center 1,9%
Customer 6 Transp. Equipment 1,8%
Customer 7 Oil & Gas 1,4%
Customer 8 Oil & Gas 1,4%
Customer 9 Ind. Equipment 1,3%
Customer 10 Service Center 1,0%
Segments Served
Service Centres 33,5%
Metal builders 2,9%
Construction 2,6%
Heavy in. Equip. 29,3%
Transp. Equipment 4,5%
Ship building 4,8%
Oil & Gas 16,2%
Power Generation 6,2%
Sales split by type of value added
Cut to length 45%
Stock sales 34%
Shearing 1%
Slitting 3%
Thermal cutting 13%
Outside Processing 4%
Primary Steel
10. 10
Steel industry trends
Industry trends supporting Klöckner’s 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
Strategy
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
Acquisitions driving market consolidation1
Next steps
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
Status Quo
• Attractive valuations
• Proven acquisition integration capability
04/2007: Teuling
€14 million sales; 16 employees
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
04/2007: Primary Steel
€360 million sales; 389 employees
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 and steel prices
• Improved performance mainly in Germany
and France due to organizational changes
• Eastern European facilities established in
Poland, Czech Republic, Romania and
Baltic States
• Extending activities of our Chinese
representative office
Next steps
Expansion of strong market positions in core
markets:
• “STAR-Program” supporting organic
growth
• Selective extension of product range
• Increase value added services through
investments in new processing capacity
• Extension of customer base
• Opening of new branches in Eastern
Europe (Romania, Poland, Czech Republic
and Baltic States)
Leveraging existing
distribution network
Strategy
Benefits Sustainable profitable growth
Strategy
14. 14
Purchasing – Status Quo
Improved performance as a result of restructured
distribution network:
• 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
STAR: Status quo 2006 and next steps
Distribution – Status Quo Next steps
• Continuous improvement of distribution network
throughout the Group with support of the
optimization-tool “Prodacapo” (activity based
costing)
• Ongoing roll-out throughout the European
countries
• Finalize implementation of SAP throughout the
European organization (France, Switzerland) and
interface SAP with Prodacapo
• Implement unified article code
• Finalize central purchasing on country level,
especially in Germany
• Establish European purchasing (STAR Phase II) and
increase sourcing from world-class suppliers with
structural cost advantages
• Frame contracts with main suppliers
• Global sourcing for third party countries
• Implementation of new organization in
Germany (January 1, 2007)
Strategy
15. 15
3 STAR: Phase I finalized in 2008, further potential in Phase II
Phase I (2005 - 2008)
Overall targets:
• Central purchasing on country level,
especially in Germany
• Improvement of distribution network
• Improvement of inventory management
2006: ~ €20 million
2007: ~ €40 million
2008: ~ €20 million
~ €80 million
Phase II (2008 onwards)
Phase I upside potential
Overall targets:
• European Sourcing
• Ongoing improvement of distribution network
Strategy
17. 17
Strong quarterly development in 2006 compared to 2005
48494654 70
108104
74
05 Q1 06 05 Q2 06 05 Q3 06 05 Q4 06
EBITDA¹
(€m)
Net debt
deleveraging2
(€m)
Sales
(€m)
670
482 435
365
Q1 06 Q2 06 Q3 06 Q4 06
1,2171,191
1,348
1,207
1.3981,3941,4181,323
05 Q1 06 05 Q2 06 05 Q3 06 05 Q4 06
Fast and constants deleveraging
Sales increase driven by volume
and price increases
1) Adjusted by one-off effects (asset disposals): Q1 2006: about 5M€ and Q3 2006: about 35M€
2) Q1 2006 incl. shareholder loan
Strong profitability growth in Q2
and Q3 also driven by stock
profits
Financials
18. 18
Summary Income Statement Q4/FY 2006
--4.44--1.16Earnings per Share in €
-36206-254Net income
-
-
-
81
-29
16
273
-39
28
-
-
-
17
-11
4
43
16
5
Income before taxes
Income taxes
Minority interests
+149.6%
-
135
-54
337
-64
+77.4%
-
31
-14
55
-12
EBIT
Financial result
+100.5%
-
197
4.0
395
7.1
+42.9%
-
49
4.0
70
4.9
EBITDA
% margin
+22.5%
-
986
19.9
1,208
21.8
+11.4%
-
264
21,7
294
21.0
Gross profit
% margin
+11.4%4,9645,532+14.8%1,2171,398Sales
Ä%
FY
2005*
FY
2006Ä%
Q4
2005
Q4
2006
(€m)
* Pro-forma 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)
Financials
19. 19
Segment Performance FY 2006
3955,532Total
-50-HQ/Consol.
79862North America
3664,670Europe
EBITDASales(€m)
• Both segments show excellent performance
• Sales in Europe including €164 million from
Reynolds (F), €65 million from Alu Menziken
Metall Service (CH), €8 million from Aesga (E), €2
million from Gauss (CH), €20 million from Targe
(F) and €8 million from Klöckner Romania
• Sales in North America including €15 million from
Action Steel
Comments
Financials
20. 20
Balance Sheet FY 2006
957
719
1, 135
365
Net Working Capital
Net financial debt
2,2562,552Total equity and liabilities
2,256
323
921
589
1,012
536
-
2,552
799
744
416
1,009
639
-
Total assets
Equity
Total long-term liabilities
- thereof financial liabilities
Total short-term liabilities
- thereof trade payables
Other liabilities
595
694
800
80
87
579
841
933
130
69
Long-term assets
Inventories
Trade receivables
Cash & Cash equivalents
Other assets
Dec. 31
2005
Dec. 31
2006
(€m)
Comments
Financial debt as of December 31, 2006:
• Outstanding bonds: €170 million
• ABS: €156 million
• Bilateral credit facilities: €147 million
• Net financial debt reduced from €719 to
€365million
Equity:
• Conversion shareholder loan: €165 million
• IPO: capital increase €98 million
• Strong results
• Equity ratio increased from 14% to 31%
Net Working Capital:
• Increase in line with the additional sales
Financials
21. 21
365 M€
558 M€
50%
173%
0
200
400
600
FY 2005 FY 2006
€m/%
Net debt Gearing
Constant deleveraging
• Strong cash flow leads to
constant deleveraging and
opens up room for acquisitions
• Bond redeemed from €260
million to €170 million
• Standard & Poor’s increased
rating to “BB” with stable
outlook
Comments
Financials
Leverage* 2.8 0.9
Net debt FY 2005 excluding shareholder loans €161 million
* Net indebtedness/EBITDA LTM
Net debt and Gearing
22. 22
Statement of Cash Flow
FY
2005*
FY
2006
(€m)
* Pro-forma consolidated figures for the FY 2005
• Strong business development
reflected in positive CF
deriving from operational
activities and increased NWC
requirements
• Investing CF FY 2006 mainly
includes:
- cash inflow from the sale
of non core activity AVZ
and real estate disposals
- cash outflows mainly due
to acquisitions of Targe,
Aesga, Action Steel and
Gauss
Comments
38
-119
64
-33
-12
-62
15
98
-
-136
-46
-6
-90
52
Proceeds from capital increase
Net impact of change of financing
Changes in financial liabilities
Net interest payments
Dividends
Cash Flow from financing activities
Total Cash Flow
22
-66
-44
102
-92
10
Inflow from disposals of fixed assets/others
Outflow from investments in fixed assets
Cash Flow from investing activities
179
126
-184
121
354
-195
-27
132
From operational activities
Changes in net working capital
Others
Cash Flow from operating activities
Financials
24. 24
New holding facility increases scope for further acquisitions
Debt structure
ABS Europe
ABS USA
Total
Syndicated Loan
Bilateral Credit Agreements
Total Senior Bank Facilities
High Yield Bond
Total Facilities
Current Debt
Structure
Change in
Debt Structure
New Debt
Structure
380
60
440
-
480
480
170
1,090
+40
-
+40
+450
-100
+350
-
+390
420
60
480
450
380
830
170
1,480
(€m)
25. 25
Outlook / Guidance 2007
Basic Assumptions for 2007
• Positive prospects for the steel
industry
• Economic growth in relevant markets
of about 1.8% -5% in 2007
• Stable and increasing demand
especially in the construction and
machinery industries
• Price development stable or better
– In H1 expected to rise
Outlook
Guidance
• At least10% top line growth driven by
acquisitions and organic growth
• EBITDA at about 2006 level adjusted
by one-offs – provided that the
positive economic development
continues
• Dividend continuity: 30% payout
ratio after deduction of extraordinary
income
26. 26
Financial Calendar 2007 and Contact Details
Contact Details Investor Relations
Claudia Nickolaus, Head of IR
Phone: +49 (0) 203 307 2050
Fax: +49 (0) 203 307 5025
E-mail: claudia.nickolaus@kloeckner.de
Internet: www.kloeckner.de
Financial Calendar 2007
May 14: Q1 Interim Report
June 20: General Shareholders’ Meeting
August 15: Q2 Interim Report
September 19: Analysts’ and Investors’ Meeting
November 14: Q3 Interim Report
Contact
29. 29
Quarterly/FY Results 2006
* Pro-forma 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).
Appendix
Q4 Q3 Q2 Q1 FY FY
2006 2006 2006 2006 2006 2005*
Sales 1,398 1,394 1,418 1,323 5,532 4,964
Gross profit 294 313 316 285 1,208 986
% margin 21.0 22.5 22.3 21.5 21.8 19.9
EBITDA 70 143 104 79 395 197
% margin 4.9 10.3 7.3 6.0 7.1 4.0
EBIT 55 128 89 64 337 135
Financial result -12 -24 -14 -14 -64 -54
Income before taxes 43 104 75 50 273 81
Income taxes 16 -20 -21 -13 -39 -29
Minority interests 5 8 9 6 28 16
Net income 54 76 45 31 206 36
Earnings per Share in € 1.16 1.64 0.97 - 4.44 -
(€m)
30. 30
IPO on 28 June 2006 followed by free float increase
IPO Highlights
Issue price: €16 per share
Offer Size: €264 million; of which Klöckner
received €104 million gross proceeds from the
capital increase
Placement: 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.)
Current shareholder structure
January 2007 sell-down
• LGB/Management 15.5%
• Free float 84.5%
October 2006 sell-down
• LGB/Management 45.0%
• Free float 55.0%
Post-IPO
• LGB/Management 65.0%
• Free float 35.0%
• Mainly large European Institutional Investors
• Increasing share of US Investors
• Growing share of Retail Investors
Appendix
32. 32
This presentation contains forward-looking 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 forward-looking
statements. We assume no liability whatsoever to update these forward-looking statements or to
conform them to future events or developments.
Disclaimer
