Klöckner & Co SE

EANS-News: Klöckner & Co SE: Double-digit improvement in turnover and sales versus previous year. Operating income (EBITDA) before restructuring expenses EUR50 million in the second quarter in line with guidance. Profitability action plan ...

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quarterly report


Duisburg (euro adhoc) - -       Turnover raised by 14.1% to 3.7 million tons and
sales by 12.6% to some EUR3.9 billion due to acquisitions and strong growth in
the USA 
-       EBITDA EUR98 million (EUR78 million including restructuring expenses),
compared with EUR166 million in prior year 
-       Net income EUR- 48 million (before restructuring expenses and
impairments: 
EUR-5 million), compared with EUR50 million in prior year 

-       Earnings per share EUR- 0.48 as against EUR0.69 in prior year
-       Profitability action plan pushed ahead and recently substantially
expanded
-       EBITDA guidance for Q3 EUR25 million to EUR35 million before
restructuring expenses with a slight seasonal decrease in turnover
 
Figures relate to first six months relative to first six months of prior year


Duisburg, August 8, 2012 - Turnover and sales increased sharply in the first six
months of 2012, primarily from the acquisition of Macsteel Service Centers USA
and strong organic growth in the USA. At EUR98 million, operating income
(EBITDA) before restructuring expenses, however, was down on the previous year,
mainly on account of the weaker economic trend in Europe. In spite of the
downbeat environment, EBITDA before restructuring expenses in the second quarter
amounted to EUR50 million and was thus within the guided range. In light of the
deteriorating economic conditions, above all in Europe, the forecast achievement
of last years' EBITDA during the current fiscal year is rather unlikely.
Gisbert Rühl, Chairman of the Management Board of Klöckner & Co SE: "The
situation in Europe is becoming increasingly tense and we remain skeptical about
what lies ahead. We made arrangements for this situation early on and recently
substantially expanded our restructuring measures. The US market, where we are
ideally positioned thanks to the almost completed integration of Macsteel, is
and remains the growth driver for Klöckner & Co."

Turnover and sales up, earnings significantly down on previous year 
Klöckner & Co increased turnover in the first six months of fiscal 2012 -
primarily through acquisitions but also thanks to organic growth in the United
States - by 14.1% to 3.7 million tons compared with the prior-year period (3.3
million tons). 
In the Europe segment, turnover was 6.5% down on the previous year owing to the
difficult economic environment as well as the discontinuation of business
activities generating low profitability.
In contrast, turnover in the Americas segment was 67.8% up on the first half of
2011, particularly on account of acquisitions. Even after adjusting for the
acquisitions made in fiscal 2011, turnover in the United States showed organic
growth of 10.9% and thus rose notably against the market and the prior-year
level. Adjusted Group turnover fell by  2.7% due to the weak development in
Europe.
Group sales in the first half-year of 2012 amounted to some EUR3.9 billion,
which represents a 12.6% increase as against the first six months of 2011
(excluding acquisitions: a decrease of  2.7%). Due to increased competition, it
was not possible to match the prior-year period's gross profits, which were
marked by high inventory gains. This led to a gross profit margin of 17.5%,
which was significantly down on the previous year's 19.9%. As a result, EBITDA
fell sharply from EUR166 million in the first half of 2011 to EUR98 million (-
41.0%) before restructuring expenses. In the second quarter, EBITDA amounted to
EUR50 million before restructuring expenses, which is 18.5% down on the previous
year's EUR62 million.
Earnings were impacted during the past half-year by an impairment charge on
goodwill arising from the Brazilian Frefer acquisition in the amount of EUR21
million, which meant that EBIT for the first six months of 2012 was EUR- 5
million 
(HY1 2011: EUR122 million). Earnings before taxes (EBT) came in at 
EUR- 47 million after EUR81 million for the corresponding period of the previous
year. Overall, Klöckner & Co therefore posted a net loss of EUR 48 million
(before restructuring expenses and impairments: EUR-5 million; HY1 2011: net
income of EUR50 million). Basic earnings per share came to EUR- 0.48, compared
with EUR0.69 in the prior-year period.

Strong balance sheet and financing structure retained 
The change in the company's financial position particularly reflects the
seasonal build-up of net working capital. Accordingly, total assets rose by 4.9%
to EUR4,938 million. In addition to consolidation effects, higher turnover drove
an increase in funds tied up in net working capital to EUR1,685 million as
against EUR1,534 million at the end of the 2011 fiscal year. 
The equity ratio stood at around 37% as of June 30, 2012 and was thus roughly on
a par with the end of the 2011 fiscal year. Due to the higher volume of funds
tied up in net working capital, net financial debt amounted to EUR582 million as
against EUR471 million at the end of the last fiscal year. Net financial debt
was kept low relative to equity, with gearing of 36%. Liquidity remained at a
high level of EUR974 million, compared with EUR987 million as of December 31,
2011. Some of the substantial liquidity was used at the end of July to repay the
EUR325 million convertible bond when it matured. 

Action plan pushed ahead and substantially expanded
Back in September 2011, Klöckner & Co responded to the recessionary trend in the
European periphery with an action plan; in doing so, it assumed a 5% decline in
European steel consumption. This scenario was considered to be too negative by
many market participants at that time, but the scale of the current downswing is
in fact even more pronounced.
In addition to reductions in administration costs and sales overheads and the
discontinuation of insufficiently profitable business activities, the action
plan also centered on deep cuts to the site network in Spain. The related
restructuring expenses depressed second-quarter EBITDA by EUR17 million. 
As economic conditions in Europe worsened, Klöckner & Co once again responded
immediately, increasing the 700 jobs originally scheduled to be cut to 1,300, or
12% across the Group as a whole. By expanding the plan, Klöckner & Co is
currently seeking to add around EUR90 million to EBITDA after EUR70 million on a
comparable annualized basis. Implementation of the measures is progressing
according to plan, although the full effect will not be seen until 2013. Of the
700 jobs originally affected in Europe and recently increased to 1,300, some 520
have been cut since the plan began. The increase in the headcount reduction
relates entirely to the country organizations in Spain, France and Eastern
Europe. The measures are scheduled to be largely implemented by the end of the
year. Furthermore, initial steps were also completed to discontinue unprofitable
locations and business activities. The subsidiary in Spain is particularly
affected, as is the beams business with large customers in Germany and the
Netherlands.
At the same time, the integration of Macsteel in the USA was all but completed.
This will lead to considerable synergy and cross-selling effects, alongside the
generally more upbeat growth forecasts in the United States. 

Expansion into US automotive business initiated
By building a steel service center at the ThyssenKrupp Steel USA site in
Alabama/USA, Klöckner & Co has continued the strategy that the Company is
pursuing with its acquisition of Macsteel to expand the service center business,
thereby rounding out its product portfolio in the United States by adding
automotive grades for premium manufacturers. The plant is expected to launch
operations in the fall of 2013.

Outlook
As things stand at the moment, due to the adverse market environment and the
usual seasonal slowdown in business activities during the summer, the company
expects EBITDA before restructuring expenses of EUR25 million to EUR35 million
in the third quarter of 2012. This development will be supported not only by a
more favorable economic trend in the United States, but also by a stronger
market position following the complete integration of Macsteel and the resulting
economies of scope.
From today's perspective, Klöckner & Co continues to expect a rise in turnover
and sales in fiscal 2012 compared with the prior year. The increase is expected
to be achieved, in spite of portfolio streamlining measures and the weak market
development in Europe, by last year's acquisitions and the organic growth in the
United States. Due to the escalating economic situation in Europe overall and a
possible slowdown in the US economy, achieving the operating income (EBITDA) of
the previous year is rather unlikely from today's perspective.

About Klöckner & Co:
Klöckner & Co is the largest producer-independent distributor of steel and metal
products and one of the leading steel service center companies in the European
and American markets combined. The core business of Klöckner & Co is the
warehousing and distribution of steel and non-ferrous metals as well as the
operation of steel service centers. Based on the Group's distribution and
service network, more than 170,000 customers are supplied through around 290
locations in more than 20 countries. Currently Klöckner & Co employs around
11,200 employees. The Group had sales of around EUR7.1 billion in fiscal 2011.

The shares of Klöckner & Co SE are admitted to trading on the regulated market
segment (Regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter
Wertpapierbörse) with further post-admission obligations (Prime Standard).
Klöckner & Co shares are listed in the MDAX®-Index of Deutsche Börse.

ISIN: DE000KC01000; WKN: KC0100; Common Code: 025808576.


Further inquiry note:
Dr. Thilo Theilen
Leiter Investor Relations & Corporate Communications
Telefon: +49 (0)203 307 2050
E-Mail: thilo.theilen@kloeckner.de

end of announcement                               euro adhoc 
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company:     Klöckner & Co SE
             Am Silberpalais 1
             D-47057 Duisburg
phone:       +49(0)203-307-0
FAX:         +49(0)203-307-5000
mail:     info@kloeckner.de
WWW:      http://www.kloeckner.de
sector:      Metal Goods & Engineering
ISIN:        DE000KC01000
indexes:     CDAX, Classic All Share, Prime All Share
stockmarkets: free trade: Berlin, München, Hamburg, Düsseldorf, Stuttgart,
             regulated dealing/prime standard: Frankfurt 
language:   English
 



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