EANS-News: Klöckner & Co SE / Sales volumes, sales and operating income (EBITDA) increased with support from acquisitions but developments marked by increasing uncertainty and economic slowdown. Outlo

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quarterly report

Duisburg (euro adhoc) - • Sales volumes increased mainly as a
result of acquisitions by 25.8% to 5.0 million tons (Q3: 1.8 million
tons, compared with 1.4 million tons in Q3 2010)

• Sales 38.6% up to some EUR5.4 billion (Q3: EUR1.9 billion, compared with
EUR1.4 billion in Q3 2010)
• Operating income (EBITDA) improved from EUR190 million in prior year to
EUR203 million (Q3 EBITDA: EUR37 million, significantly below Q3 2010 figure of
EUR61 million)
• Net income down from EUR63 million in prior year to EUR38 million,
largely due to higher depreciation and amortization as a result of acquisitions,
higher financing charges and higher taxes (Q3: EUR- 12 million; compared with
EUR15 million in Q3 2010)
• Earnings per share EUR0.47, compared with EUR0.92 in the prior-year
period

All figures relate to the first nine months of 2011 relative to the
same period of the prior year

Duisburg, November 9, 2011: The business situation throughout the
year and especially in the third quarter has been visibly affected by
the economic slowdown. While cumulative operating income (EBITDA), at
EUR203 million, is up on the prior-year period, the earnings trend is
unsatisfactory and remains negative. After EUR104 million in the
first and EUR62 million in the second quarter, operating income
(EBITDA) fell in the third quarter to EUR37 million. The drop in
operating income partly reflected the customary seasonal softening of
demand in the summer months, but partly also the economic slowdown
which hasn't resulted in the usual end-of-summer recovery. In
addition, producers generally failed in their attempts to stabilize
prices, and this put a squeeze on margins. Customers were accordingly
more cautious whereby margins came increasingly under pressure.

Gisbert Rühl, Chairman of the Management Board of Klöckner & Co SE:
"As expected, we are moving into increasingly choppy economic waters.
Risks are increasing, customers are being cautious. That clearly
shows through in our earnings performance."

Robust sales volume and sales growth, unsatisfactory earnings trend
Klöckner & Co increased sales volumes by 25.8% from 4.0 million tons
in the prior-year period to 5.0 million tons in the first nine months
of 2011. Sales volumes gained 8.5% in Europe and 90.5% in the
Americas segment compared with the prior-year figures. Adjusted for
the business acquisitions in 2010 and 2011, sales volumes were up
16.9% on the prior-year period in the Americas segment and 3.2% in
the Europe segment, while adjusted sales volumes for the Group as a
whole rose by 6.5%. The third quarter saw only slight organic growth
in sales volumes relative to the prior-year period - kept up solely
by growth in the USA, while sales volumes in Europe already showed a
slight decrease. Despite a falling price trend, average selling
prices were above the prior-year level, as a result of which sales
grew more strongly than sales volumes, increasing by 38.6% from
EUR3.9 billion to EUR5.4 billion. Excluding the effects of the
acquisitions, sales increased by 20.7%, likewise with a decreasing
trend in the third quarter, when sales growth was down to 10.9%. The
gross profit margin fell continuously through the year. At 18.8%, the
figure for the first nine months was significantly down on the 22.3%
prior-year level in line with the economic and price situation; the
third quarter saw the margin fall to its lowest level for the year at
16.8%. It became ever harder to keep margins up at adequate levels in
the market as increasingly fierce competition chased shrinking market
volumes compounded by a backdrop of sinking prices. Operating income
(EBITDA) increased - mainly as a result of the good business
situation in the first quarter of 2011 - from EUR190 million in the
first nine months of 2010 to EUR203 million in the first nine months
of 2011 (an increase of 6.8%). The consolidation of Macsteel Service
Centers USA (MSCUSA) contributed to this increase. EBITDA is on a
pronounced downward trend, however, decreasing from EUR104 million in
the first quarter to EUR62 million in the second and only EUR37
million in the third. EBIT came to EUR129 million in the first nine
months, about on a par with the prior-year period figure of EUR127
million. Higher finance expenses as a result of a rise in debt meant
that Group earnings before taxes, at EUR66 million, was down on the
EUR79 million figure for the prior-year period. Net income decreased
to EUR38 million due to a higher tax burden (2010: EUR63 million).
Basic earnings per share consequently stood at EUR0.47, compared with
EUR0.92 in the prior-year period. Total assets increased mainly as a
result of the acquisitions and also due to the rights issue by 41.8%
to EUR4,950 million. With an equity ratio of 37%, Klöckner & Co has a
sound financial position with a balanced and long-term maturities
profile in non-current liabilities.

Profitability action plan After signs of the economic slowdown
accelerated over the course of the third quarter, Klöckner & Co
immediately initiated a comprehensive action plan. Alongside cuts in
administration costs and overheads, the plan centers on structural
changes in the country organizations, including the discontinuation
of insufficiently profitable business activities. The plan is
expected to deliver an annual contribution to operating income in the
mid double-digit millions of euros. The total one-off costs required
to achieve this is expected to be in the low double-digit millions of
euros and will be financed in full out of disposal proceeds. While
potentially discontinuing business activities, the company is holding
to its "Klöckner & Co 2020" growth strategy.

Outlook For fiscal 2011, despite softening demand, Klöckner & Co
continues to anticipate year-on-year growth of more than 25% in sales
volumes and more than 35% in sales, largely thanks to the
contributions made by the acquisitions. Given the weak demand trend
and the sustained price pressure, the Company projects that
fourth-quarter operating income (EBITDA) will be down on the third
quarter. Restructuring costs in the low double-digit millions of
euros will have an additional impact on income. For 2012, Klöckner &
Co currently expects rising demand for steel in North and South
America and at best stable demand for steel in Europe, with risks due
to the sovereign debt crisis in the euro zone remaining high. In
light of this, the 6% long-term EBITDA margin target will not yet be
attained in the next year. The initial restructuring measures will,
however, contribute to achieving this target as soon as possible
thereafter.

Gisbert Rühl: "We confirm our outlook of over 25% sales volume growth
and more than 35% sales growth this year. It will not be possible to
stop the earnings trend, however, and we expect a further decrease in
EBITDA in the fourth quarter. We are nonetheless well equipped to
carry ourselves through a potentially sustained lean period and in
the process to carve out options for further growth."

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: regulated dealing/prime standard: Frankfurt, free trade: Berlin,
Hamburg, Stuttgart, Düsseldorf, München
language: English