Journal: Finanzplatz (Deutsches Aktieninstitut), Issue 05/2010
(Translated from german original version)
Journal: Finanzplatz (Deutsches Aktieninstitut), Issue 05/2010
(Translated from german original version)
With a successful crisis management he managed to put Klöckner & Co back on the growth path after the serious fall in sales experienced during the recent crisis
years. In an interview with Finanzplatz, Gisbert Rühl describes how Klöckner & Co has survived the economic crisis, rejects a quota for women managers and gives his
view on the issue of the visibility of small and medium-sized businesses.
Mr. Rühl, they say that every crisis also offers opportunities. Have you put the opportunities for your business into practice by buying the Becker Stahl-Service and Bläsi group this year? How did you manage to integrate both businesses?
For us, the crisis actually has two sides. On the one hand, we had to struggle with a dramatic drop in sales. On the other hand, we did not want to remain frozen in the crisis – we wanted to use our opportunities. The requirement for this was, however, fast and consistent action in three directions: decreasing costs, securing finances and reducing debt. The next step was to strengthen our capital base through an increase in capital and a convertible bond in order to be prepared for acquisitions. Thanks to the quick implementation of the program, we were able to experience growth again in autumn through the take-over of Becker Stahl Service and then subsequently through the purchasing of Bläsi AG in Switzerland. In this respect, the take-over of the Becker Stahl-Service-Group was the largest of our 21 acquisitions since the initial public offering in 2006. Both businesses were integrated without any problems, partly because the sellers realised integrating the business in our group could bring further advantages for the further development of the business. Furthermore, the earnings situation, particularly with Becker Stahl-Service, is well above the investment case. In retrospect, the necessity of quick action has once again been confirmed. Quickly changing from crisis to growth or even expe riencing both at the same time will remain to be one of the key challenges for all businesses in the future.
You have financed both businesses with the help of an increase in capital which took place at the end of last year. Will the money suffice for the third acquisition planned for this year? Which advantages does private equity in comparison to debt financing offer Klöckner & Co SE?
We want to grow intrusively but finance conservatively and thus above all achieve the greatest possible independence from banks in long-term financing. We will therefore subject our equity requirements for acquisitions with a mix of private equity and capital market products such as convertible bonds or most recently, promissory note bonds. At present, we have over 500 million EUR available for further acquisitions. On the other hand, as a stock-holding distributor we have strongly fluctuating capital equirements
as a result of the volatile price and volume development which we cover using bank credit facilities and licensed products such as asset backed securities. Being largely independent from banks is, however, also important to us here, and we safeguard this through a wide diversification of various financing products and through a low bulk risk.
At the end of May you warned of excess capacities in the steel sector, just as you did in November 2009, because final demand was said to still be low. Do you think that the steel producers are, in the meantime, cutting back on their capa cities? How can you as a steel trader respond to this situation?
As a steel distributor we are not deluding ourselves that we could influence the behaviour of manufacturers but we have, unfortunately, been proved right. Since the end of the second quarter the prices, as we predicted, have again been put under noticeable pressure due to the fact that the temporarily immobilised production capacities were started too quickly. Throughout the summer months a few producers have taken capacities off the market again. Although this was late, it will force the prices to continue moving upwards, as long as the capacities are not increased again. We anticipated this development from an early stage and so we were able to respond early by adjusting the warehouse stock.
The signals coming from the economy are predominantly rated as positive for the development of the economy. The alumi nium producer Alcoa has presented better figures than expected in the USA. Doesn’t that mean that the situation is improving, that now the final demand is rising too?
This must certainly be viewed in different ways. On the whole, it is mainly export-oriented countries such as Germany that have developed surprisingly strongly with the orld trade driven by the emerging markets. Industries which are important for the steel industry such as car manufacturing, household goods and machine and system construction are primarily benefitting from this. On the other hand, the largest steel purchaser is still the construction industry. Here the downturn seems to be over, but growth can still not be expected this year. This means that the real steel consumption in Europe and North America will only slightly increase this year and thus remain significantly under the pre-crisis years. Even overall demand for steel which is rapidly increasing as a result of the increase in stock right along the entire value added chain is still considerably lower. In other words, things are looking up, but the crisis is not yet over.
Although the economy is slowly recovering, the effects of the crisis will be noticeable for a long time. With regard to the crisis, politicians have said that no participant, no product and no region of the financial market may remain unregulated. How do you assess the politicians' previous attempts to put a stop to future crises?
In my opinion, due to the great complexity of the capital markets, it is impossible and probably even dangerous to compress this into a global policy. Even any kind of over- reaction such as the recent ban on unsecured bear sales in Germany, is out of place. However, with the American financial market reform, the first steps have been made which are already making an impact, even if the changes do not go far enough for many people. Even the banks themselves will make sure that mistakes are better prevented in the future and that the risks are curbed. I am not of the widely held opinion that here people are speculating unconditionally because the government must help in the case of doubt. The overwhelming number of bank management boards definitely has no interest in being permanently criticised and people should not assume that every banker is a speculator.
A topic which has received a great deal of interest in the general public is the diver sity of management boards and supervisory boards. The Klöckner & Co management board has two people. What would the introduction of a quota for women mean for your business?
The introduction would probably mean that we could not fulfil the quota at all in the beginn ing as the steel trade is not really considered one of the most attractive industries for women. It would thus lead to a real com petitive distortion given the ever limited offer. On the other hand, I believe the introduction of a quota for women is completely unnecessary, as many businesses, including ourselves, are striving to increase the number of women anyway because of their specific skills. It would therefore be helpful if politics stayed out of the topic and left it to the economy. As soon as the offer is great enough, then a higher number of women in the near future is self-evident and is no longer an issue.
Other businesses have announced that they will firstly increase the number of female managers. Are there female staff in managerial positions at Klöckner & Co? What impact would a higher number of women in managerial positions have on your business?
We have now employed a woman as a manager of our management training who has the particular task of increasing the number of women at management level. If we as Klöckner & Co manage to increase the number of women as a result of their special skills such as communicative competency and empathy, in an otherwise maledominated industry, I see this as a clear competitive advantage. We just have to be left to do it. As I said, we do not need quotas to do this, nor an ever expanding Corporate Governance Codex.
Manager remuneration in listed companies is currently also discussed in the EU’s green paper. One question states whether “shareholders as well as the employees and their representatives should play a greater role in the creation of remuneration policy”. What do you think of this idea? Is this already reality as far as the occupation of German supervisory boards is concerned?
The topic of management remuneration is an envy-driven side issue. As business leaders in Europe we have more important things to do, for example create jobs, so that the domestic economy also grows again. The few excesses on managerial level have completely over-exaggerated the topic. In addition, shareholders and employees
already have sufficient opportunity to influence the remuneration structures through the supervisory board. If you are member of the board of a business like Klöckner & Co, which is 100% occupied by institutional investors and private shareholders, you also have to face questions about the structure and amount of remunerations at any roadshow, even without regulation and new laws.
Another topic which the EU has included on the agenda is the listing of small and medium-sized businesses. This discusses whether decreasing the transparency obli gations would not lead to more businesses braving the step onto the stock market. In your opinion, should SMEs be faced with different
transparency obligations on the regulated markets than large businesses?
This is a difficult topic as, on the one hand, the transparency obligations undoubtedly overload the small and medium-sized businesses yet, on the other hand, the capital market punishes a lack of transparency and capital market orientation with disregard.
In your view, what would have to happen for more SMEs to take that brave step onto the stock market?
Perhaps the capital market is not the correct environment for SMEs anyway, because, for small businesses, too much transparency can, for example, also be anti-competitive. Other investors such as Private Equity may be the better alternative here.
The lack of visibility of SMEs on the markets is also deplored. Can you imagine any measures from the national or European legislators which would help the SMEs achieve more visibility e.g. for the analysts?
The perception of analysts stops at the latest with small cap index SDAX or technology index Tec-DAX. The crisis has somewhat strengthened this trend as banks have also made massive cut backs on analysts. The analysts must market their analyses and depend on many people following their advice and this is where the control of larger businesses is simply greater. This makes the IR work in smaller businesses extremely difficult. This is difficult to counteract practically with regulations..
Mr. Rühl, 27% of the shares of Klöckner & Co are in the hands of private investors. How important are private investors for your business or businesses in general?
For us, private investors are a very important target group as they stabilise our ownership conditions. We address our private investors individually and keep them up to date with video podcasts from me on current developments, for example. This goes down very well.
Source: Finanzplatz (Deutsches Aktieninstitut), Issue 05/2010, author Uta-Bettina von Altenbockum