Information about cookies

We use cookies so that we can provide you with a better online experience. By clicking "accept" without changing the settings for the cookies you are agreeing to our use of cookies. For further information please refer to our cookie policy.

Header Image

Our strategy: "Klöckner & Co 2020"

Steel distribution in our European and American core markets is highly fragmented, with a large share of commodity products and hence also strong competition. We are increasingly setting ourselves apart from competitors with our “Klöckner & Co 2020” strategy. The two main thrusts of this strategy are digital integration and the accelerated expansion of business involving higher value-added products and processing services. In this way, we are increasingly breaking free from the environment of sector-wide overcapacity and steel price volatility while leveraging new options for growth.

DIGITAL INTEGRATION

We were very early movers in the digital integration that will redraw the face of many industries in the years ahead. Internet-based platforms will gradually supersede traditional cascading value chains. This process will be driven forward by the more distributed production that follows from enhanced digitalization, and also by the leaps and bounds being made in artificial intelligence. The future belongs to open platforms that link market players by plug and play. Platforms that succeed in integrating the greatest possible numbers of market participants will generate substantial value – not through assets as in the past, but by orchestrating physical and digital resources as well as by capitalizing on data. There is no stopping this trend, even if much of the technical groundwork is yet to be laid. But converting linear value chains into integrated platforms is not just technically challenging. It will also profoundly alter organizations traditionally marked by hierarchical structures. And as if that were not enough, digitalization – most of all when driven by artificial intelligence – will also radically change the way we work.

It is hard to tell how fast these changes will take place. But one thing is for sure: Only the early movers can hope to shape them. For this purpose we have initiated the following activities and change processes:

  • Launch and establishment of kloeckner.i, Berlin, Germany, harnessing the creativity of “digital natives” and the agility of a startup to develop innovative tools and the first version of a platform. kloeckner.i currently has a staff of 30.
  • Launch and establishment of kloeckner.v, Berlin, as a vehicle for us to take direct and indirect stakes in startups that will ultimately be compatible with and enhance the value of our industry platform. So far, we have invested indirectly in two venture capital funds in Berlin and Palo Alto, and directly in a startup, Contorion – an online specialist dealer for craftsmen and industry needs.
  • Creation of an in-house social network as a management tool for us to dismantle traditional hierarchies moving forward
  • Launch and establishment of the “Kloeckner Digital Academy” for employees to continue learning online during working hours

Today we have already digitally linked up with several producers, wholesalers and other business partners. Initial digital tools, including contract portals and web shops, are already being used successfully by customers. All the tools introduced so far will be integrated into the Klöckner Service Platform during 2016 and further enhanced. This will give customers and business part-ners one-stop access to all digital services and all relevant data. Further on, from 2017, we plan to launch the first version of our Industry Platform that will also be open to competitors and others in the market.

The second quarter of this year also saw us make further progress in our digital transformation. In sales, we continued the rollout of digital pricing tools. These enabled us to benefit more strongly than in the past from rising prices for steel and metal products.

The Klöckner & Co contract portals and our web shops quickly ramped up sales. In total, some 10% of Group sales were generated via digital channels.

We have set ourselves ambitious goals for the ongoing implementation of our digitalization strategy: As early as 2019, we aim to generate more than half of Group sales online and cut net working capital by about a third relative to the 2014 year-end.

ACCELERATING THE SHIFT TO HIGHER VALUE-ADDED PRODUCTS AND PROCESSING SERVICES

Alongside digitalization, our second source of strategic leverage for setting ourselves apart from competitors is by boosting the share of higher value-added products and processing services. There is huge market potential here as many of our customers are highly vertically integrated and still carry out tasks we could perform more efficiently by consolidating orders. A good example is our investment in 3D lasers, which we can use to combine several conventional customer tasks such as drilling, sawing and slotting at an attractive price and with significant gains in precision. We will also be undertaking a major expansion of higher-margin business with higher value-added products. At our Bönen location in North Rhine-Westphalia, Germany, for example, we recently celebrated the ground-breaking ceremony for a service center to process aluminum flat products for the European automotive and manufacturing industries. Slated for completion in the coming year, the facility will have an annual capacity of around 50,000 tons.

In total, we plan to further increase the percentage of sales accounted for by higher value-added products and processing services to 45% by 2017, having already raised it from 34% to 39% in 2015. By 2020, we aim to generate the lion’s share of sales with such higher-margin products and services.

 

KCO WIN+ PROGRAM

The restructuring measures under the KCO WIN+ optimization program were completed in the second quarter of 2016. These measures saw a total of 16 persistently unprofitable locations closed and the headcount reduced by over 600. The main focus was on France, where eleven locations were shuttered. In other European countries, another four locations were closed and the country headquarters downsized. Due to the poor outlook for the local steel market, closures also included Klöckner & Co’s only service center in China, with 35 employees affected.

Further measures under KCO WIN+ target business process improvements. After €11 million in the first half year, KCO WIN+ is budgeted to deliver an incremental EBITDA contribution of €20 million for 2016 as a whole, with another €10 million earmarked for 2017.

NEW PROGRAM: “ONE EUROPE”

Over the last few years, we have restructured the European distribution business at country level, downsized capacity and pooled operations, and further stepped up cross-border procurement. Under the “One Europe” program, we are now bringing the activities of our country organizations in Austria, Belgium, Germany, France, the Netherlands, Spain and the United Kingdom even closer together. In this way, we not only aim to reap cost savings and synergies more easily, but to enable even faster and more efficient implementation of the “Klöckner & Co 2020” strategy. “One Europe” is set to deliver an incremental EBITDA contribution of some €10 million a year in the next three years. This means the program is expected to generate its full earnings contribution of some €30 million for the first time in 2019.

RETURN TO GROWTH PATH THROUGH EXTERNAL AND ORGANIC GROWTH

Our key organic growth drivers are the expansion of higher value-added products and processing services along with digitalization.

In terms of regional growth opportunities, we see the USA as our most attractive market over the medium and long term, despite the slump in steel prices last year. This market is especially attractive for us because of the far better match between steel demand and local supply compared with Europe, coupled with the strict separation of producers and distributors. We aim to increase the US share of shipments from 41% in 2015 to more than 50% in the medium term.

When it comes to strengthening higher-margin business, we target a mix of organic and external growth. Consequently, alongside a marked increase in capital expenditure in this area – and following the acquisition of American Fabricators, Inc. in the USA and Riedo in Switzerland – we envisage further acquisitions of companies that offer a wide range of higher value-added products and processing services.