Klöckner & Co reports solid business performance in continued challenging overall economic environment

• Operating income (EBITDA) increased to €41 million in third quarter of 2023 (Q3 2022: €16 million)

• Significantly positive cash flow from operating activities in third quarter of 2023, at €36 million (Q3 2022: €163 million)

• Further strengthening of market position in North America through completion of acquisition and integration of National Material of Mexico (NMM) with positive earnings contribution (EBITDA before material special effects) of €7 million since August 1, 2023

• EBITDA of €170 million to €200 million before material special effects and strong and significantly positive cash flow from operating activities expected for full year 2023

• Initiation of a European efficiency program to improve operating income by around €25 million per year with planned execution from the fourth quarter of 2023 onwards

Duisburg, Germany, October 31, 2023 – Klöckner & Co’s sales amounted to €6.0 billion in the first nine months of 2023 as an outcome of the continued challenging macroeconomic environment and lower steel prices (9M 2022: €7.4 billion). Operating income (EBITDA) adjusted for material special effects was €172 million in the first nine months of the 2023 fiscal year (9M 2022: €439 million). Despite the challenging market environment, EBITDA before material special effects improved significantly compared to the prior-year period to €41 million in the third quarter of 2023 (Q3 2022: €16 million). The result was driven by the continued positive development in North America and Switzerland. Net income was a negative €8 million in the first nine months of 2023 (9M 2022: positive €301 million). Basic earnings per share accordingly came to a negative €0.09 (9M 2022: positive €2.96).

In the third quarter of 2023, through proactive net working capital management, Klöckner & Co once again generated a significantly positive cash flow from operating activities of €36 million (Q3 2022: €163 million). As a result of the acquisition of National Material of Mexico (NMM), net working capital increased to €1.9 billion (year-end 2022: €1.8 billion) and free cash flow in the first nine months of 2023 was a negative €241 million (9M 2022: positive €148 million).

Strengthening of market position in North America

With the successful completion of the acquisition of NMM through its US subsidiary Kloeckner Metals Corporation (KMC), Klöckner & Co has significantly expanded and lastingly strengthened its market position in North America. Since completion of the acquisition and integration into the Klöckner Group on August 1, 2023, NMM generated EBITDA before material special effects of €7 million. In addition, at the beginning of October 2023, KMC acquired Sol Components, a US market leader in end-to-end structural solutions for the solar industry. The transaction paves the way for KMC to play a key role in the transition to renewable energy sources in North America.

Reassignment of responsibilities on the Management Board and measures to increase efficiency in the European business

In September 2023, the Supervisory Board of Klöckner & Co SE decided to reorganize the responsibilities of the members of the Management Board regarding the European business. Guido Kerkhoff, CEO of Klöckner & Co SE, has additionally assumed responsibility for the Group’s EU activities in Europe.

To support the Company’s further growth, the implementation of the hub structure in France announced at the beginning of the year will be completed in the fourth quarter of 2023. In response to the challenging macroeconomic environment, Klöckner & Co additionally plans to make its European business even more resilient. To this end, target-oriented, efficiency-enhancing measures for the country organizations in the Kloeckner Metals EU and Kloeckner Metals Non-EU segments have been defined as part of a European efficiency program and will be implemented step by step from the fourth quarter of 2023. Following implementation of the measures under the European efficiency program, together with the establishment of the hub structure in France, Klöckner & Co anticipates a 10% workforce reduction in the European distribution business. The aim in introducing the measures is to achieve a recurring annual improvement in operating income by around €25 million by as early as 2024. In addition, the negative special effects resulting from the European efficiency program will be largely offset by positive special effects from associated site sales.

Digitalization and automation of the value chain

Klöckner & Co was able to make significant progress in digitalization and automation over the past months. The Company is consistently building toward “zero touch,” meaning value generation with minimum manual effort. Driven by the AI-based Kloeckner Assistant application, the average number of manual interventions per digital order was reduced significantly by more than 14% in the first nine months of 2023 compared to the prior-year period. In addition, the number of automatically generated quotes more than doubled during the same period.

Outlook

For the fourth quarter, Klöckner & Co anticipates a slight decrease in shipments and sales compared to the previous quarter. For fiscal year 2023, due to the ongoing challenging macroeconomic environment, especially in Europe, the Company expects an EBITDA of €170 million to €200 million before material special effects. Klöckner & Co continues to predict a strong and significantly positive cash flow from operating activities for fiscal year 2023.