KlöCo with positive operating income before material special effects

Spurred by its well-advanced level of digitalization and despite the impact on earnings resulting from the COVID-19 pandemic, Klöckner & Co (KlöCo) achieved second-quarter operating income (EBITDA) before material special effects of €11 million. Restructuring expenses of €72 million associated with the project Surtsey transformation program led to negative EBITDA of €61 million (Q2 2019: positive EBITDA of €82 million). Compared with net income of €28 million in the prior year quarter, the Group recorded a net loss of €111 million in the second quarter of 2020. This resulted in a loss per share of €1.11 (Q2 2019: earnings per share of €0.28). Despite the substantial negative impact on earnings, strict net working capital management enabled the Group to achieve a positive cash flow from operating activities of €98 million (Q2 2019: €140 million).

By way of project Surtsey, which was initiated at the start of the pandemic, Klöckner & Co has increased the automation of core processes to accelerate its transformation into a platform company and implement restructuring measures. The goal of the implemented measures is to achieve an overall improvement in earnings of more than €100 million by the end of 2021 and simultaneously increase the share of sales generated via digital channels to over 50%.        

Gisbert Rühl, CEO of Klöckner & Co SE: “Our transformation strategy is taking effect. Thanks, in particular to our Kloeckner Assistant, we have succeeded in further accelerating the growth of our sales via digital channels. Through the implementation of project Surtsey, we are also strengthening the profitability of the entire Group in a challenging environment and paving the way for future growth.”

Klöckner & Co has continued to drive its digital transformation and grew the share of sales generated via digital channels at a much faster pace to 38% (Q2 2019: 29%). Kloeckner Assistant delivered a significantly increasing contribution to this development. This artificial intelligence-driven application shortens what was previously a complex ordering process for both buyers and sellers – from quotation request to offer preparation and order input – from several days to just a few minutes.

Additional important progress was also made with the open industry platform XOM Materials. The new AI-driven XOM eProcurement solution will almost fully automate the procurement process for XOM customers. Klöckner & Co is already using the application for a large proportion of its procurement activities in Europe, with its main suppliers now connected to the XOM Materials platform in this way.

In light of the global pandemic, Klöckner & Co is anticipating a substantial decline in steel demand in the relevant key European and US markets for 2020. Depending on the future course of the COVID-19 pandemic, the Group expects operating income (EBITDA) before material special effects of between €50 million and €70 million for the 2020 fiscal year. For the third quarter, EBITDA before material special effects is expected to come to between €15 million and €25 million. The expected ranges for both the third quarter and the full year are based on various scenarios and subject to great uncertainty due to the dynamic evolution of the pandemic. Moreover, Klöckner & Co is expecting a positive cash flow from operating activities that will, however, be considerably below the prioryear level.

Source and photo: Klöckner & Co SE