Kloeckner & Co SE

Quarterly Report • Oct 31, 2019

Interim Management Statement for 9M 2019

January 1, 2019 to September 30, 2019

• EBITDA before material special effects €110 million in first nine months of 2019. Including material special effects, EBITDA for the first nine months was €136 million, compared with €197 million in the prior-year period
• Third-quarter EBITDA before material special effects €26 million, within the €25 million to €35 million guidance range
• At 4.4 million tons, shipments in the first nine months were 6.6% down on the prior year (4.7 million tons)
• · Sales of €4.9 billion down on prior-year period (€5.2 billion)
• Share of Group sales generated via digital channels further raised to 30% (Q3 2018: 22%)
• · Full-year 2019 EBITDA guidance now between €120 million before material special effects

GROUP SALES AND EARNINGS DOWN ON PRIOR YEAR DUE TO WEAK MARKET ENVIRONMENT

Shipments totaled 4.4 million tons in the first nine months, marking a fall of 6.6% relative to the prior-year period. The decrease affected all segments, although Kloeckner Metals Distribution Europe was impacted strong est with a reduction of 13.6%. The main factors here the economic slowdown in Germany, notably in the automotive and mechanical engineering industries, as well as product portfolio changes in France.

Despite the appreciation of the US dollar, sales, at €4.9 billion, were likewise below the previous year's level of €5.2 billion (a currency-adjusted decrease of 7.2%). Sales were down due to lower volumes in all operating segments and in the USA notably as a result of lower prices.

Including material special effects, EBITDA for the first nine months was €136 million, compared with €197 million in the prior-year period. Net income consequently deteriorated from €76 million in the prior-year period to -€4 million. Basic earnings per share came to -€0.05, compared with €0.75 in the prior year.

MARKET-DRIVEN IMPACT ON SEGMENTAL EARNINGS

Primarily due to negative price effects on account of significantly reduced market prices across all key product groups, EBITDA in the Kloeckner Metals US segment fell to €48 million in the first nine months of the fiscal year, compared with €135 million a year earlier. The decrease in gross profit by €94 million was offset only to a minor extent by lower OPEX and the effect of the new IFRS 16 lease accounting standard (+€11 million). Segment EBITDA also includes €2 million in one-off income from compensation payments.

EBITDA in the Kloeckner Metals Switzerland segment on the other hand went up from €36 million in the prioryear period to €44 million. Reinforcing products were the main performance driver here. Introduction of the new IFRS 16 lease accounting standard positively impacted EBITDA by €6 million.

The economic environment for the Kloeckner Metals Services Europe segment remained challenging, primarily due to a sharp fall in automotive production in Europe and especially in Germany, and as a result of lower steel prices. Consequently, EBITDA fell from €37 million to €20 million.

EBITDA in the Kloeckner Metals Distribution Europe segment stood at €50 million, marking a substantial increase on the €12 million prior-year figure. However, this was mainly due to an one-off effect of €36 million from the sale of a property in London. Conversely, EBITDA was reduced by restructuring expenses (€5 million) due to portfolio adjustments in France. Excluding these effects, EBITDA amounted to €19 million. Moreover, implementation of the revised IFRS 16 lease accounting standard had a €16 million positive impact on EBITDA.

In the Holding and other group companies segment, EBITDA including material special effects came to a negative €26 million, compared with a negative €23 million in the prior-year period. Here, restructuring-related expenses made for material special effects totaling €8 million in the reporting period.

VERY SOLID FINANCIAL POSITION SUSTAINED

Total assets were €3,193 million as of September 30, 2019, about 4% higher than the prior year-end figure, mainly due to the effect of the newly introduced IFRS 16 lease accounting standard.

Equity decreased from €1,282 million. This mainly related to measurement effects on our pension obligations that are due to lower discount rates and are accounted for in other comprehensive income (-€54 million). Despite the decrease, the equity ratio stayed at a very solid 38% (December 31, 2018: 42%),

Net working capital increased due to strict management only moderately from €1,229 million at the prior yearend to €1,325 million and was therefore below the figure at the end of the previous quarter (€1,386 million).

Given the higher net working capital and introduction of the new IFRS 16 lease accounting standard (+€178 million), net financial debt went up accordingly from €383 million as of December 31, 2018 to €634 million at the end of the third quarter.

The rise in net working capital is also the main driver of the cash outflow from operating activities of €6 million in the first nine months of the fiscal year, although this was considerably below the cash outflow in the prioryear period (€160 million). Adding the net cash inflow from investing activities – including the cash inflow from the sale of a property in London (€37 million) – gives a free cash flow of €9 million (9M 2018: -€197 million).

EXPANSION OF DIGITALIZATION ACTIVITIES

Consistent implementation of the digitalization strategy led to a further increase in the share of sales generated via digital channels to 30% in the quarter under review (Q3 2018: 22%). Moreover, a new digitalization project was launched in the shape of Kloeckner Assistant. The aim is for inquiries via any channel to be processed automatically with the aid of artificial intelligence and answered instantly thanks to seamless integra tion with existing digital tools. This minimizes not only manual processing, but also the time between inquiry, quote and order.

Further additions were also made to the range of offerings on the independent industry platform XOM Materials. The number of different products available on XOM already exceeds 10,400. Contracts have been signed in Europe and North America with 43 distributors, 30 of which are already linked up with the platform.

OUTLOOK

After the short-term recovery of steel prices in the third quarter, we now anticipate weaker market conditions and again a negative price development in the fourth quarter. In light of this, we expect to generate EBITDA of between €120 million and €130 million before material special effects for the full year 2019.

Klöckner & Co SE Financial information

for the nine-month period ending September 30, 2019

Shipments and income statement		Q3 2019	Q3 2018	Variance	an. 1- Sep. 30, 2019	lan. 1- Sep. 30, 2018	Variance
Shipments	Tto	1,420	1,519	-99	4,398	4,709	-311
Sales	€ million	1,565	1,754	-189	4,950	5,171	-221
Gross profit	€ million	284	332	-48	890	1,027	-137
Gross profit margin	%	18.1	18.9	-0.8%p	18.0	19.9	-1.9%p
Earnings before, interest, taxes, depreciation and amortization (EBITDA)	€ million	21	59	-38	136	197	-61
EBITDA before material special effects	€ million	26	ਦਰੇ	-33	110	199	-89
EBITDA margin	0/0	1.3	3.4	-2.1%p	2.7	3.8	-1.1%p
EBITDA margin before material special effects	0/0	1.6	3.4	-1.8%p	2.2	3.8	-1.6%p
Earnings before interest and taxes (EBIT)	€ million	-13	38	-51	37	133	-96
Earnings before taxes (EBT)	€ million	-24	30	-54	5	109	-104
Net income	€ million	-23	22	-45	-4	76	-80
Net income attributable to shareholders of Klöckner & Co SE	€ million	-23	22	-45	-5	75	-80
Earnings per share (basic)	€	-0.23	0.22	-0.45	-0.05	0.75	-0.80
Earnings per share (diluted)	€	-0.23	0.21	-0.44	-0.05	0.71	-0.76
Cash flow statement		Q3 2019	Q3 2018	Variance	an. 1- Sep. 30, 2019	an. 1- Sep. 30, 2018	Variance

Last Trum Statelliciit		ﮞ ﺍ ﺍ	026010		Valiance
Cash flow from operating activities		82	-5	+87	-6	-160	+154
Cash flow from investing activities		-12	-13	+1 =	15	-37	+52
Free cash flow )	€ million	70	-18 -	+88	o	-197	+206

Balance sheet		September 30, 2019	December 31, 2018	Variance	September 30, 2019	September 30, 2018	Variance
Net working capital '	€ million	1,325	1,229	+96	1,325	1,467	-142
Net financial debt	€ million	634	383	+251	634	ਦਿੱਤਾ। ਦੇ ਦੇ ਉੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ ਵਿੱਚ ਇੱਕ	+65
*** Gearing	%	52	31	+21%p	52	44	+8%D
Equity	€ million	1,225	1,282	-57	1,225	1,320	-95
Equity ratio	%	38.4	41.9	-3.5%p	38.4	40.6	-2.2%p
Total assets	€ million	3,193	3,061	+132	3,193	3,250	-57

Employees	September 30, December 31, 2019	2018	Variance	September 30, September 30, 2019		2018 Variance
Employees as of the end of the reporting period	8,370	8,579	-209	8,370	8,623	-253

*) Free cash flow = Cash flow from operating activities plus cash flow from investing activities.

**) Net working capital = Inventories plus trade receivables less trade liabilities.

***) Gearing = Net financial debt / (Equity/non-controlling incerests/goodwill resulting from acquisitions subsequent to May 23, 2019 resp. until December 31, 2018: May 23, 2013).

Klöckner & Co SE Consolidated statement of income

for the nine-month period ending September 30, 2019

03 2019	Q3 2018	Sep. 30, 2019	an. I- Sep. 30, 2018
1,565,475	1,754,177	4,949,837	5,171,229
1,569	8,235	-9,456	9,921
372		900
8,178	5,464	60,389	21,443
-1,283,525	-1,430,117	-4,051,080	-4,153,867
-155,757	-150,259	-459,470	-454,841
-34,172	-21,247	-98,724	-63,326
-115,282	-127,575	-356,134	-394,496
-178	-630	952	-2,655
-13,320	38,048	37,214	133,408
197	1,726	1,0339	3,700
-10,893	-9,497	-33,508	-28,190
-10,696	-7,771	-32,469	-24,490
-24,016	30,277	4,745	108,918
1,121	-8,526	-8,937	-33,092
-22,895	21,751	-4,192	75,826
-23,176	21,513	-4.964	75,021
281	238	772	805
-0.23	0.22	-0.05	0.75
-0.23	0.21	-0.05	0.71
			dil. I-

Statement of comprehensive income

for the nine-month period ending September 30, 2019

(€ thousand)	Q3 2019	Q3 2018	an. 1- Sep. 30, 2019	Jan. 1– Sep. 30, 2018
Net income	-22,895	21,751	-4,192	75,826
Other comprehensive income not reclassifiable
Actuarial gains and losses (IAS 19)	-25,411	24,761	-56,644	52,374
Related income tax	3,179	-5,486	2,503	-10,695
Total	-22,232	19,275	-54,141	41,679
Other comprehensive income reclassifiable
Foreign currency translation	25,615	11,338	33,591	25,434
Gain/loss from equity instruments			-2,502
Gain/loss from cash flow hedges	24	-7	5	-143
Reclassification to profit and loss due to sale of foreign subsidiaries		7		7
Total	25,639	11,338	31,094	25,298
Other comprehensive income	3,407	30,613	-23,047	66,977
Total comprehensive income	-19,488	52,364	-27,239	142,803
thereof attributable to
-shareholders of Klöckner & Co SE	-19,761	52,124	-27,996	141,997
- non-controlling interests	273	240	757	806

Consolidated statement of financial position

as of September 30, 2019

Assets

(€ thousand)	September 30, 2019	December 31, 2018
Non-current assets
Intangible assets	137,601	147,945
Property, plant and equipment	807,270	638,914
Non-current investments	7,910	8,574
Other financial assets	6,300	7,961
Other non-financial assets	5,368	5,215
Current income tax receivable	6,155	6,156
Deferred tax assets	18,505	17,502
Total non-current assets	989,109	832,267
Current assets
Inventories	1,144,045	1,242,209
Trade receivables	806,637	716,492
Contract assets	16,226	23,453
Current income tax receivable	13,255	6,327
Other financial assets	64,669	78,195
Other non-financial assets	31,137	21,068
Cash and cash equivalents	127,690	141,344
Total current assets	2,203,659	2,229,088

oral asset	3 192 768	061 355

Equity and liabilities

(€ thousand)	September 30, 2019	December 31, 2018
Equity
Subscribed capital	249,375	249,375
Capital reserves	682,412	682,412
Retained earnings	289,858	324,638
Accumulated other comprehensive income	-4,222	18,935
Equity attributable to shareholders of Klöckner & Co SE	1,217,423	1,275,360
Non-controlling interests	7,191	6,282
Total equity	1,224,614	1,281,642
Non-current liabilities
Provisions for pensions and similar obligations	302,297	260,180
Other provisions and accrued liabilities	17,083	16,422
Financial liabilities	699,651	500,845
Other financial liabilities	144	156
Other non-financial liabilities	8	3
Deferred tax liabilities	43,705	45,876
Total non-current liabilities	1,062,888	823,482
Current liabilities
Other provisions and accrued liabilities	121,671	114,444
Income tax liabilities	9,678	12,156
Financial liabilities	58,191	19,740
Trade payables	641,924	752,770
Other financial liabilities	23,135	21,118
Other non-financial liabilities	50,667	36,003
Total current liabilities	905,266	956,231
Total liabilities	1,968,154	1,779,713
Total equity and liabilities	3,192,768	3,061,355

Consolidated statement of cash flows

for the nine-month period ending September 30, 2019

Q3 2019	03 2018	an. 1- Sep. 30, 2019	Jan. 1– Sep. 30, 2018
-22,895	21,751	-4,192	75,826
-1,121	8,526	8,937	33,092
10,696	7,771	32,469	24,490
34,172	21,247	98,724	63,326
472	-122	178	-393
-218	202	-39,677	-1,095
66,449	-40,172	126,806	-158,498
90,479	28,438	-59,223	-232,957
-68,368	-19,372	-129,688	85,664
-12,195	-16,187	5,808	-2,550
-8,984	-7,778	-26,841	-20,466
ાતેર	171	617	681
-6,484	-9,585	-20,290	-26,991
82,198	-5,110	-6,372	-159,871
938	2,233	44,196	4,332
-12,697	-14,925	-28,634	-41,281
-11,759	-12,692	15,562	-36,949
		-29,925	-29,925
-105,078	7,612	12,472	133,731
-6,719	1,980	-7,878	-1,579
-111,797	9,592	-25,331	102,227
-41,358	-8,210	-16,141	-94,593
2,734	1,023	2,487	1,089
166,314	67,244	141,344	153,561
127,690	60,057	127,690	60,057

Segment reporting

(€ million)	Kloeckner Metals US		Kloeckner Metals Switzerland		Kloeckner Metals Services Europe		Kloeckner Metals Distribution Europe		Holding and other group companies ** )		Total
	9M 2019	9M 2018	9M 2019	9M 2018	9M 2019	9M 2018	9M 2019	9M 2018	9M 2019	9M 2018	9M 2019	9M 2018
Shipments (Tto)	2,017	2,055	438	464	735	797	1,169	1,353	ਤੇਰੇ	40	4,398	4,709
External sales	2,075	2,030	739	756	584	628	1,509	1,714	43	43	4,950	5,171
Gross Profit	320	414	203	200	77	97	279	305	11	11	890	1,027
Gross profit margin (%)	15.4	20.4	27.4	26.5	12.9	15.2	18.5	17.8	17.0	25.9	18.0	19.9
Segment result י (EBITDA)	48	135	44	36	20	37	50	12	-26	-23	136	197
Earnings before in- terest and taxes (EBIT)	g	109	21	19	15	32	23	1	-31	-28	37	133
Cashflow from operating activities	12	-8		-7	2	ব	-19	-109	-8	-40	-6	-160

*) EBITDA = Earnings before interest, taxes, depeciation and reversals of impairments on intangible assets and property, plant and equipment.
**) Including consolidations.

	Kloeckner Metals US		Kloeckner Metals Switzerland		Kloeckner Metals Services Europe		Kloeckner Metals Distribution Europe		Holding and other group companies ***		Total
(€ million)	9M 2019	FY 2018	9M 2019	FY 2018	9M 2019	FY 2018	9M 2019	FY 2018	9M 2019	FY 2018	9M 2019	FY 2018
Net working capital as of closing date	468	453	269	217	211	192	362	345	15	22	1,325	1,229
Net financial debt as of closing date	401	321	97	43	151	149	311	239	-326	-369	634	383
Employees as of closing date	2,337	2,382	1,650	1,707	596	597	3,370	3,500	417	393	8,370	8,579

*) Net Working Capital = linentories plus trade receivables trade liabilities.
**) Net financial debt =Financial liabilities plus transaction cost less cash and cash equiva

Financial Calendar

March 10, 2020	Annual Financial Statement 2019 Financial statement press conference
	Conference call with analysts
May 5, 2020	Q1 quarterly statement 2020
	Conference call with journalists
	Conference call with analysts
May 20, 2020	Annual General Meeting 2020, Düsseldorf, Germany
August 14, 2020	Half-yearly financial report 2020
	Conference call with journalists
	Conference call with analysts
November 3, 2020	Q3 quarterly statement 2020
	Conference call with journalists
	Conference call with analysts

Subject to subsequent changes.

Klöckner & Co SE

Felix Schmitz Head of Investor Relations, Internal Communications & Sustainability

Telephone:	+49 203 307-2295
Email:	ir@kloeckner.com

Christian Pokropp Head of External Communications

Telephone: Email:

+49 203 307-2050 pr@kloeckner.com

This statement contains forward-looking statements that are based on the Klöckner & Co SE management with respect to future events. They are generally identified by the words "expect", "assume", "intend", "estimate", "target", "aim", "plan", "will", "endeavor", "outlook" and comparable expressions, and generaly contain information that relates to expectations or targets for economic conditions, sales or other performance measures. Forward-looking statements are based on currently valid plans, estimates and projections and are therefore only valid on the day on which they are made. You should consider them with caution. Such statements are subject to numerous risks and uncertainties (e.g. those described in publications), most of which are difficult to predict and are generally beyond the control of Klöckner & Co SE. The relevant factors include the effects of significant strategic and operational initiatives, including the acquisition or disposal of companies or other risks or uncertainties materialize or if the assumptions any of the statements turn out to be incorrect, the actual results of Klöckner & Co SE may be materially different from those stated or implied by such statements. Klöckner & Co SE can offer no assurance that its expectations or targets will be achieved. Without prejudice to existing legal obligations, Klöckner & Co SE does not assume any obligation to update forward-looking statements to take information or future events into account or otherwise. In addition to the figures prepared in line with IFRS or HGB (Handelsgesetzbuch – German Commercial Code), Klöckner & Co SE presents non-GAAP financial performance measures, e.g. EBIT, net working capital and net financial debt. These non-GAAP measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS or HGB. Non-GAAP key figures are not subject to IFRS or HGB, or to other ecounting regulations. In assessing the net assess, financial position and results of operations of Klöckner & Co SE, these supplementary figures should not be used in isolation or as analternative to the key figures presented in the consolidated financial statements and interim management and calculated in accordance with the relevant accounting principles. Other companies may different ways. Please refer to the definitions in the annual report.

Rounding

There may be rounding differences with respect to the percentages and figures in this report.

Variances to the German version

Variances may arise for technical reasons (e.g., conversion of electronic formats) between the accounting documents contained in this Annual Report and the format submitted to the Federal Gazette (Bundesanzeiger). In this case, the version submitted to the Federal Gazette shall be binding.

This English version of the interim management is a courtesy translation of the original German version; in the event of variances, the German version shall prevail over the English translation.

Evaluating statements are unified and are presented as follows:

+/- 0-1%	+/->1-5%	+/->5%
stable	slight	considerable