Kloeckner & Co SE

Quarterly Report • Aug 12, 2015

Klöckner & Co SE

A Leading Multi Metal Distributor

Interim Report as of June 30, 2015

KLÖCKNER & CO GROUP FIGURES	2
INTERIM GROUP MANAGEMENT REPORT	3
KLÖCKNER & CO SHARE	20
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX-MONTH PERIOD ENDING JUNE 30, 2015	22
STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX-MONTH PERIOD ENDING JUNE 30, 2015	23
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF JUNE 30, 2015	24
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX-MONTH PERIOD ENDING
JUNE 30, 2015	27
SUMMARY OF CHANGES IN EQUITY	28
SELECTED EXPLANATORY NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS OF KLÖCKNER & CO SE FOR THE SIX-MONTH PERIOD ENDING JUNE 30, 2015	30
REVIEW REPORT	40
RESPONSIBILITY STATEMENT	41

Shipments and income statement	Q2 2015	Q2 2014*)	Variance	HY1 2015	HY1 2014*)	Variance
	1,645			3,306
	1,693			3,391
	320			630
	18.9			18.6
	– 17			– 7
	36			46
	– 1.0			– 0.2
	2.1			1.4
	– 44			– 59
	– 56			– 84
	– 55			– 76
	– 54			– 75
	– 0.54			– 0.75
	– 0.54			– 0.75
Cash flow statement/Cash flow	Q2 2015	Q2 2014*)	Variance	HY1 2015	HY1 2014*)	Variance

	96		– 15
	7		6
	102		– 9

Balance sheet	June 30, 2015	December 31, 2014	Variance	June 30, 2015	June 30, 2014*)	Variance
	1,452			1,452
	571			571
	1,407			1,407
	37.9			37.9
	3,714			3,714

Employees	June 30, 2015	December 31, 2014	Variance	June 30, 2015	June 30, 2014	Variance
	9,719			9,719

Key developments in the first six months of 2015 and outlook

• •
• •
• •
• •
• •
• •
• •
• •

Corporate strategy

The additional restructuring measures in France* became necessary largely due to the further deterioration in the situation of the French construction industry, which represents by far our most important customer group in this region. In the coming years, we only expect a moderate improvement in the market there at best. We therefore plan a further consolidation of our network relative to the 63 locations we have today and in particular largely to pull out of the low-margin key account business with standard merchandise. This will entail the closure of eleven locations and a significant downsizing of the country headquarters. The size of the workforce will decrease as a result by 310 to 1,360.

Structural improvements are planned or already in the process of being implemented at other European country organizations as well. These include downsizing the country organizations' headquarters and closing persistently unprofitable sites and non-core activities. In total, a further five sites will be closed and the number of employees reduced by around 260 as a result of the measures.

Due to the poor economic trend and the subdued outlook for the local steel market, we also plan to close our service center in China, which has a headcount of 35, in the current quarter.

This means that we are planning to close what will probably be a total of 17 sites and reduce the workforce by approximately 600 in 2015 and 2016.

Return to growth path through external and internal growth

Our key organic growth drivers are expanding our higher value-added products and processing services business and digitalization.

In terms of regional growth opportunities, we see the US as our most attractive market over the medium and long term, despite the slump in steel prices at the beginning of the year. This market is also especially attractive for us because of the far better match between steel supply and demand compared with Europe, plus the strict separation of producers and distributors. We aim to increase the US share of shipments from 42% in 2014 to more than 50% in the medium term.

When it comes to expanding higher-margin business, we aim to achieve this through both organic and external growth. Consequently, alongside a market increase in capital expenditure in this area, further acquisitions of companies offering a wide range of higher value-added products and processing services are also an option.

Target of over 5% EBITDA margin by 2017

The next milestone in our "Klöckner&Co 2020" strategy is an increase in the EBITDA margin from 2.9% in the last fiscal year to over 5% in 2017. The main contributing factors here are investments in higher value-added processing and products, the extended KCO WIN+ program, and increasingly the digitalization of our business processes.

* Planned measures that in accordance with French law have been communicated to the works council requesting its opinion.

Economic environment

Macroeconomic situation

Global economic performance continued to be influenced by geopolitical and fiscal policy issues in the first half of 2015. In the eurozone, growth was held in check by the tight financial situation in some European economies. One source of stimulus, though, was the weak euro, which made the European economy more competitive. Overall, eurozone GDP increased by 1.4% compared with the prior-year quarter.

The US saw a continuation of the upturn under way since 2009. Buoyed by good labor market data and a related rise in consumer spending, growth reached 2.3% compared with the previous quarter.

At 6.8%, second-quarter economic growth in China was once again lower than in preceding quarters. Both domestic demand and exports showed lower rates of growth.

With economic output down by 1.2% on the prior-year quarter, Brazil found itself in recession in the second quarter. Following a contraction of 1.5% in the first quarter, rises in the benchmark interest rate and sustained high inflation prevented the situation from easing significantly.

Development of GDP in our core countries (in percent)	Q2 2015 vs. Q2 2014
Europe *)	1.4
Germany	1.6
United Kingdom	2.4
France	1.1
Spain	2.8
Switzerland	0.8
China	6.8
Americas
United States	2.3
Brazil	$-1.2$

Source: Bloomberg; experts' estimates (in some cases provisional). *) Eurozone.

Industry-specific situation

Although overall economic conditions are good, the market environment in the steel industry remains challenging. According to the World Steel Association, global production of raw steel declined by 2.0% year-on-year to 813 million tons in the first six months of 2015. The EU saw a small rise in production volumes of 0.5%, while in the US steel production declined by 6.9%. Production was also down in China where it fell by 1.3%. Brazil, on the other hand, saw an increase of 2.0%.

In Europe, Eurometal reports that shipments in steel distribution fell by 3% in the first six months of this year. Shipments in the US were down by 5% according to the Metals Service Center Institute (MSCI).

The steel industry still faces the problem of massive excess capacity, notably in China and Europe, with the current level of demand continuing to result in structural underutilization. At the end of June, the capacity utilization of steel producers in Europe and the US stood at just 76% and 73% respectively. There is also considerable surplus capacity at distribution level, with competition remaining fierce as a result.

Trend in key customer industries

Construction industry

As the largest processor of steel, the construction industry is key to the global trend in steel consumption. The weak first quarter in Europe due to the weather conditions was largely offset by catch-up effects in the second quarter, meaning that construction activity held more or less constant in the first half of the year according to estimates from Eurofer. In the US, the construction industry benefited primarily from rising demand in the commercial construction segment. The US Census Bureau puts the growth in construction spending at 8% compared with the first half of 2014. In China, the downward trend in the construction industry continued during the reporting period.

Machinery and mechanical engineering

Demand in machinery and mechanical engineering showed a mixed picture in the first half of 2015. According to Eurofer, the sector in Europe made a weak start to 2015, posting zero growth year-on-year. Companies held back from investing due to the many political uncertainties. The US, on the other hand, saw moderate growth, driven mainly by rising demand in machine tools and construction machinery. China, the largest market, continued to expand at a robust rate, although not as strongly as in previous years.

Automotive industry

The international automotive industry showed a mostly positive trend in the first half of 2015. In Europe, demand increased by around 8.2% year-on-year according to the German Association of the Automotive Industry (VDA). Shipments rose by 4.4% in the US and by 6.9% in China. Only Brazil recorded a sharp decline of 19.7%.

Results of operations, financial position and net assets

(€ million)	Q2 2015	Q2 2014*)	HY1 2015	HY1 2014*)
	1,645		3,306
	1,693		3,391
	320		630
	18.9 %		18.6 %
	– 17		– 7
	36		46
	– 1.0 %		– 0.2 %
	2.1 %		1.4 %

(€ million)	June 30, 2015	June 30, 2014	December 31, 2014
	1,452
	571

(€ million)	June 30, 2015	June 30, 2014*)	December 31, 2014
	41 %
	4.1x

Discussion of the key figures in detail:

Shipments and sales

Group shipments in the first six months of 2015, at 3.3 million tons, were slightly down on the prior-year period (-1.4 %). Performance varied in our two operating segments, Europe and Americas:

The Europe segment increased shipments by 0.3% compared with the first six months of 2014. This rise was mainly driven by the ongoing strong performance at Becker Stahl-Service GmbH (BSS), which serves the automotive business, and the acquisition of Riedo by the Swiss country organization early in the second quarter of 2014. The remaining European country organizations recorded a drop in shipments due to the ongoing difficult market environment.

By contrast, shipments in the Americas segment decreased by 3.8% year-on-year. This affected both the USA and Brazil. While shipments in Brazil continued to be depressed by structural problems in the first half of the year, the decline in shipments in the US was mainly attributable to our customers holding back from buying in expectation of further falls in prices.

In contrast to the trend in shipments, Group sales climbed from €3.3 billion to €3.4 billion (+4.3%) due to the rise in exchange rates, in particular the rate of the US dollar and the Swiss franc, against the euro. Despite the movement of exchange rates in our favor and the inclusion of Riedo, sales in the Europe segment declined by 0.4% due to low price levels. At constant exchange rates, sales were down by 4.8%. While prices likewise fell in the Americas segment, notably in the flat steel business that is important to Klöckner, this was more than offset by the sharp rise in the US dollar exchange rate. In total, the segment saw sales rise by 12.7%; at constant exchange rates, sales were 8.0% down on the first half of 2014.

.
$(\epsilon$ million)	Q2 2015	Q2 2014*)	HY1 2015	HY1 2014*)
Sales	1,693	1,680	3,391	3,252
Gross profit	320	325	630	627
$OPEX^{**}$	$-337$	$-266$	$-636$	$-530$
EBITDA	$-17$	58	$-7$	97
EBITDA before restructuring expenses	36	58	46	97
EBIT	$-44$	36	$-59$	52
EBT	$-56$	19	$-84$	19
Net income	$-55$	12	$-76$	10

Results

*) Comparative amounts for the first half of 2014 adjusted due to the initial application of IFRIC 21 (Levies).

**) Personnel expenses plus other operating expenses less other operating income and less income from investments.

Due to the fall in prices, above all in the USA, and strong price pressure in Switzerland as a result of the appreciation of the Swiss franc, the gross profit margin dropped from 19.3% in the first half of the previous year to 18.6%; at 18.9%, however, the gross margin in the second quarter of 2015 was significantly higher than the 18.2% recorded in the first quarter of 2015. Gross profit, depressed by restructuring expenses of €5 million, was up slightly year-on-year (0.5%) to €630 million. This was, however, mostly due to the exchange rate changes already mentioned (+€61 million).

Other operating income and expenses (OPEX) changed as follows:

$(\epsilon$ million)	HY1 2015	HY1 2014*)
Other operating income	20	17
Personnel expenses	$-354$	$-287$
Other operating expenses	$-302$	$-260$
Income from investments		$\Omega$
OPEX	$-636$	-530

*) Comparative amounts for the first half of 2014 adjusted due to the initial application of IFRIC 21 (Levies).

At €20 million, other operating income was up slightly on the prior-year figure of €17 million.

Personnel expenses showed a substantial increase of €67 million, €33 million of which was mainly due to the change in the US dollar and Swiss franc exchange rates against the euro. The redundancy plan expenses related to the restructuring measures resulted in further charges to this item of €29 million.

Likewise, the €42 million rise in other operating expenses is mainly due to exchange rate changes (€25 million) and restructuring (€18 million). Other operating expenses include €5 million (HY1 2014: €4 million) relating to the firsttime application of new rules on accounting for levies (IFRIC 21).

As a result, EBITDA was a negative €7 million. Excluding restructuring expenses of €52 million EBITDA came in at €46 million compared to €97 million in the first half year of 2014.

--------------------------------------	$ -$
$(\epsilon$ million)	Q2 2015	Q2 2014*)	HY1 2015	HY1 2014*)
Europe	29	33	36	56
Americas	13	30	20	50
Headquarters	-6	-5	$-10$	$-9$
Klöckner & Co Group	36	58	46	97

EBITDA before restructuring expenses by segments

*) Comparative amounts for the first half of 2014 adjusted due to the initial application of IFRIC 21 (Levies).

EBITDA in the Europe segment decreased significantly to €36 million in the first six months of 2015 compared with €56 million a year earlier. With the exception of BSS and the Netherlands, earnings performance was unsatisfactory at all country organizations. The most severe impact on earnings came from the price pressure (euro discount) induced by the removal of the cap on the Swiss franc exchange rate as well as from the very weak business situation in France and the United Kingdom. Earnings improved significantly in the course of the first half of the year, however, due to the dissipating effects of the appreciation of the Swiss franc and seasonal factors. Segment EBITDA before restructuring effects climbed from €8 million in the first quarter of the fiscal year to €29 million in the second quarter.

Gross profit declined due to price factors and, in the second quarter, quantity factors as well. As a result, EBITDA in the Americas segment dropped to €20 million, which is also well under the prior-year comparative figure of €50 million. In particular, the significantly lower market prices for heavy plate at the beginning of the first quarter of 2015 resulted in inventory effects and pressure on margins, whereas the first quarter of the prior year saw prices rising. The negative price trend eased significantly in the course of the second quarter. Due to lower cost prices, the gross margin also started to recover, rising by 1% in the second quarter compared with the first.

Headquarters EBITDA was approximately on a par with the prior-year period, at a negative €10 million (HY1 2014: negative €9 million).

.
$(\epsilon$ million)	HY1 2015	HY1 2014*)
EBITDA	$-1$	97
Depreciation, amortization and impairments	$-52$	$-45$
EBIT	$-59$	52
Financial result	$-25$	$-33$
EBT	$-84$	19
Income taxes		$-9$
Net income	$-76$	10

Reconciliation to net income

*) Comparative amounts for the first half of 2014 adjusted due to the initial application of IFRIC 21 (Levies).

After deducting depreciation and amortization, which was higher due to exchange rate effects (up €6 million) and impairment losses (up €4 million), EBIT came out at a negative €59 million, compared with a positive €52 million in the prior-year period. On the other hand, the financial result improved significantly, from a negative €33 million to a negative €25 million. The main alleviating factor here lay in interest expense following the redemption of promissory notes and convertible bonds in the prior year. Accordingly, EBT was a negative €84 million as against a positive €19 million in the first half of 2014.

Notwithstanding the inability to offset tax losses between countries combined with restrictions on the recognition of deferred tax assets for current losses, income tax income still amounted to €7 million in the first half of the year (HY1 2014: income tax expense of €9 million).

All in all, net income thus amounted to a negative €76 million (HY1 2014: positive €10 million). Basic earnings per share amounted to a negative €0.75 compared with a positive €0.10 in the prior-year period.

Consolidated balance sheet

(€ million)	June 30, 2015	December 31, 2014
Non-current assets	1,168	1,103
Current assets
Inventories	1,216	1,318
Trade receivables	918	746
Other current assets	108	146
Liquid funds	304	316
Total assets	3,714	3,629
Equity	1,407	1,429
Non-current liabilities
Financial liabilities	427	522
Other non-current liabilities	505	479
Current liabilities
Financial liabilities	442	259
Trade payables	682	743
Other current liabilities	251	197
Total equity and liabilities	3,714	3,629

Compared with December 31, 2014, total assets increased by €85 million or 2.4% to €3,714 million. Most of the increase is due to seasonal factors and exchange rate changes.

Of the €65 million increase in non-current assets, €25 million relates to intangible assets and €36 million to property, plant and equipment. On a constant exchange rate basis, however, there was a decrease both in intangible assets (by $\epsilon$ 15 million) and in property, plant and equipment (by $\epsilon$ 16 million).

The reduction in other current assets is due to lower supplier bonus receivables during the year and the disposal of assets held for sale.

Cash and cash equivalents amounted to €304 million, approximately the same as at the end of the past fiscal year (€316 million).

In spite of the increase in total assets, the equity ratio of nearly 38% as of June 30, 2015 continues to reflect the solid balance sheet and remained at the level of December 31, 2014 (39%).

The increase of €26 million in other non-current liabilities primarily relates to the fair value measurement of derivatives used for hedging purposes (€23 million) and higher deferred taxes due to exchange rate factors (€3 million).

The increase in other current liabilities from $\epsilon$ 197 million to $\epsilon$ 251 million includes $\epsilon$ 47 million in allocations to restructuring provisions.

Net working capital

$($ $\in$ million)	June 30, 2015	June 30, 2014	December 31, 2014
Inventories	1,216	1,238	1,318
Trade receivables	918	914	746
Trade payables	$-682$	$-689$	$-743$
Net working capital	1,452	1,463	1,321

Net working capital rose to €1,452 million compared with the end of fiscal year 2014 (€1,321 million). However, it remained at approximately the prior-year level (€1,463 million). Exchange rate effects accounted for €83 million of the increase relative to the prior year-end.

Net financial debt

$($ $\in$ million)	June 30, 2015	June 30, 2014 *)	December 31, 2014
Net financial debt	571	579	472
Gearing (Net financial debt/shareholders' equity $^{**}$ )	41 %	41 %	34 %

*) Comparative amounts for the first half of 2014 adjusted due to the initial application of IFRIC 21 (Levies).

**) Consolidated shareholders' equity less non-controlling interests and less goodwill from business combinations subsequent to May 23, 2013.

Net financial debt came to €571 million and thus surpassed the figure as of December 31, 2014 (€472 million), predominantly due to the increase in resources tied up in net working capital and exchange rate effects (up €24 million). At 41%, gearing remained well below the 150% maximum applicable for financing purposes.

Our syndicated loan was prolonged ahead of term in an amend and extend process in April by one year to May 2018 while retaining the €360 million loan amount. In addition, some of the loan terms were amended in Klöckner& Co's favor effective May 2015. Klöckner&Co therefore succeeded in negotiating more favorable financing terms while improving the maturity profile.

Key substantive changes also include the accession of Kloeckner Metals Corporation as a borrower and the ability to draw on up to 50% of the facility amount in US dollars. This gives Klöckner & Co added financial flexibility. The new loan documentation once again includes the option, subject to the banks' approval, to extend the loan term in two stages up to May 2020. The banking syndicate was reduced from eleven to ten banks, thus strengthening the business relationship with Klöckner & Co's core banks.

(€ million)	Q2 2015	Q2 2014*)	HY1 2015	HY1 2014*)
	96		– 15
	7		6
Free cash flow	102	– 162	– 9	– 234
	– 78		– 10

Subsequent events

Macroeconomic outlook including key opportunities and risks

The outlook for the Brazilian economy is still poor. In light of high interest rates, fiscal adjustments and weak consumer confidence, the IMF expects economic output to decline by 1.5%. Although the government is launching economic stimulus programs, these will probably only lend impetus in the medium term.

Expected development of GDP in our core countries (in percent)	2015
Europe *)	1.5
Germany	1.6
United Kingdom	2.4
France	1.2
Spain	3.1
Switzerland	0.8
China	6.8
Americas
United States	2.5
Brazil	$-1.5$

Source: International Monetary Fund, Bloomberg. *) Eurozone.

Expected sector trend

The World Steel Association currently predicts that global steel consumption will grow by 0.5% in 2015. For the European Union, the Association anticipates an increase of 2.1%, while the North American Free Trade Agreement (NAFTA) region is expected to contract by 0.9% and South and Central America by 3.4%. A slight decline (0.5%) is also forecast for China.

Expected trend in our core customer sectors

Construction industry

According to Euroconstruct estimates, the European construction industry will grow by some 2% in 2015, driven by civil engineering and residential construction. In the US, the sector is expected to expand by 6% in 2015, with stimulus coming primarily from commercial construction. Growth is also likely to be supported by individual government infrastructure projects. China is forecast to record an increase of around 7%. Infrastructure spending is likely to be supportive of growth, while residential construction is expected to lose momentum. In Brazil, industry investment in construction projects is very subdued due to the weak state of the economy, as a result of which the sector is expected to barely grow at all.

Machinery and mechanical engineering

Global machinery and mechanical engineering is projected to see a further increase in shipments over the year as a whole. In Europe, the favorable exchange rate environment is having a positive impact, while the crisis in Ukraine is acting as a drag. Industry association Eurofer expects the sector in this region to expand by a marginal 0.4% overall. A sharp increase of 3.6% is forecast for the US due to substantial replacement demand. Strong growth is also expected for China, the world's largest machinery producer by far.

Automotive industry

The German Association of the Automotive Industry (VDA) currently estimates that the major automotive markets will remain on a growth track this year, but with the pace slackening to 1%. VDA forecasts growth of 4% in Europe and 2% in the American market. In China, the industry is likely to continue to grow strongly, expanding by 6%. Brazil, on the other hand, is expected to see a sharp decline in automotive production.

Current assessment of opportunities and risks

Outlook

®

Share price performance

	Q2 2015	Q2 2014	HY1 2015	HY1 2014
	99,750,000		99,750,000
	8.10		8.10
	808		808
	9.87		10.12
	7.71		7.71
	1,161,981		974,261

2015 Annual General Meeting

Ownership structure

Capital market communications

(€ thousand)	Q2 2015	Q2 2014*)	HY1 2015	HY1 2014*)
	1,693,067		3,390,532
	7,739		19,844
	– 2,424		– 7,780
	16		21
	– 1,370,623		– 2,753,209
	– 192,765		– 354,102
	– 26,758		– 52,316
	– 3,439		– 3,916
	– 151,780		– 301,865
Operating result	– 43,528	35,660	– 58,875	52,320
	30		908
	– 12,777		– 25,805
Financial result	– 12,747	– 16,446	– 24,897	– 33,219
Income before taxes	– 56,275	19,214	– 83,772	19,101
	1,406		7,341
Net income	– 54,869	11,797	– 76,431	9,820
	– 53,768		– 75,250
	– 1,101		– 1,181
Earnings per share (€/share)
– basic	– 0.54	0.12	– 0.75	0.10
– diluted	– 0.54	0.12	– 0.75	0.10

(€ thousand)	Q2 2015	Q2 2014*)	HY1 2015	HY1 2014*)
Net income	– 54,869	11,797	– 76,431	9,820
	43,881		– 572
	– 6,166		1,881
Total	37,715	– 9,680	1,309	– 20,747
	– 10,347		75,465
	– 110		– 1,742
	-		-
	877		552
Total	– 9,580	5,113	74,275	9,428
Other comprehensive income	28,135	– 4,567	75,584	– 11,319
Total comprehensive income	– 26,734	7,230	– 847	– 1,499
	– 25,968		280
	– 766		– 1,127

(€ thousand)	June 30, 2015	December 31, 2014
Non-current assets	462,692
	665,969
	10,486
	1,373
	15,266
	4,046
	7,737
Total non-current assets	1,167,569	1,103,143
Current assets
	1,215,766
	918,197
	24,232
	82,011
	304,313
	2,165
Total current assets	2,546,684	2,525,534
Total assets	3,714,253	3,628,677

(€ thousand)	June 30, 2015	December 31, 2014
Equity
	249,375
	900,759
	201,489
	45,864
Equity attributable to shareholders of Klöckner & Co SE	1,397,487	1,414,701
	9,266
Total equity	1,406,753	1,428,685
Non-current liabilities
	330,466
	16,468
	426,589
	56,941
	102,121
Total non-current liabilities	932,585	1,000,985
Current liabilities
	165,916
	8,108
	441,967
	681,959
	76,965
Total current liabilities	1,374,915	1,199,007
Total liabilities	2,307,500	2,199,992
Total equity and liabilities	3,714,253	3,628,677

(€ thousand)	Q2 2015	Q2 2014*)	HY1 2015	HY1 2014*)
	– 54,869		– 76,431
	– 1,406		– 7,341
	12,747		24,897
	26,758		52,316
	– 1,173		– 848
	– 1,569		– 4,983
	100,018		186,229
	30,756		– 127,974
	– 48,100		– 106,424
	49,576		71,903
	– 11,716		– 16,564
	311		663
	– 5,560		– 10,531
Cash flow from operating activities	95,773	– 76,229	– 15,088	– 142,046
	22,522		25,657
	-		-
	-		12,168
	– 14,738		– 30,918
	– 1,135		– 1,135
Cash flow from investing activities	6,649	– 85,857	5,772	– 91,896
	– 19,950		– 19,950
	-		-
	– 100,000		– 100,000
	– 51,500		– 51,500
	93,193		161,366
Cash flow from financing activities	– 78,257	– 15,472	– 10,084	– 12,556
Changes in cash and cash equivalents	24,165	– 177,558	– 19,400	– 246,498
	– 1,096		7,349
	281,244		316,364
Cash and cash equivalents at the end of the reporting period as per statement of financial position	304,313	349,963	304,313	349,963

(€ thousand)	Subscribed capital of Klöckner & Co SE	Capital reserves of Klöckner & Co SE	Retained earnings
Balance as of January 1, 2014	249,375	900,759	266,925
Other comprehensive income
Total comprehensive income
Balance as of June 30, 2014*)	249,375	900,759	276,476
Balance as of January 1, 2015	249,375	900,759	289,257
Other comprehensive income
Total comprehensive income
Balance as of June 30, 2015	249,375	900,759	201,489

Accumulated other comprehensive income

Currency translation adjust ment	Actuarial gains and losses (IAS 19)	Fair value adjust ments of financial instruments	Equity attributable to shareholders of Klöckner & Co SE	Non–controlling interests	Total
72,912	– 56,648	– 3,764	1,429,559	15,913	1,445,472
					6,769
					400
					3,400
					– 22,519
					631
			– 11,607	288	– 11,319
					9,820
			– 2,056	557	– 1,499
79,323	– 77,325	– 1,105	1,427,503	16,470	1,443,973
114,797	– 138,862	– 625	1,414,701	13,984	1,428,685
					75,465
					– 1,742
					– 572
					2,433
			75,530	54	75,584
					– 76,431
			280	– 1,127	– 847
					– 1,135
					– 19,950
185,286	– 137,607	– 1,815	1,397,487	9,266	1,406,753

	Closing rate			Average rate
1 € =	June 30, 2015	December 31, 2014	HY1 2015	HY1 2014
	3.4699		3.3102
	0.7114		0.7323
	1.0413		1.0567
	1.1189		1.1158

̓

In the opinion of the Management Board, the interim consolidated financial statements reflect all adjustments deemed necessary to provide a true and fair view of the results. The results for the period ending June 30, 2015 are not necessarily indicative of future results.

The present interim consolidated financial statements for the six-month period ending June 30, 2015 were authorized for issuance by the Management Board after discussion with the Audit Committee of the Supervisory Board on August 6, 2015. Unless otherwise indicated, all amounts are stated in million euros (€ million). Discrepancies to the unrounded figures may arise.

(2) New accounting standards and interpretations

The following table summarizes accounting standards and interpretations that were initially applied in fiscal year 2015:

Standard/Interpretation

Annual improvements to IFRSs 2011-2013

IFRIC Interpretation 21 (Levies)

As part of the Annual Improvement Project, modifications were made to four standards under the term "Annual improvements to IFRSs 2011-2013". These changes did not have an impact on the financial statements of Klöckner & Co SE.

IFRIC 21 regulates the closing date of public taxes accrued either upon threshold limits or accrued irregularly within the year and not being subject to IAS 12 (Income Taxes). The initial application of the interpretation led to a change in periodization of such taxes and thus increased other expenses and other liabilities in the amount of $\epsilon$ 5 million as well as deferred tax liabilities by €1 million in the first six months 2015 for the Klöckner & Co Group. Under consideration of income tax benefit effects totaling €1 million, the net result was decreased by €4 million. Prior year's presentation of other operating expenses and other liabilities in the financial statements as of June 30, 2014 increased accordingly by €4 million. Additionally, deferred tax liabilities decreased by €1 million. The impact on earnings during the first six months 2014 amounted to €3 million after consideration of the tax reducing effects. The initial application of IFRIC 21 will not have an impact on the 2015 full year results.

(3) Changes in ownership interests

By contract dated June 24, 2015 the remaining non-controlling interests of 30% in Klöckner Metals Brasil S.A. -Group, São Paulo, Brazil, was acquired at a purchase price of €1 million. The acquisition, which did not have a material impact on the consolidated financial statements, is accounted for as equity transaction in accordance with IFRS 10.

(4) Special items in the results

Due to the continuously difficult economic situation especially in France a further restructuring program was initiated during the second quarter 2015 (mainly site closures and lay-offs). In addition, the winding down of our Chinese operations commenced. Further measures are attributable to continuously unprofitable actvities in Great Britain and Switzerland.

The program impacted the Klöckner & Co Group results as follows:

(€ thousand)	EBITDA		EBIT		Net income
	O2 2015	HY 1 2015	O2 2015	HY1 2015	O2 2015	HY1 2015
Result as reported	$-16,770$	$-6,559$	$-43,528$	$-58,875$	$-54.869$	$-76,431$
Stock write-downs	5,166	5,166	5,166	5,166	5,166	5,166
Personnel expenses	29,131	29,131	29,131	29,131	29,131	29,131
Other restructuring expenses	18,060	18.060	18.060	18.060	18.060	18,060
Asset impairments			2,514	2.514	2,514	2,514
Tax effects					$-1,582$	$-1,582$
Result before restructuring expenses and impairments	35,587	45.798	11,343	$-4.004$	$-1,580$	$-23.142$

(5) Earnings per share

Earnings per share are calculated by dividing net income of the interim period attributable to shareholders by the weighted average number of shares outstanding during the period. In accordance with IAS 33.41, 7,419 thousand dilutive potential shares of the convertible bonds (2014: 12,675 thousand shares) were not included in the computation of diluted earnings per share as they were anti-dilutive.

		HY1 2015	HY1 2014 *
Net income attributable to shareholders of Klöckner & Co SE	$(\epsilon$ thousand)	$-75,250$	9,551
Weighted average number of shares	(thousands of shares)	99,750	99,750
Basic earnings per share	(€/share)	$-0.75$	0.10
Diluted earnings per share	(€/share)	$-0.75$	0.10

*) Comparative amounts 2014 adjusted due to initial application of IFRIC 21 (Levies).

(6) Inventories

$( \in$ million)	June 30, 2015	December 31, 2014
Cost	1,265	1,355
Valuation allowance (net realizable value)	$-49$	$-37$
Inventories	1,216	1.318

(€ million)	June 30, 2015	December 31, 2014
Non-current financial liabilities
	140
	-
	284
	3
	427	522
Current financial liabilities
	185
	123
	133
	-
	1
	442	259
Financial liabilities as per consolidated balance sheet	869	781

(€ million)	June 30, 2015	December 31, 2014
Financial liabilities as per consolidated balance sheet	869	781
	6
Gross financial liabilities	875	788
	– 304
Net financial debt Klöckner & Co Group	571	472

Financial assets as of June 30, 2015 Measurement in accordance with

				IAS 39	IAS 17
(€ million)	Carrying amount	Amortized costs	Fair value recognized in profit and loss	Fair value recognized in equity	Amortized costs	Not covered by the scope of IFRS 7	Fair value
Non-current financial assets
Current financial assets
Total	1,320	1,299	-	-	-	21	1,299

Financial liabilities as of June 30, 2015 Measurement in accordance with

				IAS 39	IAS 17
(€ million)	Carrying amount	Amortized costs	Fair value recognized in profit and loss	Fair value recognized in equity	Amortized costs	Not covered by the scope of IFRS 7	Fair value
Non-current financial liabilities
Current financial liabilities
Total	1,684	1,565	2	58	4	55	1,635

Financial assets as of

December 31, 2014 Measurement in accordance with IAS 39 IAS 17

(€ million)	Carrying amount	Amortized costs	Fair value recognized in profit and loss	Fair value recognized in equity	Amortized costs	Not covered by the scope of IFRS 7	Fair value
Non-current financial assets
Current financial assets
Total	1,185	1,167	-	-	-	18	1,167

Financial liabilities as of December 31, 2014 Measurement in accordance with

				IAS 39	IAS 17
(€ million)	Carrying amount	Amortized costs	Fair value recognized in profit and loss	Fair value recognized in equity	Amortized costs	Not covered by the scope of IFRS 7	Fair value
Non-current financial liabilities
Current financial liabilities
Total	1,635	1,540	5	38	4	48	1,596

The fair values of current financial assets are largely identical to their carrying amounts. The fair values of financial liabilities reflect the current market environment as of the reporting date for the respective financial instruments. The fair value is not reduced by transaction costs. For current financial liabilities for which no transaction costs are to be considered, the carrying amount approximates the fair value.

Any assets and liabilities recognized are accounted for at fair value and are regularly remeasured.

The fair values of the derivative financial instruments are determined on the basis of banks' quoted market prices or on the basis of financial models commonly used by banks. The fair value calculation also considers counterparty risk at the respective valuation date. If fair values exist, they correspond to the amount third parties would pay for the rights or obligations arising from the financial instruments. The fair values are the market values of the derivative financial instruments, irrespective of any offsetting changes in value in the underlying transactions.

The valuation of all financial instruments follows the hierarchy concept of IFRS 13. Financial instruments for which the fair value is obtained from quoted prices for similar instruments are classified as Level 1. If fair values are derived from directly observable market inputs, those instruments are included in Level 2. Financial instruments for which the fair values are not based on observable market data are assigned to Level 3. All financial instruments are allocated to Level 2 of the measurement hierarchy.

$(9)$ Subsequent events

By resolution of the registry court dated July 14, 2015 the Supervisory Board of Klöckner & Co SE was extended in accordance with Sec. 104 para. 2 sentence 2 AktG with Prof. Dr. Tobias Kollmann, Köln, Germany, as member of the Supervisory Board to replace the deceased member Robert J. Koehler.

(10) Related party transactions

Within the framework of its ordinary business activities, the Klöckner & Co Group has business relationships with numerous companies. These also include related parties. Business relations with these companies do not fundamentally differ from trade relationships with third parties. No material transactions were conducted with any of these related parties in the reporting period.

(11) Segment reporting

Starting with the second quarter of 2015, the activities of Klöckner European Operations GmbH are included in the Europe segment (previously Headquarter/Consolidation segment). Further information is provided in Note (1) Basis of presentation.

		Europe		Americas		Headquarters/ Consolidation		Total
$(\epsilon$ million)	HY 1 2015	HY1 $2014^{*}$	HY1 2015	HY1 $2014$ *	HY1 2015	HY 1 $2014$ *	HY 1 2015	HY1 $2014^{*}$
Segment sales	2,079	2,087	1,312	1,165			3,391	3,252
EBITDA (segment result)	$-16$	56	19	50	$-10$	$-9$	$-7$	97
EBIT	$-43$	33	$-4$	30	$-12$	$-11$	$-59$	52
Net working capital as of June 30, 2015 (December 31, 2014)	869	764	581	555	$\overline{2}$	$\overline{2}$	1,452	1,321
Employees as of June 30, 2015 (December 31, 2014)	7,087	7,104	2,551	2,559	81	77	9,719	9,740

*) Comparative amounts 2014 adjusted due to initial application of IFRIC 21 (Levies).

Reconciliation of EBIT to income before taxes:

$(\epsilon$ million)	HY1 2015	HY1 2014*)
Earnings before interest and taxes (EBIT)	$-59$	52
Financial result	$-25$	$-33$
Income before taxes	$-84$	19

*) Comparative amounts 2014 adjusted due to initial application of IFRIC 21 (Levies).

Duisburg, August 6, 2015

Klöckner&Co SE

Management Board

Gisbert Rühl Chairman of the Management Board

Marcus A. Ketter Member of the Management Board Karsten Lork Member of the Management Board William A. Partalis Member of the Management Board

Review report

To Klöckner & Co SE, Duisburg

We reviewed the condensed interim consolidated financial statements - comprising the consolidated balance sheet as of June 30, 2015 as well as the consolidated income statement, the statement of comprehensive income, the consolidated cash flow statement and the statement of changes in consolidated equity for the period from January 1 to June 30, 2015 as well as selected notes to the interim consolidated financial statements and selected explanatory notes - and the interim group management report of Klöckner & Co SE as of June 30, 2015 that are part of the semiannual financial report according to §37w WpHG. The preparation of the condensed interim consolidated financial statements in accordance with those IFRS applicable to interim financial reporting as adopted by the EU, and of the interim group management report in accordance with the requirements of the WpHG applicable to interim group management reports, is the responsibility of the Company's management. Our responsibility is to issue a report on the condensed interim consolidated financial statements and on the interim group management report based on our review.

We performed our review of the condensed interim consolidated financial statements and the interim group management report in accordance with the German generally accepted standards for the review of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW) as well as in additional consideration of the International Standard on Review Engagements 2410 (ISRE 2410). Those standards require that we plan and perform the review so that we can preclude through critical evaluation, with a certain level of assurance, that the condensed interim consolidated financial statements have not been prepared, in material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU, and that the interim group management report has not been prepared, in material respects, in accordance with the requirements of the WpHG applicable to interim group management reports. A review is limited primarily to inquiries of company employees and analytical assessments and therefore does not provide the assurance attainable in a financial statement audit. Since, in accordance with our engagement, we have not performed a financial statement audit, we cannot issue an auditors' report.

Based on our review, no matters have come to our attention that cause us to presume that the condensed interim consolidated financial statements have not been prepared, in material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU, or that the interim group management report has not been prepared, in material respects, in accordance with the requirements of the WpHG applicable to interim group management reports.

Düsseldorf, August 6, 2015

KPMG AG Wirtschaftsprüfungsgesellschaft

Dr. Markus Zeimes Wirtschaftsprüfer (German Public Auditor) Hélio Rodrigues Wirtschaftsprüfer (German Public Auditor)

Responsibility statement

To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the interim management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining months of the financial year.

Duisburg, August 6, 2015

Klöckner & Co SE

Management Board

Gisbert Rühl Chairman of the Management Board

Marcus A. Ketter Member of the Management Board

Karsten Lork Member of the Management Board

William A. Partalis Member of the Management Board

October 28, 2015	Q3 interim report 2015 Conference call with journalists Conference call with analysts
March 1, 2016	Annual financial statements 2015 Financial statements press conferenc Conference with analysts
May 4, 2016	Q1 interim report 2016 Conference call with journalists Conference call with analysts
May 13, 2016	Annual General Meeting 2016 Düsseldorf
August 4, 2016	Q2 interim report 2016 Conference call with journalists Conference call with analysts
November 3, 2016	Q3 interim report 2016 Conference call with journalists Conference call with analysts

Klöckner&Co SE

Christian Pokropp

Disclaimer

This report (particularly the "Forecast" section) contains forward-looking statements that are based on the current estimates of the Klöckner & Co SE management with respect to future developments. They are generally identified by the words "expect", "anticipate", "assume", "intend", "estimate", "target", "aim", "plan", "will", "endeavor", "outlook" and comparable expressions, and include generally any information that relates to expectations or targets for economic conditions, sales or other performance measures.

Forward-looking statements are based on current plans, estimates and projections. You should consider them with caution. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Klöckner & Co's control. Among the relevant factors are the impacts of important strategic and operating initiatives, including the acquisition or disposal of companies. If these or other risks or uncertainties materialize, or if the assumptions underlying any of the statements prove incorrect, Klöckner & Co's actual results 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., EBITDA, 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 measures are not subject to IFRS or HGB, or to other generally accepted accounting principles. Other companies may define these terms in different ways.

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

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