Klöckner increases income in Q2, EU outlook brighter

Germany-based distributor and service center operator Klöckner & Co significantly increased its operating income (EBIDTA) in Q2 to €72 million, owing to steel price increases and the implementation of digital pricing tools that react quicker to price sensitivity, CEO Gisbert Rühl said in a press call on Thursday.

The distributor expects continued profit growth during Q3, but highlights that steel prices are likely to stop increasing further and to stagnate in Europe (see related article).

Klöckner improved its EBIDTA by €36 million year-on-year in Q2 after being hit hard by steel price deterioration mid-2015. In a quarter-on-quarter comparison, EBIDTA grew by €56 million. The price recovery, however, did not have as much effect on the sales figures, which decreased 10.4% y-o-y to €1.5 billion, resulting from still lower price levels on average and site closures in Europe. Shipments remained stable at 1.6 million metric ton y-o-y in Q2, while showing seasonal increases of 5.6% from Q1.

According to Rühl, introducing digital pricing tools that react more quickly to market developments has helped the distributor to benefit more from price increases than previously when pricing was done “offline”. Klöckner wants to increase its revenue coming from digital sales to 50% by 2019 from around 10% now.

The firm also announced a “one Europe” programme to streamline and centralise the management structure of its European distribution services by the end of 2018. As reported, the distributor will reduce its workforce by around 100 jobs and create two regional headquarters for Europe so as to have a more transnational approach. The job cuts will mainly affect Spain, France and the UK, but will not involve closures of actual stockholding sites, Rühl told Platts.

While both the European and the US businesses regained strength in Q2, Klöckner sees decreasing steel demand in the US for the year continuing as oil prices remain low. Where European demand is forecast to increase by 3%, US demand is expected to fall by 3% despite a strong automotive market. Klöckner expects an EBIDTA between €65 million and €75 million for Q3.

— Laura Varriale