Steel distribution group Klöckner & Co has ended the first quarter with a net loss of €10 million ($11m). This outcome was still unforeseen as late as mid-March, when the group expected revenues to rise this year, Kallanish notes.
At a conference phone call five days after the group issued an ad-hoc profit warning with a downward-adjusted guidance, ceo Gisbert Rühl was clear in his statement. The company had had a “… very bad start” to the year, he said, essentially because the group’s characteristically strong business with the automotive industry suffered from reduced production at carmakers.
Although weakening demand from automotive has been a topic among German steel players since late last year, the dip has apparently turned out to be more pronounced than foreseen. According to Rühl, car sales are -19% below those in the previous year, which is especially painful for the group’s strong German service centre business. Sales within the mechanical engineering industry are also affected, to a lesser extent, while business with construction continues to flourish, especially in Switzerland.
On its sales volume of 1.5 million tonnes. Klöckner actually achieved an increase in revenues of 4.5% to €1.7 billion on higher prices year-on-year. It had however still suffered from the recent price deterioration, which lead to windfall losses, Rühl explained.
The group fared quite well in the US market, as it achieved slight growth against the overall trend, as the market in total fell by -6% in Q1, Rühl added. Windfall losses however were also an issue for the group in America. “We have three main profit engines: automotive, USA and Switzerland. If two out of three fail, we have a problem,” Rühl said.