The business situation throughout the year and especially in the third quarter has been visibly affected by the economic slowdown. While EBITDA, at EUR 203 million, is up on the prior year period, the earnings trend is unsatisfactory and remains negative. After EUR 104 million in the first and EUR 62 million in the second quarter, EBITDA fell in the third quarter to EUR 37 million.
The drop in operating income partly reflected the customary seasonal softening of demand in the summer months, but partly also the economic slowdown which hasn't resulted in the usual end of summer recovery. In addition, producers generally failed in their attempts to stabilize prices, and this put a squeeze on margins. Customers were accordingly more cautious whereby margins came increasingly under pressure.
Mr Gisbert Ruehl chairman of the management board of Kloeckner & Co SE said that "As expected, we are moving into increasingly choppy economic waters. Risks are increasing, customers are being cautious. That clearly shows through in our earnings performance."
Klöckner & Co increased sales volumes by 25.8% from 4.0 million tonnes in the prior year period to 5.0 million tons in the first nine months of 2011. Sales volumes gained 8.5% in Europe and 90.5% in the Americas segment compared with the prior year figures. Adjusted for the business acquisitions in 2010 and 2011, sales volumes were up 16.9% on the prior year period in the Americas segment and 3.2% in the Europe segment, while adjusted sales volumes for the Group as a whole rose by 6.5%. The third quarter saw only slight organic growth in sales volumes relative to the prior year period kept up solely by growth in the USA, while sales volumes in Europe already showed a slight decrease.
Despite a falling price trend, average selling prices were above the prior year level, as a result of which sales grew more strongly than sales volumes, increasing by 38.6% from EUR 3.9 billion to EUR 5.4 billion. Excluding the effects of the acquisitions, sales increased by 20.7%, likewise with a decreasing trend in the third quarter, when sales growth was down to 10.9%.
The gross profit margin fell continuously through the year. At 18.8%, the figure for the first nine months was significantly down on the 22.3% prior year level in line with the economic and price situation; the third quarter saw the margin fall to its lowest level for the year at 16.8%. It became ever harder to keep margins up at adequate levels in the market as increasingly fierce competition chased shrinking market volumes compounded by a backdrop of sinking prices. EBITDA increased, mainly as a result of the good business situation in the first quarter of 2011, from EUR 190 million in the first nine months of 2010 to EUR 203 million in the first nine months of 2011. The consolidation of Macsteel Service Centers USA contributed to this increase. EBITDA is on a pronounced downward trend, however, decreasing from EUR 104 million in the first quarter to EUR 62 million in the second and only EUR 37 million in the third.
EBIT came to EUR 129 million in the first nine months, about on a par with the prior year period figure of EUR 127 million. Higher finance expenses as a result of a rise in debt meant that Group earnings before taxes, at EUR 66 million, was down on the EUR 79 million figure for the prior year period. Net income decreased to EUR 38 million due to a higher tax burden (2010: EUR 63 million). Basic earnings per share consequently stood at EUR 0.47, compared with EUR 0.92 in the prior year period.
Total assets increased mainly as a result of the acquisitions and also due to the rights issue by 41.8% to EUR 4,950 million. With an equity ratio of 37%, Klöckner & Co has a sound financial position with a balanced and long term maturities profile in non current liabilities.
