ANNUAL REPORT 2018 Key Figures Klöckner & Co SE
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ANNUAL REPORT 2018 Key figures Klöckner & Co SE Change in € million 2018 2017 2016 2015 2014 2018 – 2017 Shipments Tto 6,107 6,135 6,149 6,476 6,598 – 28 Sales 6,790 6,292 5,730 6,444 6,504 +498 EBITDA before material special effects 229 220 196 86 191 +9 EBITDA 227 220 196 24 191 +7 EBIT 141 130 85 – 350 98 +11 EBT 107 97 52 – 399 39 +10 Net income 69 102 38 – 349 22 – 33 Earnings per share (basic) € 0.68 1.01 0.37 – 3.48 0.22 – 0.33 Earnings per share (diluted) € 0.66 0.96 0.37 – 3.48 0.22 – 0.30 Cash flow from operating activites1) 60 79 73 276 68 – 19 Cash flow from investing activities – 59 2 – 52 – 85 – 132 – 61 Free cash flow 1 81 21 191 – 64 – 80 Liquid funds 141 154 134 165 316 – 13 Net working capital 1,229 1,132 1,120 1,128 1,321 +97 Net financial debt 383 330 444 385 472 +53 Equity ratio % 41.9 41.7 39.6 39.2 39.4 +0.2%p Balance sheet total 3,061 2,886 2,897 2,841 3,629 +175 Employees as of December, 31 8,579 8,682 9,064 9,592 9,740 –103 1) Starting in 2014 cash flows from hedging transactions are presented in cash flows from financing activities (previously: operating activities). SHIPMENTS BY SEGMENTS IN 2018 SALES BY SEGMENTS IN 2018 44% 40% Americas Americas 56% 60% Europe Europe 3 Content To our shareholders Letter to the shareholders 6 Management Board 9 Report of the Supervisory Board 10 Supervisory Board 17 Klöckner & Co on the capital market 18 Corporate Governance Corporate Governance Report and Corporate Governance Statement 24 Data Protection 36 Remuneration report 37 Group Management Report Fundamental information about the Group 46 Economic report 57 Individual financial statements of Klöckner & Co SE 72 Macroeconomic outlook including key opportunities and risks 77 Group forecast 99 Sustainability reporting 101 Financial Statements Group financial statements 130 Consolidated statement of income 130 Statement of comprehensive income 131 Consolidated statement of financial position 132 Consolidated statement of cash flows 135 Summary of changes in consolidated equity 136 Notes to the consolidated financial statements 139 Independent Auditor’s Report 216 Declaration of the Management Board 225 Individual financial statements 227 Statement of income 228 Balance sheet 229 Fixed asset movement schedule 230 Notes to the financial statements 231 Independent Auditor’s Report 244 Declaration of the Management Board 250 Additional information concerning the consolidated and individual financial statements 260 Services Glossary 264 Contact / Imprint 271 Financial calendar 272 4 FACTS 2018 >100,000 CUSTOMERS € 6,790 m SALES € 227 m EBITDA 6,107 Tt SHIPMENTS ~8,600 EMPLOYEES 5 € 2.741 m SALES AMERICAS € 0.30 DIVIDEND PER SHARE1) € 69 m NET INCOME 25% € 4,049 m SALES EUROPE DIGITAL SALES BY Q4 2018 ~160 LOCATIONS ~60 MAIN SUPPLIERS 1) Proposal to the Annual general Meeting on May 15, 2019. 6 KLÖCKNER & CO SE ANNUAL REPORT 2018 In the past fiscal year, we succeeded in increasing our operating income (EBITDA) for the third time in a row, to €227 million, following the €220 million achieved in the prior year. While net income at €69 million fell short of the prior-year figure of €102 million, which was buoyed by tax-related one-off effects, we will nevertheless propose to our share- holders at the Annual General Meeting on May 15, 2019 a dividend of €0.30 per share for the 2018 fiscal year, on a par with the prior-year dividend. But we are not yet satisfied with this. We aim to achieve a good deal more with our “Klöckner & Co 2022” strategy, especially in terms of the digitalization of our supply and value chain. We have again made significant progress in this regard. The online shops developed by our digital unit kloeckner.i have gone live in six countries and grew during the period under review to become online marketplaces. So we are no longer selling just Gisbert Rühl our own products this way; some 30 third-party suppliers have already come on board to offer their complementary products as well. This lets Klöckner customers access a significantly wider range of steel and metal products without our having to invest in additions to our product portfolio. We went further still with the XOM Materials industry platform which, unlike the Klöckner marketplaces, is also open to our direct competitors. This is certainly an unusual step. So you are probably wondering why we have taken it. Why, in addition to our Klöckner marketplaces, are we offering a platform where our competitors can also sell their products? Because we consistently consider the customer’s perspective. When customers want to buy specific products or special processing services from Klöckner, our digital Klöckner marketplaces give them the perfect way to do that. But what if customers want the most efficient way to compare prices for standard products? In that case, they are better served by XOM Materials because it gives them online access to offerings from any number of vendors. It doesn’t get any better or more efficient than that. From the outset, we were positive that our Klöckner marketplaces and XOM Materials alike would deliver major benefits for customers. They are also helping us drive digitaliza- tion forward and tap into new lines of business. Although we are still in the early stages of this development, we have already made great strides. For instance, we increased our quota of online sales to an impressive 25% of total sales in the fourth quarter of 2018, up from 17% in the prior-year quarter, and had already transacted over €5 million worth of business through XOM Materials by the end of last year. GROUP MANAGEMENT SUSTAINABILITY FINANCIAL TO OUR SHAREHOLDERS REPORT REPORTING STATEMENTS SERVICES 7 Letter to the shareholders We are continuing to make good headway not only with the expansion of our digital business but also with the related cultural transformation. For instance, over 5,000 of our roughly 8,600 employees now use our internal social network Yammer to communicate hierarchy-free. On top of that, more than 1,200 people have voluntarily completed our online courses on digital topics. And the agile work methods kloeckner.i is promoting in our Company are gaining more and more traction. That is making us faster and more agile all the time, which is a key competitive edge in times of an ever more rapidly changing business environment. Thanks to its in-depth experience with digital transformations, kloeckner.i will begin offer- ing consulting services to external companies in 2019. This represents yet another unusual step for a traditional company to take. But unusual steps are called for in order to make Klöckner and our share price less depen- dent on economic fluctuations. Increasing the proportion of sales we generate through higher value-added products and services, plus our VC² efficiency enhancement program, will not be sufficient to get the job done. This is strikingly clear against the backdrop of the past fiscal year. We recorded the best operating income in eight years, while our shares periodically dropped to their lowest level since 2009. By digitalizing our supply and value chain and setting up XOM Materials, we have given ourselves the opportunity to improve our situation fundamentally and free ourselves long-term from steel price fluctuations over which we have no control. This transformation is supported by our employees, so I would like to express my gratitude to each and every one of them for their outstanding efforts. My thanks also go out to you, our shareholders, for your trust and loyalty. We will continue to forge ahead with this transformation, which should eventually also make itself felt in a lasting improvement in our share price performance. Gisbert Rühl Chairman of the Management Board 8 KLÖCKNER & CO SE ANNUAL REPORT 2018 GROUP MANAGEMENT SUSTAINABILITY FINANCIAL TO OUR SHAREHOLDERS REPORT REPORTING STATEMENTS SERVICES 9 Management Board Management Board Gisbert Rühl CHAIRMAN OF THE MANAGEMENT BOARD (CEO) Born in 1959. CEO since November 1, 2009 and CFO from July 2005 to December 2012, appointed until December 31, 2020. He is responsible for the coordination of the Management Board and functionally responsible for the headquarter depart- ments Corporate Communications, Corporate Development / M&A, Group Data Protection Office, Group HR, Investor Relations & Sustainability and Legal & Com- pliance / Personnel & Insurances. As part of his responsibility for Corporate Develop- ment Gisbert Rühl is in charge for implementing the digitalization strategy. Marcus A. Ketter CHIEF FINANCIAL OFFICER (CFO) Born in 1968. CFO since January 1, 2013, appointed until May 15, 2019. He is functionally responsible for the headquarter departments Corporate Accounting, Corporate Controlling / Risk Management / Information Security, Corporate IT, Corporate Taxes, Corporate Treasury and Internal Audit. Jens M. Wegmann MEMBER OF THE MANAGEMENT BOARD (COO) Born in 1965, Member of the Management Board since December 1, 2017, and appointed until November 30, 2020. As Chief Operating Officer (COO) he is responsible for all Group Operations including North and South America, Europe, Switzerland as well as for the departments Digital Supply Chain, Procurement and Advanced Development & Innovation. 10 KLÖCKNER & CO SE ANNUAL REPORT 2018 Report of the Supervisory Board During the year under review, the Supervisory Board performed with due care the tasks required by law, the Company’s Articles of Association and by Rules of Procedure. It regularly advised and continuously super- vised the Management Board, and assured itself that the Management Board’s decisions and actions were legally compliant, orderly and fit for purpose.