EUR 407.14 For Business Accounts Only

KLOECKNER & CO - Rating Report

RATING RATIONALE

- Spread Research has initiated its rating on Kloeckner & Co (“KCO”) and assigns B+.

- The company is positioned as one of the top three multi-metal distribution and service centre operators on the European (5% market share) and US fragmented markets (4% market share). In FY16, KCO improved its profit-ability, with adjusted EBITDA increasing to €196m compared to a poor performance in FY15 (€86m within the context of very difficult market) due to its restructuring and optimization programs. Investments in digitalization and in higher value-added products, as well as the sale of low-profitability businesses are part of the “Kloeckner & Co 2020” plan to improve the group’s margins. This has started to bear fruit and is on track. In addition the company recently initiated another efficiency program, “One Europe & One US”, with further savings expected. We believe that profitability will increase slightly over the coming years thanks to the effect of the programs and from the strategy of higher value-added products and digitalization. Nevertheless, some of the benefits will prob-ably be passed on to customers as the industry remains very competitive. We also recognize as supportive of the credit KCO’s strong liquidity position.