IMÁGENES DEIMOS-

1.

HIGHLIGHTS

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Prior-year EBITDA before restructuring expenses exceeded despite ongoing market contraction

in Europe

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KCO 6.0 restructuring program completed

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KCO WIN optimization program launched with annual EBITDA contribution of €50 million

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Further marked reduction in net financial debt to €325 million (2012: €422 million)

2.

FUNDAMENTAL INFORMATION ABOUT THE GROUP

2.1

GROUP STRUCTURE

Klöckner&Co SE is the parent and ultimate holding company of the Klöckner&Co Group. It controls the management companies of the Europe and Americas segments with their operational country organizations. Except for the sale of the Eastern European operations, there was no change in the Group’s legal and financial structure relative to the prior year. Klöckner&Co SE primarily complies with the provisions of the European Company Regulation, its Articles of Association, and the German SE Implementation Act. In particular, it is also subject to the provisions of the German Stock Corporations Act.

Klöckner&Co SE’s subscribed capital remains unchanged at a total of €249.4 million, composed of 99.75 million no-par-value registered shares carrying full voting rights. Since the initial public offering at the end of June 2006, Klöckner&Co SE’s shares have been listed on the Frankfurt Stock Exchange’s Regulated Market (Prime Standard). They have been a component of Deutsche Börse AG’s MDAX® index since January 2007.

Business activities/business model

Klöckner&Co is the largest producer-independent, stockholding steel and metal distributor and one of the leading steel service center companies operating in Europe and the Americas. We act as a connecting link between steel producers and consumers. As we are not tied to any particular steel producer, our customers benefit from our centrally coordinated procurement activities and wide range of national and international sourcing options spanning around 70 main suppliers worldwide. Our key competitive factors are economies of scale in global procurement, our large product portfolio, customer access provided by an extensive logistics and distribution network, a diverse range of prefabrication services, and high product availability. The Klöckner&Co network spans some 15 countries and provides customers with local access to around 220 distribution and service locations. Our high product availability levels largely eliminate the need for customers to hold their own inventories. Concentrated mainly in the construction industry as well as the machinery and mechanical engineering industries, our customer base comprises more than 146,000 mostly small to medium-sized steel and metal consumers. We also supply intermediate products for the automotive, shipbuilding, and consumer goods industries, and offer customers an optimized, end-to-end solution from procurement through logistics to prefabrication, including individual deliveries and 24-hour service.

Both in Europe and North America, the market for warehouse-based distribution and steel service centers is highly fragmented into wholesale, regional and local dealers. There are around 3,000 companies operating in Europe and 1,200 in the more consolidated North American market. Our market share in steel and metal distribution is some 7% in Europe and around 3% in the USA. In all the European markets in which we operate as well as in the USA, we are one of the top three distributors and service centers.

2.2

CORPORATE STRATEGY

“Klöckner&Co 2020” long-term growth strategy

We further developed our “Klöckner & Co 2020” long-term growth strategy during the reporting period, adapting it to the altered market conditions.

The main focus of measures on the strategy front is currently on process improvements under KCO WIN and differentiate ourselves apart most notably vis-à-vis our many small and mid-size competitors. Following the successful completion of our KCO 6.0 restructuring program, acquisitions are once again on the agenda, although mostly on an opportunistic basis for the time being. We continue to press ahead with flanking activities.

Growth with focus on the USA

In terms of regional growth opportunities, we continue to see the USA as our most attractive market. We expect steel demand to grow faster there than in Europe. For the main part, we anticipate stimulus for robust growth in steel demand from commercial construction and the comparatively low energy prices, which will likely fuel a resurgence of energy-intensive industries. We have already boosted US turnover to 43% of total turnover in the reporting period, and we aim to raise this to over 50% in the medium term. Our entry into the attractive American automotive industry segment with the opening of our new service center in Alabama in the fall of 2013 will take us closer to that goal. We can also capitalize on the established customer relationships and know-how of our German subsidiary Becker Stahl-Service, which for decades has been a reliable supplier of flat steel to the European automotive industry.

In Europe, we aim to lock in the high profitability levels at our Swiss country organization and Becker Stahl-Service while further expanding the volume of their business. With the restructuring taking full effect for the first time in the current year as well as through other enhancement measures, we are working to achieve a substantial improvement in profitability at all other European country organizations.

We also plan to push growth in China and Brazil in the medium term in line with the development of their markets. The launch of activities in the two regions in 2010 and 2011 respectively and the local knowledge acquired as a result provide a sound basis for such growth. Supporting functions KCO WIN Growth and Optimization

External growth is currently opportunistic Internal growth with a focus on the US market

Focus on KCO WIN

Current strategic focus

Current Differentiation Broad product range Higher value-added processing Advanced tools and systems

External & Internal Growth

Operations

Management- & Personnel development Controlling & IT- Systems

Acquisitions are once again an option for us as a growth accelerator, although mostly on an opportunistic basis for the time being. In line with our strategy of external growth, the focus here is on companies offering extensive higher value-added processing as well as a large proportion of specialty products.

Workflow and process improvements with KCO WIN

A main focus of the measures is on improvements in sales. Our prime objective in this area is to fine-tune pricing in order to raise our gross profit margin. As part of this, we are linking variable remuneration for our sales staff more closely to gross profit generated, while stipulating product-specific minimum margins to prevent unprofitable sales from the outset. Introduction of KliCC sales software will give sales staff fast, remote access to key customer data for greater effectiveness in preparing sales pitches. The newly developed Sales Playbook additionally supports our sales force in selective customer relationship development.

In procurement, we plan to better leverage the economies of scale we enjoy compared with many competitors by extending centrally controlled procurement activities to additional product ranges. To this end, we will also forge strategic alliances with producers in order to secure a high level of material availability and favorable terms – also in case demand picks up again. At the same time, we are planning a range of enhancements in the areas of logistics and stockyard management. These include lasting improvements to workflows and structures in internal logistics, prefabrication, and transportation logistics.

KCO WIN is set to contribute around €20 million to EBITDA as early as in the current year. It is then expected to make its full annual contribution to EBITDA of around €50 million for the first time in 2015.

Differentiation – most of all from small and mid-size competitors

To enhance our differentiation, primarily from the many small and mid-size competitors, we follow three main thrusts:

Supply of a wide range of steel and metal products through our network

We are going to supply customers to a greater extent through our network instead of via individual locations. This means we can deliver a wide range of steel and metal products to customers without adding extra inventory.

Expansion of higher value-added processing

We are stepping up investment in higher value-added processing such as 3D tube and pipe laser cutting to supplement our wide range of steel and metal products with ready-to-fit parts. Customers gain here with superior quality at lower cost, and integration into customer supply chains gives us higher margins while enhancing customer loyalty.

Extended service portfolio and innovation

We are pushing ahead with innovation and augmenting our service portfolio with offerings such as web shops, which benefit notably small customers with 24/7 availability and improved order processing, as well as scanner-based solutions that also enhance efficiency, reliability, and traceability in stockyard material flows.

Differentiation