Kloeckner Sees 2014 Profit Revival Following Cut in Outlook

Kloeckner & Co SE, a German steel trader part-owned by the Knauf family, expects profit to revive next year on gains in the U.S., an improvement in prices and restructuring efforts after lowering its 2013 earnings outlook.

“Even if we cannot expect any tailwind from the European steel market, we anticipate that, given the timely, radical restructuring measures, we will regain profitability under our own power next year,” Chief Executive Officer Gisbert Ruehl said today in a statement. “Additional impetus can come from the generally expected recovery in the U.S., our growth market, and from the currently improving price environment.”

Kloeckner, based in Duisburg, surged 9 percent, the most since Feb. 19, to close at 10.225 euros in Frankfurt, where more than 3.5 times of the three-month average was traded.

Profitability improved in the second quarter even as sales fell amid weak European economies. The company today reported a 30 percent gain in quarterly earnings before interest, taxes, depreciation and amortization to 43 million euros ($57 million), beating the 35.7 million-euro average estimate of 14 analysts Bloomberg surveyed. Sales slid 14 percent to 1.7 billion euros.

Kloeckner forecast full-year Ebitda of 140 million euros, a decline from a prior estimate of 200 million euros as it sees demand in Europe down 5 percent instead of 2 percent previously, Ruehl said today on a conference call. He also forecast a net loss, compared with a profit before, and sees a profit in 2014.

Cost Savings

“We expect economic growth in Europe to move through the trough in the second half 2013 and see the U.S. market as the main driver for Kloeckner profits in the coming years,” said Christian Obst, an analyst at Baader Bank AG. “The development is backed by the near end of the internal restructuring and a healthy balance sheet. Reduced guidance matches expectations.”

Kloeckner will extend cost savings by closing or selling 10 more sites in France and the U.S., and cutting 200 more jobs by year-end, the company said in today’s statement.

Dwindling demand for steel used in autos and construction in Europe and competition from China have squeezed margins and forced cost cuts as steelmakers grapple with spare capacity. Germany’s second-largest steelmaker Salzgitter AG lowered its profit forecast for the third time in nine months this week.

Interfer Holding GmbH, which owns Kloeckner’s rival Knauf Interfer SE, said in February it bought a 7.82 percent stake in Kloeckner. The unit of the holding company, owned by 70-year-old Dortmund-based entrepreneur Albrecht Knauf, plans to expand and said the deal was a “strategic investment.”

While Kloeckner continues talks with Knauf, discussions have moved away from integrating with Knauf Interfer because of “significant restructuring costs” and the lack of a benefit for Kloeckner’s shareholders, Ruehl said on the conference call.

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