Tuesday 25 June 2013

Analysis of Kloeckner

A German steel company

Company: Kloeckner & Co SE

Business: German producer of steel and metal products. The product lines they offer are: Long products (special profiles), Flat products (sheets for shipbuilding and machinery engineering), Tubes (precision steel and seamless heavy wall tubes), Stainless steel & quality steel (e.g. high-alloy round steel bars for machinery engineering), Aluminium (mechanical engineering) as well as Special products (plastics & ironware). The biggest one is the so called flat products which represents 46% of their business.

Active: The bigger European countries, the USA, Mexico and Brazil as well as China. In total they are present in 15 countries. As a small comment I was not happy with their homepage due to that it was not directly clear what they are producing and selling. Even though they live on B2B sales it should be 100% clear when one enters the homepage what they have to offer.

P/E: -4.4

The P/E is negative due to a bad year in terms of earnings. Revenue-wise it was the best year since the last five years. The P/B is great with 0.5 which means that the P/E could be very high to be a buy according to Graham. The E/S is of course also not acceptable due to the loss. The book to debt is fully acceptable with 0.7 and the growth has for the last five years been almost 2% which gives a motivated P/E of 10 to 12. They decided not to pay any dividends last year and in the last five years they have only paid dividends once so one should not expect any money there.

Conclusion: When I compare Kloeckner with ThyssenKrupp then I would definitely pick Kloeckner. They seem to have the possibility to make a very nice turn-around if they decrease their costs even further and continue with their growth. In the end they have only entered into 15 countries which means they have many more places to go to. So I would keep observing them to see when that turn-around is coming and then maybe step in.

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