Kloeckner & Co’s shipments and sales could trend down in Q4 2020 from Q3 due to seasonality, though revenue would remain unaffected due to favorable price increases.
The company attributed the fall in expectations to the uncertainty around a second wave of the COVID-19 pandemic influencing shipments due to potential lockdowns in winter. However, the firm noted in its Q3 2020 earnings that it expects a positive cash flow from operating activities with a full-year EBITDA guidance of €75-95mn ($88-111mn).
Kloeckner’s business model was cushioned through the first three quarters in 2020 by ongoing digitalization and restructuring measures through a project internally called Surtsey. Under this plan, the total workforce will be reduced by 1,200 employees and the company will close 19 sites.
In January-September 2020, the steel distributor’s workforce was reduced by 580 with four US sites closed permanently. Sales generated through digital channels increased to 42pc of total sales in Q3 compared to 30pc in the same quarter in 2019. Restructuring cost-saving measures include the installation of improved automation and adaptive intelligence applications.
Kloeckner’s steel shipments fell by 16.4pc to 3.7mn mt in the first nine months of 2020 against the prior-year period. Sales revenue fell by 21.2pc to €4bn for January-September 2020 against the same period a year ago, a sharper drop compared to shipment volumes due to lower prices, especially, in Q2 2020.
Shipments dropped by 12.5pc to 1.2mn mt in Q3 2020 against 1.4mn mt in the same prior-year quarter. Sales revenue fell by 18.3pc to €1.3bn in Q3 2020 during the same period under comparison.
The company’s EBITDA declined by 34.5pc to €72mn in the first nine months of 2020 from €110mn in the same period last year. EBITDA in Q3 2020 stood at €40mn and contributed 55.6pc to its nine months EBITDA.
The earnings for Kloeckner’s Switzerland business increased in the January-September period owing to sales in the reinforcing steel product lines and lower operating costs. However, the EBITDA at its US business, as well as the Europe Metal Services segment, reported declines due to weak demand from the automotive market.