Good afternoon, ladies and gentlemen, and welcome to today's full year 2024 conference of Klöckner & Co. Felix, for your information, this conference is being recorded. At this time, I would like to turn the call over to your host today, Mr. Fabian Joseph. Please go ahead, sir.
Yes, thank you very much, and welcome to our full year 2024 conference call. We apologize for any inconvenience caused by the postponement of the call. We are pleased to inform you that our operators successfully resolved all technical issues. With me today are our CEO, Guido Kerkhoff, our CFO, Oliver Falk, and our CEO, Americas, John Ganem. They will guide you through the presentation, and afterwards, we are happy to take your questions. With that, I'd like to hand over to you, Guido.
Yeah, thank you, and welcome from my side as well to our full year 2024 call. Now, after fire alarms this time, the line broke down. Sorry for any inconvenience. We really appreciate that you're joining now for this call, and we're not happy with our situation, so sorry for that. I will now start with the financial highlights of the year, followed by an update on the company's latest strategic achievements. As with recent analysts and investors' conferences, financial statements were prepared according to our IFRS 5 and include our continuing operations. Despite the continued challenging macroeconomic environment, shipments were slightly above last year's level, mainly due to the strong development of our Klöckner M etals Americas segment, and the acquisitions in the second half of 2023. Europe continued to face a challenging market environment.
Sales came in slightly below previous year's level as a result of the strong decline in steel prices despite increased shipments. Gross profit for the full year 2024 is slightly below the figure of previous year, driven by negative price effects as a result of the steel price correction. Despite the persistently challenging macroeconomic conditions, especially in Europe, and an ongoing correction in steel prices, EBITDA before material special effects came in at EUR 136 million for the full year 2024, a result in line with our guidance range. Operating cash flow came in at EUR 160 million, marking the third time in a row of a significant cash generation. Net financial debt came in at a constant level year on year. We will propose to the annual general meeting to pay a dividend of EUR 0.20 per share.
This would be a dividend for the fourth consecutive time for our shareholders, the first time since our IPO. With that, we're demonstrating that shareholder remuneration remains one of our top priorities with the aim of being a steady and consistent dividend pay. Let's now have a look at our performance by segment. In our Klöckner M etals Americas segment, we achieved slightly increasing shipments year on year in Q4 2024 and continued to gain market share. Nevertheless, as a result of the steel price correction in the U.S., sales came in considerably below last year's quarter. Our EBITDA before material special effects came in at a level of EUR 42 million, a strong result. In our Klöckner M etals Europe segment, both shipments and sales came in slightly below previous year's quarter as a result of the persistently challenging macroeconomic environment.
EBITDA before material special effects consequently came in negative at minus EUR 8 million in Q4 2024. Let's now focus on our strategic achievements in recent months. As we've stated before, generating less volatile earnings while increasing our underlying profitability base is a key part of our group's strategy. Developing our higher value-added business is a key lever in achieving this goal. I'd like to take this opportunity to highlight how this company has changed and improved in the recent past. We closed and integrated our value-creative growth platform, National Material Company Mexico, in August 2023, and this acquisition is fully on track to achieve our ambitious targets. We also acquired highly profitable Industrial Manufacturing Services, significantly expanding the less volatile fabrication business.
In addition, we acquired Amerinox, a leader in material polishing, including high-gloss finishing, as well as Sol Components, U.S. market leader, and end-to-end structural solutions for the solar industry. All these acquisitions aim to build an unrivaled portfolio of products and services that create value for our customers while improving profitability and resilience. On the other hand, we sold parts of the low-margin distribution business in Europe. It's an important milestone to strengthen our focus on our attractive business in Germany, Austria, and Switzerland. The sale of our Brazilian distribution business is the next step in further streamlining our portfolio. In financial year 2024, we also continue to invest organically in order to transform distribution warehouses into HVAB powerhouses. Our sites in Charlotte and Dallas in the U.S. are evidence of this, but also in Germany, we invested into state-of-the-art laser capacity.
Our progress can already be seen in our financials. The distribution business only makes up around 20% of our sales, almost half compared to the financial year 2019. Furthermore, we already generate around 40% of our sales with HVAB, which is responsible for around 80% of our EBITDA, clearly proving that we are on the right track with our strategy. Going forward, we will capitalize even more on our strong presence in North America and the DACH region and press ahead with our group strategy. We will now have a closer look on what we did during the past month, starting with John and a closer look at our investment in the new aluminum processing facility in North America.
Thank you, Guido. With the investment in Columbus, Mississippi, we are taking another significant step in expanding our higher value-added business. It further strengthens our existing market leadership position in flat rolled metal processing. It creates a more strategic relationship with both Aluminum Dynamics and its parent company, Steel Dynamics, while also streamlining supply chain processes and lowering complexity, cost, and lead times for future ADI and Klöckner customers. With that, we increase our annual aluminum processing capacity by over 200,000 metric tons, which we will achieve by applying cutting-edge automation technology and creating the most modern and efficient metal service center in North America. We are further expanding and differentiating our product and services portfolio to better meet the needs of both automotive and industrial customers across North America.
Furthermore, we are supporting our sustainability goals by processing ADI's high-energy efficient CO2-reduced aluminum products and will be able to provide best-in-class aluminum processing solutions. By significantly broadening our total processing portfolio, we benefit not only from increasing our share of more profitable aluminum product lines, we also become significantly less exposed to market price volatility. The Columbus, Mississippi location is compelling for us as it is strategically positioned within our existing footprint and will provide strong opportunities for further accretive growth across the wider Klöckner North American network. Finally, this investment positions Klöckner perfectly for growth as ADI's entry into the market will quickly help address the current structural deficit of aluminum production capacity in the U.S. and will provide customers with a much-needed and well-timed domestic-based aluminum supply chain solution. With that, I'll turn it back over to Guido.
Thanks, John. In the recent months, we've also reached important milestones in our company development in the DACH region. In Germany, we invested in advanced 30-kilowatt laser in Kassel to further develop our higher value-added business in our German country organization. The laser is one of the most modern machines in Europe and significantly increases our capacity and enables us to grow in the industries of agriculture, machinery, mechanical engineering, but also in the significantly growing defense sector. With improved production quality, we will further reduce our process costs, leading to greater efficiency. The machine is already in use and completely operational. In Switzerland, we invested in optimizing our logistics. By introducing combined transport seamlessly, linking rails and road logistics, we enhance our efficiency. This approach allows us to transport material to our customers at night while unlocking cost savings potential through improved workforce and site efficiency.
By leveraging the environmental and cost advantages of rail transport, we're further improving our cost base while supporting sustainability goals. Our logistic concept is already fully operational. Before I hand over to Oliver, let me clearly state we're very proud that within 2024, we could continue all the upstream and downstream investments we did in Europe, in Germany, and in Switzerland, and that was well received by our customers as they see that we're continuously working on improving our service portfolio towards that. Now I'll hand over to the financials to Oliver.
Yes, thank you, Guido. As Guido already stated, the market environment continues to remain challenging in 2024 with a significant steel price correction. You can see the magnitude of the negative steel price development in 2024 on the left-hand side of the slide with some strong declines, particularly in the U.S. This steel price development led to significantly negative windfall effects, which we had to digest over the course of the year despite fast turning stocks. Despite these steel price declines, coupled with the ongoing challenging macroeconomic environment, especially in Europe, we achieved an EBITDA before material special effects of EUR 32 million in quarter four and EUR 136 million in the full year 2024, which is within our guidance range. In addition, we delivered a significantly positive operating cash flow for the third year in a row.
These figures are solid results taking into account the macroeconomic environment we operate in and the aforementioned windfall effects we had to digest in the full year 2024. The results, as you can see on slide five, were once again driven by our strong service center business and our HVAB business, demonstrating that we are on the right track with our strategy. Hence, we are committed to increase our exposure to the HVAB business further to reduce the volatility of our earnings and the dependency on steel price developments while generating stable cash flows. In addition, we continue to leverage our digitalization and automation initiatives. For instance, the number of digital quotes increased by more than 26% year on year in full year 2024, therefore continuing to relieve salespeople from manual work related to quotes.
Let's take a look at our shipment sales, gross profit, and gross profit margin for the fourth quarter of 2024. Shipments came in at a constant level year on year, driven by the strong performance of Klöckner Metals Americas, supported by the acquisitions made in the second half of 2023, and despite the challenging macroeconomic environment in Europe. Sales decreased considerably year on year due to the overall lower average price level and came in at EUR 1.5 billion in quarter four. Gross profit came in at EUR 261 million in quarter four after a gross profit of EUR 269 million in quarter four 2023. Gross profit margin increased to 17.6% year- over- year from 16.7%. We will now focus on the EBITDA for quarter four and the full year 2024. In quarter four of 2024, EBITDA before materials special effects came in at EUR 32 million.
In quarter four, we saw minor volume, price, and FX effects. OpEx, however, were lower by EUR 15 million year- over- year. For full year 2024, EBITDA before material special effects came in at EUR 136 million. We had a positive volume effect of EUR 34 million. The year-over-year price effect, however, was significantly negative with EUR 69 million, a result of the steel price decline over large parts of the year. OpEx were only EUR 20 million higher year- over- year despite the acquisitions in the second half of 2023. Lastly, we had minor negative FX effects of EUR 1 million in the full year 2024. We are now coming to cash flow and net debt development. In the fourth quarter of 2024, we had a net working capital release of EUR 160 million.
Taking into consideration interest, tax payments, and other items totaling EUR 110 million, our cash flow from operating activities came in at EUR 160 million in full year 2024. Including net CapEx of EUR 121 million, free cash flow from continuing operations was positive at EUR 39 million. Taking into account free cash flow from discontinued operations of EUR 64 million, thereof EUR 61 million from the sale of parts of our European distribution business, the total free cash flow was EUR 103 million for full year 2024. Let's look at our net financial debt. Negative cash effects were visible for FX, leasing, dividends, and others. Leasing with a total amount of EUR 44 million includes EUR 11 million for the acquisition of Amerinox. Dividend payments amounted to EUR 21 million.
Accordingly, our net financial debt came in at a constant level year- over- year with EUR 780 million after EUR 775 million in the previous year. Further, we maintain an equity ratio of 49% with the equity of around EUR 1.7 billion. We will now focus on the group's financing. We continue to possess a diversified financing structure, which you can see in the table above. With credit facility of approximately EUR 1.6 billion, excluding leasing, we are very solidly positioned, including contractual terms and financial covenants. Overall, we maintain a total liquidity of around EUR 1 billion with adjusted equity of around EUR 1.7 billion. Recently, we further improved the maturity profile of the group's financing. In the full year 2024, leverage was elevated as a result of the lower EBITDA and the significant windfall effects, which we had to digest.
However, leverage has already come down significantly quarter over quarter and will continue to do so as we execute our strategy. I now hand over to John to have a closer look at our end markets in North America.
Thank you, Oliver. After a difficult 2024, for which we estimate demand contracted in the U.S. by between 1.5% and 2%, the outlook for 2025 is definitely more positive with a return to a modest growth rate of between 1% and 2% and a significantly improved metals pricing cycle. We also expect to see additional support from restocking, which is already becoming evident in our first quarter shipping rates. Now, turning to the specific segments, in construction, we see positive year-over-year developments in residential, non-residential, and non-building investments with year-over-year square footage growth exceeding 5% and non-building spending increasing by closer to 8%. Of course, these sectors are inherently sensitive to interest rates, and these forecasts assume at least two interest rate cuts over the second half of 2025.
Looking at manufacturing and machinery, these were some of the hardest-hit segments in 2024 with severe second-half destocking and double-digit year-over-year declines in production, especially in off-highway equipment. The outlook for 2025, based on current OEM forecast, indicates a return to a more modest year-over-year growth scenario with positive momentum expected to build as the year progresses. As usual, the actual development may vary materially from segment to segment. Jumping to transportation, auto production is expected to be stable to down slightly in 2025 after posting positive 2%-3% gains in 2024. This sector is probably most affected by trade policy uncertainty and the current higher-for-longer interest rate cycle. As the tariff situation becomes clearer for North America and interest rates are likely reduced, we expect the outlook for automotive to become more positive.
Shipbuilding, on the other hand, is expected to expand nicely in 2025 and looks like it stands to benefit longer term from the new administration's renewed focus on expanding shipbuilding capacity in North America, which should be supportive of increased steel demand as we look forward into 2026 and beyond. Appliance, HVAC, and electrical had a strong performance in 2024 but are now expected to move sideways to only slightly higher in 2025. Similar to other segments, we would expect the outlook to improve as interest rates come down and consumer confidence rebounds from current lows. Finally, for energy, we expect this to be the strongest segment for growth in 2025, with a renewed focus on drilling and extraction already resulting in large line pipe projects being released.
While policy shifts may slow growth in renewables at some point in the future, there remains a strong backlog of projects which will remain supportive of steel demand in 2025. Lastly, there will be continued large-scale investments to secure and modernize the electrical grid while improving transmission capacity and efficiency. It is clear the surging demand for electricity in the U.S. will continue unabated and will require massive steel-intensive investments not only in 2025 but for many years to come. In summary, after facing severe demand and pricing headwinds in 2024, we now expect and already see a much more positive situation developing in 2025.
While there remains no shortage of uncertainty related to the economy and trade policy, we feel strongly that Klöckner, with a highly diversified and increasingly differentiated product and services portfolio, is optimally positioned to continue to deliver solid year-over-year growth and materially improved through cycle financial results. With that, I once again turn back over to Guido.
Yeah, thanks, John. In total, we expect the real steel demand in Europe to increase by 0%-1% in 2025 compared to a contraction in the previous year. Coming to our sectors in Europe, construction industry overall, we expect the construction industry in 2025 to grow slightly after a very weak 2024. The structural drivers of the sector remain intact with significant pent-up demand. The impact of rate cuts of central banks is lagging but more and more becoming visible in the market. We have seen it from the ECB. Further, we sense improving sentiment in the sector, and again, the demand is there. The rents have increased significantly. Manufacturing, machinery, and mechanical engineering. Mechanical engineering is expected to develop broadly in 2025, although tight credit conditions and the delayed impact of high interest rates will continue to weigh on the economy this year.
When it comes to defense, however, we sense considerably higher demand than in full year 2024 and continue to benefit from higher order intake than in the past and continue our active positioning in the sector. Because as a bigger company, well-known, with an easier access to all the certification processes that are required, we're in a pretty good position to bargain on these new developments in Europe. Transportation, let's first focus on the automotive. The Industry Association expects a slight increase in 2025. However, customer demand should remain weak until the macroeconomic environment improves. The sector would benefit from a broader recovery in global trade and more export demand. Shipbuilding, we benefit already, and we've continued to position ourselves to benefit from projects, especially in the gray ship sector.
Household and commercial appliances, a segment with marginal impact on our European business, we now expect a rather stable development in 2025. Consumer confidence remains on low levels. Energy industry, despite some political uncertainty, the trajectory towards greener energy generations remains intact. We position ourselves to benefit, especially with our green solutions. Let's now come to the financial outlook for the first quarter of this year and the full year 2025. John and I pointed out we expect the macroeconomic environment to remain challenging, especially in Europe. However, for the ongoing quarter, we expect a considerable increase in shipments and sales each quarter over quarter, and we've seen in the last weeks historic highs in order intake and shipments in the U.S.
EBITDA, before materials special effects in Q1 2025, is expected to come in around previous year's level, but sequentially, and that's different to the last year, improving month over month. While last year, we were still benefiting from a price hike in North America coming from November and December and saw declining results month by month, we now see that it's improving with the increased pricing and the restocking of our customers month over month, and this should continue through to Q2 and therefore give a different picture compared to 2024. For 2025 full year, we forecast shipments to considerably increase compared to the previous year. Consequently, sales are also expected to come in considerably above the previous year's figures in 2025. In total, we expect a strong EBITDA before materials special effects in 2025 and a considerable increase year- over- year .
Moreover, we also expect operating cash flow to come in significantly positive above full year 2024 strong figures. With that, we're now happy to answer your questions.
Ladies and gentlemen, if you would like to ask a question, please press 9 and star on your telephone keypad. If you'd like to cancel your question, please press 3, star on your telephone keypad. For any questions, please press now 9 and star. Just a moment, please, until the first question. The first question comes from Rochus Brauneiser at Kepler Cheuvreux. Please go ahead with your question.
Hello, ladies and gentlemen, thank you. We have two questions. The first is the obvious topic in the moment is about the U.S. tariffs. Can you share with us your view on the impact tariffs might have on your activity? I think you already touched upon it, but can you detail a bit what the first impacts are and how significant that might be on your estimates? The second question, which is a bit linked to that, that last year, you had a windfall impact of, if my memory doesn't desert me, a negative EUR 100 million on the EBITDA due to the price falls. Now we see price not only being maintained but quite increasing with tariffs. It looks like consensus might be a bit conservative. How do you look at current numbers of consensus?
Is it fair to assume that you might have at least EUR 100 million upside just to the non-repeat of the windfall impact last year, plus any extra if prices keep going up? Thank you.
Yeah. Thanks a lot. Maybe I start a bit with the windfalls, and then John, you can comment on the U.S. tariffs. Your assumption on the windfalls is totally correct, but the question is, when will it become visible? Because you always have a certain delay when price hikes really turn into results, and especially when the contract business takes a bit. In the U.S., it's rather the next or the following quarter. Therefore, for this Q1, you might see the first effects in the first quarter, but not that much. It will be more in Q2 and Q3. How that's going to develop over the full year, and especially in North America, we have to see. In Europe, it looks like at least we've seen the low end of the cycle. Therefore, windfalls shouldn't occur.
Price increases and how they might come and get through, we will have to see throughout the year. Otherwise, I am with you. We should have a completely different picture regarding windfalls as it stands right now. With that, John, on the U.S. tariffs.
Yep. The tariffs, I mean, at this point, the only tariffs that have really become effective are the reimplementation of Section 232 tariffs on steel and aluminum, and those are only becoming effective today. Not going to impact Klöckner in any way because we buy almost exclusively in North America and the U.S., for instance. We're buying very little import. We're primarily a domestic-sourced purchasing strategy. We see very limited impact from those tariffs in the immediate term on our U.S. business or Mexican business. Obviously, the ongoing on-again, off-again tariff situation for Mexico and Canada, these across-the-board tariffs, which have been delayed now twice, difficult to speculate what ultimately is going to happen here. We do feel that based on the multiple extensions granted, the current objective is not to put these tariffs in place for economic purposes.
It's more about policy wins and probably accelerating the renegotiation of USMCA. I can tell you that in conversations with virtually all of our customers in Mexico, we would have really the only material effect. It's business as usual. We've seen no change in production schedules or forecasts. We would expect that if tariffs come into play unexpectedly and persist for a long time, there could be some longer-term risk to demand in Mexico. Of course, that demand would simply shift to the U.S., where we have a much bigger presence. While we may have to deal with and address those situations in Mexico, we'll see probably an offsetting, if not bigger benefit in the U.S. We really don't think it's going to come to that.
We do think this is going to get resolved and that North America, the situation in North America will probably remain intact, and it'll be business as usual. That's our current expectations.
Okay. You added a bit to that. Sorry, before we come back. If you take a bit a look through the tariffs and see that the intention of North America and the U.S. to bring back production from Asia more into the North American sphere remains intact, we should be benefiting independent of the tariffs on one or the other side. Overall, the longer-term view that there would be more industrial production and therefore more steel and metals demand in North America, be it in Mexico or the U.S., I think that remains an underlying topic and should be positive for us.
Okay. Very clear. Thank you.
The next question comes from Lars vom Cleff, Deutsche Bank AG. Please go ahead with your question.
Yes. Thank you very much. Good evening. Thanks for taking my questions. Three shorter ones, and if you agree, I would ask them one by one. First of all, it would be helpful for me if you could classify or quantify what considerable means for you because considerable, your expectation for considerable when it comes.
Considerable is about 5%.
About 5%.
Yes. Okay. Okay. You find it in the annex, but yeah, that's it. About 5%.
Yeah. Okay. So definitely considerable for shipments and revenue is a very different considerable than you assume for the EBITDA, I assume.
Yeah. We don't have a higher, we don't have a higher definition. There's nothing above considerable. EBITDA will be very considerable.
Very considerable. That's what I thought. I mean, what shall we put into our models as a tax rate for this year? Is there anything you would suggest us to work with?
Yeah. You can see that also in our annual report. The usual tax rate, which we apply on group level, is 32%. You cannot find that in the actual figures because we have some special effects in the taxes, but if you rate it with the 32%, you are on the right side.
Okay. Perfect. And then last one, modeling cash flow. Would you already be willing to give a guidance for this year's Capex?
It is going to go slightly up because of all the investments like ADI and the movements towards more higher value stuff that we have already committed. Independent of that, we will continue in certain cases to sell off some real estate as well to counterbalance the effects that we do have. In total, the net amount should be a bit higher than this, but not outrageously. We try to refinance by selling off some of the real estate. We might not need that anymore by logistics concepts that we improve and all that stuff.
That is very helpful. Thank you very much.
At the moment, there are no further questions. If you would like to ask a question, please press 9 and star on your telephone keypad. A moment for the next question, please. Hold a moment for the next question. I will hand back to the company for the closing remarks.
Yeah. Thanks a lot for participating indeed in such a big number in this call despite our delays that we had due to technical issues. If you have any additional questions, just call Fabian or us directly. We're ready to answer your questions. Thank you very much and goodbye.