Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (December 2018)
41 slides from Russel Metals's investor presentation, December 2018
Slide 1: December 2018
NU DECEMBER 2018 W
Slide 2: Cautionary Statement on Forward-Looking Information
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION Certain statements contained in this document constitute forward-looking statements or information within the meaning of applicable securities laws, including statements as to our future capital expenditures, our outlook, the availability of future
Slide 3: Overview of Russel Metals
OVERVIEW OF RUSSEL METALS We are one of the largest metals distribution and processing companies in North America. We are one of the largest pipe, valve and fittings companies in North America. Consolidated Revenues: Year ended 2018 - $4.2 billion Year ended 2017 - $3.3 billion Based on reve
Slide 4: EPS (2013 – 2018)
EPS (2013 – 2018) $3.75 $3.53 $3.50 $3.25 $3.00 $2.75 $2.50 $2.25 $2.01 $2.00 $2.00 $1.75 $1.37 $1.50 $1.25 $1.02 $1.00 $0.75 $0.50 $0.25 $(1.42) $- 2013 2014 2015 2016 2017 2018 4 Russel Metals
Slide 5: Debt Equity Ratio
DEBT EQUITY RATIO 0.70 0.60 0.50 0.40 0.30 0.20 0.10 - 2013 2014 2015 2016 2017 2018 5 Russel Metals Note: 2013 and 2014 adjusted for convertible debentures
Slide 6: Three Distinct Segments
THREE DISTINCT SEGMENTS REVENUE EBIT YEAR ENDED 2018 (2017) YEAR ENDED 2018 (2017) Steel Steel Distributors Distributors 11% (11%) 14% (16%) Metals Service Metals Service Centers Centers 48% (36%) 51% (50%) Energy Energy Products Products 38% (39%) 38% (48%) 6 Russel Metals
Slide 7: Operating Units
OPERATING UNITS CANADA Metals Service Centers (49 units) Energy Products (48 units) Steel Distributors (3 units) British Columbia Comco Pipe Apex Distribution Wirth Steel Alberta (A.J. Forsyth) (Alberta) (Alberta) (Montreal) Ontario Fedmet Tubulars Triumph Tubulars Man/Sask (Color & Pemco) (Alberta)
Slide 8: Balance Sheet as of December 2018
BALANCE SHEET AS OF DECEMBER 2018 (millions) ASSETS EMPLOYED Cash $ 124 6% Accounts Receivable 568 27% Inventories 1,052 49% Property, Plant and Equipment 269 13% Goodwill/Intangibles 86 4% Other 28 1% $ 2,127 100% FINANCED BY Bank Indebtedness $ 128 6% Trade Creditors 495 23% Long-term Debt 444 21%
Slide 9: Broad Product Focus Breakdown for Year Ended December 31, 18 (2017)
BROAD PRODUCT FOCUS BREAKDOWN FOR YEAR ENDED DECEMBER 31, 2018 (2017) Flat Rolled Bars Non Ferrous 4.7% (7.9%) Other 7.7% (4.9%) 3.2% (3.4%) 5.3% (4.7%) Pipe Products 22.3% (22.7%) Plate 19.0% (17.8%) Flanges, Valves, Fittings & Structurals Other Energy (Beams & HSS) 16.2% (16.9%) 21.6% (21.7%) 9 Ru
Slide 10: Top Mill Suppliers Year Ended 2018
TOP MILL SUPPLIERS YEAR ENDED 2018 % of total purchased Products Purchased Supplier 1 5.9% Long Products Supplier 2 5.4% Long Prod / Plate / Pipe Supplier 3 5.3% Flat Roll / Plate / Long Products Supplier 4 4.9% Plate Supplier 5 4.4% Pipe Supplier 6 4.1% Tubing Supplier 7 4.1% Pipe Supplier 8 3.3% L
Slide 11: Service Center/Distribution Competitors
SERVICE CENTER/ DISTRIBUTION COMPETITORS TOP 15 BY REVENUE Public/ (in billions) 2017 2016 Private Headquarters Reliance Steel & Aluminum Co. $ 9.7 $ 8.6 Public U.S Samuel, Son & Co. 3.6 3.6 Private Canada * Worthington Steel Co. 3.6 3.0 Public U.S MRC Global 3.6 2.5 Public U.S Ryerson Inc. 3.4 2.9
Slide 12: Market Trends
MARKET TRENDS 12 Russel Metals
Slide 13: US Shipments - Monthly Service Center Shipments
13 US Shipments-Tons in Thousands 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Jan-16 Feb-16 Mar-16 Russel Metals Apr-16 May-16 Jun-16 Jul-16 US Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 STEEL PRODUCTS CANADA Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-
Slide 14: Price of HR Sheet & HR Plate
14 200 300 400 500 600 700 800 900 1,000 1,100 1,200 7-Jan-11 7-Mar-11 7-May-11 7-Jul-11 7-Sep-11 US$ per ton 7-Nov-11 Russel Metals 7-Jan-12 7-Mar-12 7-May-12 7-Jul-12 7-Sep-12 7-Nov-12 7-Jan-13 7-Mar-13 7-May-13 7-Jul-13 7-Sep-13 7-Nov-13 7-Jan-14 7-Mar-14 7-May-14 7-Jul-14 7-Sep-14 7-Nov-14 7-Jan
Slide 15: Carbon Plate and Russel Metals EBIT
CARBON PLATE AND RUSSEL METALS EBIT $1,200 $160 $150 Carbon Plate Adjusted EBIT $140 $1,000 $130 $120 $110 $800 Carbon plate (US$ per ton) EBIT (millions of dollars) $100 $90 $600 $80 $70 $60 $400 $50 $40 $30 $200 $20 $10 $- $- 15 Russel Metals
Slide 16: Scrap Pricing
16 $100 $150 $200 $250 $300 $350 $400 $450 $500 7-Jan-11 7-Mar-11 7-May-11 7-Jul-11 7-Sep-11 7-Nov-11 Russel Metals 7-Jan-12 7-Mar-12 7-May-12 7-Jul-12 7-Sep-12 7-Nov-12 AMM Scrap Values 7-Jan-13 7-Mar-13 7-May-13 7-Jul-13 7-Sep-13 7-Nov-13 SCRAP PRICING 7-Jan-14 7-Mar-14 7-May-14 7-Jul-14 7-Sep-14
Slide 17: Mill Production Tons
17 Net Tons (000's) 1,100 1,300 1,500 1,700 1,900 2,100 700 900 1-Jan-11 1-Apr-11 1-Jul-11 1-Oct-11 Russel Metals 1-Jan-12 1-Apr-12 1-Jul-12 1-Oct-12 1-Jan-13 1-Apr-13 1-Jul-13 1-Oct-13 1-Jan-14 1-Apr-14 1-Jul-14 1-Oct-14 1-Jan-15 1-Apr-15 1-Jul-15 MILL PRODUCTION TONS 1-Oct-15 1-Jan-16 1-Apr-16 1-J
Slide 18: Oil and Natural Gas Prices
OIL AND NATURAL GAS PRICES $10 $120 $110 $9 $100 $8 $90 $7 $80 $6 Gas Prices (CDN) Oil Prices (CDN) $70 $5 $60 $50 $4 $40 $3 $30 $2 $20 Natural Gas Crude Oil $1 $10 $- $- 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 18 Russel Metals Source: Henry Hub
Slide 19: North American Rig Count
NORTH AMERICAN RIG COUNT 1,000 2,250 900 2,000 Canada U.S 800 1,750 700 1,500 600 1,250 500 1,000 400 750 300 500 200 100 250 0 0 19 Russel Metals Source: Baker Hughes
Slide 20: RMI Operations
METALS STEEL SERVICE DISTRIBUTORS CENTERS ENERGY PRODUCTS RMI OPERATIONS
Slide 21: Total Revenues & EBIT as a % of Revenues
TOTAL REVENUES & EBIT AS A % OF REVENUES 9.9% $1,200 10% 8.9% $1,000 8% 6.8% 6.6% 6.5% 6.4% $800 6.3% 6.1% 6.0% 5.8% 6% 5.3% 5.0% 4.8% ($000,000's) 5.7% $600 4.6% 4.3% 4.8% 4% 4.3% 4.1% $400 3.9% 3.5% 2.6% 2.6% 2.5% 2% $200 822 758 797 811 924 893 1,039 1,013 904 761 773 673 662 624 639 654 804 817
Slide 22: Metals Service Centers – Strong Canadian Franchise
METALS SERVICE CENTERS – STRONG CANADIAN FRANCHISE 2018 revenues of $2.1 billion, EBIT of $169 million. 2017 revenues of $1.6 billion, EBIT of $80 million. 49 Metals Service Centers in Canada. 16 Metals Service Centers in U.S. Broad customer base - 21,000 Canadian, 14,000 U.S. Average in
Slide 23: Role of Metal Service Centers
ROLE OF METAL SERVICE CENTERS SUPPLIERS METALS SERVICE CENTERS CUSTOMERS Mills producing base metal Source material and purchase in Manufacturers, fabricators products large quantity Processing includes pickling, Process material to meet specific Focused on design assembly, blanking, tube production
Slide 24: Metals Service Centers Location of Operations
METALS SERVICE CENTERS LOCATION OF OPERATIONS 49 Locations 16 Locations 24 Russel Metals
Slide 25: Metal Service Centers Processing Capabilities
METAL SERVICE CENTERS PROCESSING CAPABILITIES • Cutting-to-Length • Stretcher Leveling • Blanking • Leveling • Edge Trimming • Slitting • Oxygen Fuel Cutting • Plasma Cutting • Hi-definition Plasma Cutting • Laser Cutting • Drilling, Tapping, Beveling • Tube Laser Cutting 25 Russel Metals
Slide 26: Processing Capabilities
PROCESSING CAPABILITIES • Shearing • Braking • Rolling • 3D and Tilt Cutting • Bundle Cutting • Shot Blasting 26 Russel Metals
Slide 27: Top Metal Service Center Customers
TOP METAL SERVICE CENTER CUSTOMERS – YEAR ENDED DECEMBER 31, 2018 % of Segment Customer Revenues Products Purchased Customer 1 Manufacturer-Transportation 0.9% Flat Rolled, Tubing, Structurals, Plate Customer 2 Manufacturer-Heavy Equipment 0.6% Flat Rolled, Tubing, Structural, Plate (Discreet & Plat
Slide 28: Metal Service Centers Revenues & EBIT as a % of Revenues
METAL SERVICE CENTERS REVENUES & EBIT AS A % OF REVENUES $600 11% 10.2% $550 10% $500 9.8% 9% $450 8% $400 6.6% 7% 6.3% $350 6.1% 5.9% ($000,000's) 5.4% 5.4% 5.4% 5.6% 5.4% 6% 5.3% $300 5.0% 5% $250 5.0% 3.9% 3.4% 4.4% 4% $200 3.8% 2.8% 2.8% 3.8% 3.3% 3% $150 $100 2% 2.2% $50 1.4% 1% 359 378 367 352
Slide 29: Energy Products
ENERGY PRODUCTS 2018 revenues of $1.6 billion, EBIT of $134 million. 2017 revenues of $1.3 billion, EBIT of $107 million. Apex Distribution, Apex Monarch & Apex Western Fiberglass - Western Canada Apex Remington - Central U.S. Fedmet Tubulars & Triumph Tubular – Calgary Comco Pipe & Supply Compa
Slide 30: Role of Pipe Distributors
ROLE OF PIPE DISTRIBUTORS SUPPLIERS PIPE DISTRIBUTORS CUSTOMERS Mills producing pipe, valves Source material and purchase Oil and gas and fittings in large quantity producers/distributors Processing includes coating Arrange coating if required Focused on production Limited ability to service Arrange
Slide 31: Role of Valve and Fitting Field Stores
ROLE OF VALUE AND FITTING FIELD STORES SUPPLIERS PIPE DISTRIBUTORS CUSTOMERS Mills producing pipe valves High service model Oil and gas and fittings producers/distributors Limited ability to service Located close to customer Focused on production and multiple customer needs base rig down time Servic
Slide 32: Energy Products - Well Positioned to Service North American Energy Sector
ENERGY PRODUCTS - WELL POSITIONED TO SERVICE NORTH AMERICAN ENERGY SECTOR 48 Locations 21 Locations 32 Russel Metals
Slide 33: Top Energy Product Customers
TOP ENERGY PRODUCT CUSTOMERS – YEAR ENDED DECEMBER 31, 2018 % of Segment Customer Revenues Products Purchased Customer 1 Midstream services 9.5% Linepipe Customer 2 Gas drilling, Gas feeder lines 5.0% OCTG, Line pipe- small OD, Flanges & Fittings , Valves Customer 3 Oil drilling, Gas drilling 4.9% O
Slide 34: Energy Products Revenues & EBIT as a % of Revenues
ENERGY PRODUCTS REVENUES & EBIT AS A % OF REVENUES $500 11% 10.1% $450 10% 8.8% 8.7% 9% $400 9.2% 8.5% 7.5% 8% $350 7.3% 7.4% 7.0% 6.6% 6.5% 6.8% 7% 6.3% 7.3% ($000,000's) $300 5.9% 5.4% 5.6% 5.6% 6% $250 4.6% 4.6% 5% $200 4% $150 2.7% 2.8% 3% 2.2% $100 2% $50 1% 0.4% 389 313 353 387 445 366 497 484
Slide 35: Steel Distributors
STEEL DISTRIBUTORS 2018 revenues of $457 million, EBIT of $47 million. 2017 revenues of $380 million, EBIT of $34 million. Sunbelt Group, Arrow Steel – Houston, Texas; Wirth Steel – Montreal, Vancouver Arrow Steel provides coil processing in Houston, Texas Customers – other steel service c
Slide 36: Role of Steel Distributors
ROLE OF STEEL DISTRIBUTORS SUPPLIERS STEEL DISTRIBUTORS CUSTOMERS Mills producing base metal Source material and purchase Large original equipment products in large quantity manufactures Processing includes pickling Arrange logistics for delivery Smaller service centers blanking, tube production whe
Slide 37: Top Steel Distributor Customers
TOP STEEL DISTRIBUTOR CUSTOMERS – YEAR ENDED DECEMBER 31, 2018 % of Segment Customer Revenue Products Purchased Customer 1 Service center 12.4% Plate Customer 2 Service center 5.2% Beam,plate Customer 3 Manufacturer- energy 4.8% Plate, HR Plate Customer 4 Service center 4.2% Rebar, Plate, Bar, Beam
Slide 38: Steel Distributors – Location of Operations
STEEL DISTRIBUTORS – LOCATION OF OPERATIONS 3 Locations 3 Locations 38 Russel Metals
Slide 39: Steel Distributors Revenues & EBIT as a % of Revenues
STEEL DISTRIBUTORS REVENUES & EBIT AS A % OF REVENUES $160 18% 16.6% $140 16% 14% $120 11.4% 11.1% 12% 10.8% $100 ($000,000's) 9.8% 10.1% 9.6% 9.6% 9.2% 10% 8.1% $80 7.7% 9.1% 7.2% 8% 6.9% 6.5% 8.3% 6.4% $60 7.4% 7.2% 6% 6.6% 6.1% 3.9% $40 5.3% 4% 1.8% $20 2% 74 65 74 70 87 106 123 125 119 106 103 7
Slide 40: Summary
SUMMARY
Slide 41: Summary
SUMMARY Leading market position Strong supplier relationships and unique market insight Successful acquisition strategy to deploy capital Multiple business segments Diversified service center and energy customer base Superior service and product availability Strong value-added processi
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