Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (August 2020)
23 slides from Russel Metals's investor presentation, August 2020
Slide 1: Company Update August 2020
COMPANY UPDATE AUGUST 2020
Slide 2: Cautionary Statement on Forward-Looking Information
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION Certain statements made on this conference call 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 our
Slide 3: Market Trends
rant 43) Russel Metals MARKET TRENDS
Slide 4: Steel Prices vs. Russel EBIT
STEEL PRICES VS. RUSSEL EBIT HR Sheet, Plate & Russel EBIT $1,600 $160 $1,400 $140 Carbon Plate HR Sheet EBIT $625 $1,200 $120 Carbon Plate / HR Sheet (US$ per Ton) $600 $1,000 $100 $575 $800 $80 $550 EBIT (millions) $525 $600 $60 $500 $400 $40 $475 $450 $200 $20 $425 10/Jul/20 24/Jul/20 12/Jun/20 2
Slide 5: Scrap and Steel Production
$150 $200 $250 $300 $350 $450 $500 $400 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 AMM Scrap Values Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Source: American Metal Market Jul-20 Net Tons (000's) SCRAP AND STEEL PRODUCTION 700 900 1,100 1,300 1,500 1,7
Slide 6: North American Rig Counts
NORTH AMERICAN RIG COUNTS 1000 2250 Canada U.S 900 2000 800 1750 700 1500 600 1250 500 1000 400 750 300 500 200 100 250 0 0 Source: Baker Hughes 6
Slide 7: Company Overview
rant 43) Russel Metals COMPANY OVERVIEW
Slide 8: Summary Observations
SUMMARY OBSERVATIONS Proactively approached the COVID-19 challenges: • Implemented the appropriate protocols for the health and safety of our employees, customers and suppliers • Deemed an essential service, but customer demand declined in late Q1/early Q2 • Adjusted operating schedules, staffing an
Slide 9: Business Overview
BUSINESS OVERVIEW We are one of the largest metals distribution and processing companies in North America. Metals Service Centers Energy Products Steel Distributors 9
Slide 10: Service Center/Distribution Competitors
SERVICE CENTER/ DISTRIBUTION COMPETITORS Ranked by Revenue (in billions) 2019 2018 Reliance Steel & Aluminum Co. $ 11.0 $ 11.5 Ryerson Inc. 4.5 4.4 MRC Global 3.7 4.2 Russel Metals Inc. * 3.7 4.2 Samuel, Son & Co. * 4.0 Worthington Steel Co. 3.8 3.6 Klockner (North America) 2.2 3.2 NOW Inc. 2.9 3.1
Slide 11: Value-Added Processing
VALUE-ADDED PROCESSING @ Russel Metals bn
Slide 12: Variable Cost Model – Breakdown of Cash Costs
VARIABLE COST MODEL – BREAKDOWN OF CASH COSTS THREE MONTHS ENDED JUNE 30, 2020 YEAR ENDED DECEMBER 31, 2019 $562 Million $3,499 Million Employee Operating Employee Operating Expenses - Expenses - Expenses - Expenses - Fixed, $50 Fixed, $19 Operating Fixed, $265 Fixed, $109 Expenses - Variable, $14 O
Slide 13: Countercyclical Cash Flows
COUNTERCYCLICAL CASH FLOWS EBITDA positive throughout the cycles; working capital repatriation during market downturns. Quarterly EBITDA vs. Change in Working Capital ($000’s) $250,000 $200,000 $150,000 $100,000 $50,000 $- $(50,000) $(100,000) $(150,000) Q2 2007 Q2 2008 Q2 2009 Q2 2010 Q2 2011 Q2 20
Slide 14: Diversified Business
DIVERSIFIED BUSINESS Geography - 141 Locations Suppliers Product Mix Tubing, OCTG, Other 5% OCTG, 2.5%1.7% Bars 6% Non-Ferrous United Pipe, 3.0% 4% States - 42 Plate, 4.7% Others, 50.8% Structurals - Flat Roll, Plate, 26% 4.9% Flat Rolled 8% Tubing, 5.0% Long Product, Plate, Pipe, Pipe 16% 5.2% Pipe
Slide 15: ESG Focused
ESG FOCUSED Environmental Aggregate Emissions Sources: • Environment Management System • Low carbon emissions from operations Electricity • Our GHG emissions in 2019 were 30% Diesel Fuel approximately 56,346 CO2(e) company 41% wide which represents an emission intensity of 0.00001533 tonnes CO2(e) p
Slide 16: Financial Overview
rant 43) Russel Metals FINANCIAL OVERVIEW
Slide 17: Financial Highlights
FINANCIAL HIGHLIGHTS $million, unless otherwise stated Q2 2019 Q1 2020 Q2 2020 Q2 2020 Observations: Income Statement: Revenues $937 $815 $588 • Gross margin % holding steady, but lower total $ • Significant reduction in operating expenses Gross Margin ($million/ %) $176 / 18.8% $152 / 18.7% $110 /
Slide 18: Segment Breakdown: Operating Results
SEGMENT BREAKDOWN: OPERATING RESULTS Revenue Breakdown (C$ millions) Gross Margins % $600 25% $538 $535 21% 21% $474 $500 19% 19% 19% 19% $437 20% $412 $373 19% 19% 16% $400 15% 17% 15% $373 $300 $343 14% $316 14% 14% $298 $298 10% 11% $200 11% 10% $149 5% $100 $122 $100 $94 $81 $62 $64 4% $0 0% Q1
Slide 19: Balance Sheet at June 30, 2020
BALANCE SHEET AT JUNE 30, 2020 (millions) ASSETS EMPLOYED Cash $ 89 • Net Debt/Invested Capital: 28% Accounts Receivable 320 • Net Debt/LTM EBITDA: 2.8x Inventories 862 Property, Plant and Equipment 286 • Liquidity: $478 million Goodwill/Intangibles 136 • Long Term Debt Maturities: 2022 & 2026 Other
Slide 20: Segment Breakdown: Net Identifiable Assets
SEGMENT BREAKDOWN: NET IDENTIFIABLE ASSETS(1) At December 31, 2019 ($millions) At March 31, 2020 ($millions) At June 30, 2020 ($millions) Metals Metals Steel Distributors Service Steel Distributors Steel Distributors Metals Service $121 8% Centers $122 8% $115 9% Service Centers $581 40% Centers $61
Slide 21: Return on Net Assets Over the Cycle
RETURN ON NET ASSETS OVER THE CYCLE 25% 23% 20% 17% 15% Target: 15% 12% 10% 10% 6% 5% 0% 2016 2017 2018 2019 June 2020 YTD Annualized 21
Slide 22: Summary
rant 43) Russel Metals SUMMARY
Slide 23: Summary
SUMMARY Leading Market Position • Strong supplier relationships and unique market insight • Low customer concentration, multiple business segments with diversified customer base • Superior service and product availability • Strong value-added processing Flexible Business Model • Variable cost/compen