Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (March 2019)
43 slides from Russel Metals's investor presentation, March 2019
Slide 1: March 2019
MARCH 2019
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: Q1 2019 - $1.0 billion Q1 2018 - $0.9 billion Based on revenues for the qua
Slide 4: EPS (2013 – 2019)
EPS (2013 – 2019) $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 $0.62 $0.75 $0.55 $0.50 $0.25 $(1.42) $- 2013 2014 2015 2016 2017 2018 Q1 2018 Q1 2019 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 19-Mar 5 Russel Metals Note: 2013 and 2014 adjusted for convertible debentures
Slide 6: Three Distinct Segments
THREE DISTINCT SEGMENTS REVENUE EBIT THREE MONTHS ENDED 2019 (2018) THREE MONTHS ENDED 2019 (2018) Steel Steel Distributors Metals Service Distributors Centers 12% (10%) 14% (15%) 41% (40%) Metals Service Centers 52% (49%) Energy Products Energy 36% (41%) Products 45% (45%) 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 March 2019
BALANCE SHEET AS OF MARCH 2019 (millions) ASSETS EMPLOYED Cash $ 107 5% Accounts Receivable 589 27% Inventories 1,032 47% Property, Plant and Equipment 354 16% Goodwill/Intangibles 84 4% Other 33 1% $ 2,198 100% FINANCED BY Bank Indebtedness $ 154 7% Trade Creditors 466 21% Long-term Debt 444 20% Le
Slide 9: Broad Product Focus Breakdown
BROAD PRODUCT FOCUS BREAKDOWN FOR THREE MONTHS ENDED MARCH 31, 2019 (2018) Flat Rolled Non Ferrous Bars 7.7% (8.3%) Other 3.6% (3.3%) 4.7% (4.5%) 4.6% (4.0%) Pipe Products 19.7% (23.6%) Plate 19.5% (17.9%) Flanges, Valves, Fittings & Other Energy Structurals 17.0% (18.5%) (Beams & HSS) 23.2% (19.9%)
Slide 10: Top Mill Suppliers
TOP MILL SUPPLIERS THREE MONTHS ENDED MARCH 31, 2019 % of total purchased Products Purchased Supplier 1 7.3% Long Products Supplier 2 6.3% Long Prod / Plate / Pipe Supplier 3 5.7% Flat Roll / Plate / Long Products Supplier 4 5.3% Plate Supplier 5 4.6% Long Products / Plate / Flat Roll Supplier 6 4.2
Slide 11: Service Center/Distribution Competitors
SERVICE CENTER/ DISTRIBUTION COMPETITORS TOP 15 BY REVENUE Public/ (in billions) 2018 2017 Private Headquarters Reliance Steel & Aluminum Co. $ 11.5 $ 9.7 Public U.S Ryerson Inc. 4.4 3.4 Public U.S MRC Global 4.2 3.6 Public U.S Russel Metals Inc. 4.2 3.3 Public Canada * Samuel, Son & Co. 4.0 3.6 Pri
Slide 12: Market Trends
MARKET TRENDS 12 Russel Metals
Slide 13: Monthly Service Center Shipments – Steel Products
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 Aug-16 US Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 STEEL PRODUCTS CANADA 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 Jan-11 Mar-11 May-11 Jul-11 Sep-11 US$ per Ton Nov-11 Russel Metals Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-
Slide 15: Scrap Pricing
15 $100 $150 $200 $250 $300 $350 $400 $450 $500 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Russel Metals Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 AMM Scrap Values Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 SCRAP PRICING Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-
Slide 16: Scrap vs Coil and Plate Pricing
16 US $ / Ton $0 $200 $400 $600 $800 $1,000 $1,200 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Russel Metals Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 #1 Heavy Melt (Chicago) Mar-17 Apr-17 May-17 Jun-17 Jul-17 HR Sheet Aug-17 Sep-17 Oct-17 Nov-17 HR Plate Dec-17 Jan-18 Feb-18 Mar-18 Apr-
Slide 17: Carbon Plate, HR Sheet & Russel EBIT
17 Carbon Plate / HR Sheet (US$ per Ton) $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 Q1-2008 Q3-2008 Russel Metals Q1-2009 Q3-2009 Q1-2010 Q3-2010 Q1-2011 Q3-2011 Q1-2012 Q3-2012 Q1-2013 Q3-2013 Q1-2014 Carbon Plate Q3-2014 Q1-2015 Q3-2015 Q1-2016 HR Sheet Q3-2016 Q1-2017 EBIT Q3-2017 Q1-2018
Slide 18: Mill Production Tons
18 Net Tons (000's) 1,100 1,300 1,500 1,700 1,900 2,100 700 900 Jan-11 Apr-11 Jul-11 Oct-11 Russel Metals Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 MILL PRODUCTION TONS Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-1
Slide 19: 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 Apr-19 19 Russel Metals Source: Henry Hub
Slide 20: 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 20 Russel Metals Source: Baker Hughes
Slide 21: RMI Operations
METALS STEEL SERVICE DISTRIBUTORS CENTERS ENERGY PRODUCTS RMI OPERATIONS
Slide 22: 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% $800 6.3% 6.1% 6.4% 6.0% 5.8% 5.6% 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
Slide 23: Metals Service Centers – Strong Canadian Franchise
METALS SERVICE CENTERS – STRONG CANADIAN FRANCHISE Q1 - 2019 revenues of $538 million, EBIT of $27 million. 2018 revenues of $2.1 billion, EBIT of $169 million. 49 Metals Service Centers in Canada. 16 Metals Service Centers in U.S. Broad customer base - 21,000 Canadian, 14,000 U.S. Avera
Slide 24: 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 25: Metals Service Centers Location of Operations
METALS SERVICE CENTERS LOCATION OF OPERATIONS 49 Locations 16 Locations 25 Russel Metals
Slide 26: 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 26 Russel Metals
Slide 27: Processing Capabilities
PROCESSING CAPABILITIES • Shearing • Braking • Rolling • 3D and Tilt Cutting • Bundle Cutting • Shot Blasting 27 Russel Metals
Slide 28: Top Metal Service Center Customers
TOP METAL SERVICE CENTER CUSTOMERS – THREE MONTHS ENDED MARCH 31, 2019 % of Segment Customer Revenues Products Purchased Customer 1 Manufacturer - Transportation 1.5% Flat Rolled, Tubing, Structurals, Plate Customer 2 Structural Fabricator - Construction 1.3% Structurals (WF & I Beam, Structural Ang
Slide 29: 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% 5.0% 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 36
Slide 30: Energy Products
ENERGY PRODUCTS Q1 - 2019 revenues of $373 million, EBIT of $30 million. 2018 revenues of $1.6 billion, EBIT of $134 million. Apex Distribution, Apex Monarch & Apex Western Fiberglass - Western Canada Apex Remington - Central U.S. Fedmet Tubulars & Triumph Tubular – Calgary Comco Pipe & Supply C
Slide 31: 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 32: 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 33: Energy Products - Well Positioned to Service North American Energy Sector
ENERGY PRODUCTS - WELL POSITIONED TO SERVICE NORTH AMERICAN ENERGY SECTOR 48 Locations 22 Locations 33 Russel Metals
Slide 34: Top Energy Product Customers
TOP ENERGY PRODUCT CUSTOMERS – THREE MONTHS ENDED MARCH 31, 2019 % of Segment Customer Revenues Products Purchased Customer 1 Oil Drilling, Gas Drilling 11.2% OCTG, Line Pipe, Pipe, Flanges & Fittings , Valves Customer 2 Oil Feeder Lines, Gas Feeder Lines, Oil Sands 7.7% Pipe, Flanges & Fittings, Va
Slide 35: 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% 7.9% 7.5% 8.5% 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 49
Slide 36: Steel Distributors
STEEL DISTRIBUTORS Q1 - 2019 revenues of $122 million, EBIT of $9 million. 2018 revenues of $457 million, EBIT of $47 million. Sunbelt Group, Arrow Steel – Houston, Texas; Wirth Steel – Montreal, Vancouver Arrow Steel provides coil processing in Houston, Texas Customers – other steel servi
Slide 37: 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 38: Top Steel Distributor Customers
TOP STEEL DISTRIBUTOR CUSTOMERS – THREE MONTHS ENDED MARCH 31, 2019 % of Segment Customer Revenue Products Purchased Customer 1 Service Center 11.9% Plate Customer 2 Service Center 10.0% Beam,plate Customer 3 Service Center 8.4% Beam, Bar Customer 4 Service Center 7.8% Plate, Beam Customer 5 Manufac
Slide 39: Steel Distributors – Location of Operations
STEEL DISTRIBUTORS – LOCATION OF OPERATIONS 3 Locations 3 Locations 39 Russel Metals
Slide 40: 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% 7.2% 9.1% 7.5% 8% 8.3% 6.5% 6.4% $60 7.4% 7.2% 6.9% 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
Slide 41: Summary
SUMMARY
Slide 42: 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
Slide 43: Contact details
6600 Financial Drive, Mississauga, Ontario L5N 7J6 Email: info@russelmetals.com Visit us at: www.russelmetals.com Tel: 905.819.5178 ║ Fax: 905.819.7409