Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (December 2017)
45 slides from Russel Metals's investor presentation, December 2017
Slide 1: Russel Metals December 2017
Russel Metals DECEMBER 2017
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 2017 - $3.3 billion Year ended 2016 - $2.6 billion Based on reve
Slide 4: EPS – 2011 - 2017
EPS – 2011 - 2017 $2.50 $1.97 $2.01 $2.00 $2.00 $1.63 $1.50 $1.37 $1.02 $1.00 $0.50 $(1.42) $- 2011 2012 2013 2014 2015 2016 2017 Notes: 2012 – restated due to adoption of IAS 19 (amended 2011) 4
Slide 5: Net Borrowing Position 2015 - 2017
$0 ($500,000) ($400,000) ($300,000) ($200,000) ($100,000) 31-Jan-15 28-Feb-15 31-Mar-15 30-Apr-15 31-May-15 30-Jun-15 31-Jul-15 31-Aug-15 30-Sep-15 31-Oct-15 30-Nov-15 31-Dec-15 31-Jan-16 29-Feb-16 31-Mar-16 30-Apr-16 31-May-16 30-Jun-16 31-Jul-16 31-Aug-16 30-Sep-16 31-Oct-16 30-Nov-16 31-Dec-16 31
Slide 6: Debt Equity Ratio
DEBT EQUITY RATIO 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 2011 2012 2013 2014 2015 2016 2017 -0.10 Note: 2011 to 2014 adjusted for convertible debentures 6
Slide 7: Three Distinct Segments
THREE DISTINCT SEGMENTS REVENUES YEAR ENDED 2017 (2016) Steel Distributors 11% (12%) Metals Service Energy Centers Products 50% (54%) 39% (34%) 7
Slide 8: Operating Units
OPERATING UNITS CANADA METALS SERVICE CENTERS STEEL DISTRIBUTORS ENERGY British Columbia Wirth Steel Comco Pipe Apex Distribution Alberta (A.J. Forsyth) (Montreal) (Alberta) (Alberta) Ontario Fedmet Tubulars Triumph Tubulars Man/Sask (including Color Steels) (Alberta) (Alberta) Quebec Atlantic (Acie
Slide 9: Balance Sheet as at December 31, 2017
BALANCE SHEET AS AT DECEMBER 31, 2017 (millions) ASSETS EMPLOYED Cash $ 126 7% Accounts Receivable 446 25% Inventories 820 47% Property, Plant and Equipment 247 14% Goodwill/Intangibles 91 5% Other 29 2% $ 1,759 100% FINANCED BY Bank Indebtedness $ 208 12% Trade Creditors 366 21% Long-term Debt 296
Slide 10: Broad Product Focus Breakdown
BROAD PRODUCT FOCUS BREAKDOWN FOR YEAR ENDED DECEMBER 31, 2017 (YE 2016) Flat Rolled Non Ferrous Bars 7.9% (6.6%) 3.5% (3.7%) Other 4.9% (6.0%) 4.7% (5.1%) Pipe Products Plate 25.3% (23.3%) 17.8% (17.9%) Structurals (Beams & HSS) 19.0% (21.7%) Flanges, Valves, Fittings & Other Energy 16.9% (15.7%) 1
Slide 11: Top Mill Suppliers for YTD December 2017
TOP MILL SUPPLIERS FOR YTD DECEMBER 2017 % of total purchased Products Purchased Supplier 1 6.3% Long Products Supplier 2 5.0% Plate Supplier 3 4.9% Flat Roll Steel Supplier 4 4.5% Tubing Supplier 5 3.7% Pipe Supplier 6 3.5% Long Products Supplier 7 3.3% Tubing & OCTG Supplier 8 3.3% Flat Roll Steel
Slide 12: Service Center/Distribution Competitors
SERVICE CENTER/DISTRIBUTION COMPETITORS TOP 15 BY REVENUE Public/ (in billions) 2016 2015 Private Headquarters Reliance Steel & Aluminum Co. $ 8.6 $ 9.4 Public U.S Samuel, Son & Co. 3.6 3.7 Private Canada * Ryerson Inc. 2.9 3.2 Public U.S Russel Metals Inc. 2.6 3.1 Public Canada * Klockner (North Am
Slide 13: Market Trends
MARKET TRENDS 13
Slide 14: Monthly Service Center Shipments – Steel Products
MONTHLY SERVICE CENTER SHIPMENTS – STEEL PRODUCTS US CANADA 4000 900 800 3500 700 3000 Canadian shipments - Tons in Thousands US Shipments- Tons in Thousands 600 2500 500 2000 400 1500 300 1000 200 500 100 0 0 Source: Metals Service Center Institute 14
Slide 15: Price of HR Sheet & HR Plate
1020 1220 220 420 620 820 20 7-Jan-11 7-Mar-11 7-May-11 7-Jul-11 7-Sep-11 7-Nov-11 (US $ per ton) 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-15 7-Mar-15 7-May-15 7-Jul-15 7-Se
Slide 16: Carbon Plate and Russel Metals EBIT
CARBON PLATE AND RUSSEL METALS EBIT $1,000 $160 $150 Carbon Plate Adjusted EBIT $900 $140 $800 $130 $120 $700 $110 Carbon plate (US$ per ton) EBIT (millions of dollars) $100 $600 $90 $500 $80 $70 $400 $60 $300 $50 $40 $200 $30 $20 $100 $10 $- $- Adjusted for Inventory Write Downs of Q1-15 $2.5, Q2-1
Slide 17: Scrap Pricing
$- $50.00 $500.00 $400.00 $450.00 $300.00 $350.00 $200.00 $250.00 $100.00 $150.00 7-Jan-11 7-Mar-11 7-May-11 7-Jul-11 7-Sep-11 7-Nov-11 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 7-Jan-14 7-Mar-14 7-May-14 7-Jul-14 7-S
Slide 18: Mill Production Tons
Net Tons (000's) 700 900 1,100 1,300 1,500 1,700 1,900 2,100 1-Jan-11 1-Apr-11 1-Jul-11 1-Oct-11 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 1-Oct-15 1-Jan-16 MILL PRODUCTION TONS 1-Apr-16 1-Jul-16 1-Oct-16 1-
Slide 19: Oil and Natural Gas Prices Low
OIL AND NATURAL GAS PRICES LOW $10 $120 $110 $9 $100 $8 $90 $7 $80 Natural Gas $6 Gas Prices (CDN) Oil Prices (CDN) $70 Crude Oil $5 $60 $50 $4 $40 $3 $30 $2 $20 $1 $10 $- $- 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Dec-17 Source: Index Mundi 19
Slide 20: North America Rig Count
1000 1250 1500 1750 2000 2250 250 500 750 0 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 U.S Jul-13 Canada Jan-14 Jul-14 Jan-15 Jul-15 NORTH AMERICA RIG COUNT Jan-16 Jul-16 Jan-17 Jul-
Slide 21: RMI Operations
RMI OPERATIONS METALS STEEL SERVICE DISTRIBUTORS CENTERS ENERGY PRODUCTS 21
Slide 22: Total Revenue & EBIT as a % of Revenues Q4-17
TOTAL REVENUE & EBIT AS A % OF REVENUES $1,200 6.8% 7% 6.6% 6.3% 6.1% 6.0% 5.8% $1,000 5.3% 5.0% 5.7% 4.8% 5% 4.6% 4.3% 4.8% $800 4.3% 4.1% 3.5% 3.9% ($000,000's) $600 3% 2.6% 2.6% 2.5% $400 1% $200 $822 $758 $797 $811 $924 $893 $1,039 $1,013 $904 $761 $773 $673 $662 $624 $639 $654 $804 $817 $851 $8
Slide 23: Metals Service Centers – Strong Canadian Franchise
METALS SERVICE CENTERS – STRONG CANADIAN FRANCHISE 2017 revenues of $1.6 billion, EBIT of $80 million. 2016 revenues of $1.4 billion, EBIT of $58 million. 51 Metals Service Centers in Canada. 14 Metals Service Centers in U.S. Broad customer base - 29,000 Canadian, 17,000 U.S. Average inv
Slide 24: Role of Metals Service Centers
ROLE OF METALS SERVICE CENTERS Suppliers Metals Service Centers Customers • Mills producing base metal • Source material and • Manufacturers, fabricators products purchase in large quantity • Processing includes • Process material to meet • Focused on design, pickling, blanking, tube specific custom
Slide 25: Location of Operations: Metals Service Centers
LOCATION OF OPERATIONS METALS SERVICE CENTERS 25
Slide 26: Operations: Metals Service Centers Units
OPERATIONS METALS SERVICE CENTERS - 65 UNITS Canada Alberta/Manitoba/Saskatchewan – 16 units British Columbia – 8 units Quebec – 12 units Ontario – 10 units Atlantic – 5 units United States 3 units 1 unit 9 units 1 unit 26
Slide 27: Metals Service Centers Processing Capabilities
METALS 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 27
Slide 28: Processing Capabilities
PROCESSING CAPABILITIES • Shearing • Braking • Rolling • Shot Blasting • 3D and Tilt Cutting • Fabricating • Bundle Cutting 28
Slide 29: Top Metals Service Centers Customers
TOP METALS SERVICE CENTERS CUSTOMERS YEAR ENDED DECEMBER 31, 2017 % of Segment Customer Revenues Products Purchased Customer 1 Manufacturer-Transportation 0.9% Flat Rolled, Tubing, Structurals, Plate Customer 2 Metals Fabricator 0.7% Plate (Discreet & Plate in Coil) Customer 3 Service Center 0.6% St
Slide 30: Metals Service Centers Revenue & EBIT as a % of Revenues
METALS SERVICE CENTERS REVENUE & EBIT AS A % OF REVENUES $500 7% 6.6% $450 6.1% 5.9% 6% 5.6% 5.4% 5.4% 5.4% $400 5.3% 5.0% 5% $350 5.0% $300 3.9% 4.4% 4% 3.4% ($000,000's) $250 3.8% 3.8% 3.3% 2.8% 2.8% 3% $200 $150 2.2% 2% $100 1.4% 1% $50 $359 $378 $367 $352 $392 $419 $417 $403 $400 $385 $369 $326
Slide 31: Energy Products
ENERGY PRODUCTS 2017 revenues of $1.3 billion, EBIT of $107 million. 2016 revenues of $881 million, EBIT of $19 million. Apex Distribution, Apex Monarch & Apex Western Fiberglass - Western Canada Apex Remington - Central U.S. Fedmet Tubulars & Triumph Tubular - Calgary Comco Pipe & Supply Comp
Slide 32: Role of Pipe Distributors
ROLE OF PIPE DISTRIBUTORS Suppliers Pipe Distributors Customers • Mills producing pipe, • Source material and • Oil and gas valves and fittings purchase in large quantity producers/distributors • Processing includes • Arrange coating if • Focused on production coating required • Limited ability to s
Slide 33: Role of Valve and Fitting Field Stores
ROLE OF VALVE AND FITTING FIELD STORES Suppliers Field Stores Customers • Mills producing pipe, • High service model • Oil and gas valves and fittings producers/distributors • Limited ability to service • Located close to • Focused on production multiple customer needs customer base and rig down tim
Slide 34: Well Positioned to Service North American Energy Sector
WELL POSITIONED TO SERVICE NORTH AMERICAN ENERGY SECTOR ENERGY PRODUCTS 25 34
Slide 35: Energy Products - 68 Units
ENERGY PRODUCTS - 68 UNITS Canada Alberta/B.C./Manitoba/Saskatchewan – 41 units Alberta/Manitoba/Ontario – 5 units Alberta – 1 unit Alberta – 1 unit United States East and Central U.S. – 14 units Colorado / Texas – 5 units Texas – 1 unit 35
Slide 36: Top Energy Products Customers
TOP ENERGY PRODUCTS CUSTOMERS YEAR ENDED DECEMBER 31, 2017 % of Segment Customer Revenues Products Purchased Customer 1 Oil drilling, Gas drilling 6.8% OCTG, Linepipe,Flanges & Fittings , Valves Customer 2 Oil drilling, Gas drilling 6.6% OCTG, Linepipe,Flanges & Fittings , Valves Customer 3 Oil dril
Slide 37: Energy Products Revenue & EBIT as a % of Revenues
ENERGY PRODUCTS REVENUE & EBIT AS A % OF REVENUES $500 11% 10.1% $450 10% 9% $400 9.2% 8% $350 7.3% 7.4% 7.0% 6.6% 6.5% 6.8% 7% 7.3% $300 6.3% ($000,000's) 5.9% 5.6% 5.6% 6% 5.4% $250 4.6% 4.6% 5% $200 4% $150 2.8% 2.7% 3% 2.2% $100 2% $50 1% 0.4% $389 $313 $353 $387 $445 $366 $497 $484 $385 $269 $3
Slide 38: Steel Distributors
STEEL DISTRIBUTORS 2017 revenues of $380 million, EBIT of $34 million. 2016 revenues of $305 million, EBIT of $29 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 39: Role of Steel Distributors
ROLE OF STEEL DISTRIBUTORS Suppliers Steel Distributors Customers • Mills producing base metal • Source material and • Large original equipment products purchase in large quantity manufacturers • Processing includes • Arrange logistics for • Smaller service centers pickling, blanking, tube delivery
Slide 40: Location of Operations: Steel Distributors
LOCATION OF OPERATIONS STEEL DISTRIBUTORS 40
Slide 41: Steel Distributors - 6 Units
STEEL DISTRIBUTORS - 6 UNITS Canada Wirth Steel – Montreal, Vancouver United States Sunbelt Group - Houston, Texas (2) 41
Slide 42: Top Steel Distributor Customers
TOP STEEL DISTRIBUTOR CUSTOMERS YEAR ENDED DECEMBER 31, 2017 % of Segment Customer Revenue Products Purchased Customer 1 Service center 8.9% Plate Customer 2 Service center 5.7% Tubing/Pipe , plate, beam, coils Customer 3 Service center 5.0% Stucturals, Plate, Other (light rail) Customer 4 Service c
Slide 43: Steel Distributors Revenue & EBIT as a % of Revenues
STEEL DISTRIBUTORS REVENUE & EBIT AS A % OF REVENUES $125 12% 11.1% 10.8% 10.1% $100 9.6% 9.6% 10% 9.8% 9.2% 7.7% 8% $75 7.2% 8.3% ($000,000's) 8.1% 6.5% 6.4% 7.2% 7.4% 6.6% 6% 6.1% $50 5.3% 3.9% 4% $25 2% 1.8% $74 $65 $74 $70 $87 $106 $123 $125 $119 $106 $103 $72 $73 $81 $72 $79 $78 $101 $97 $104 $
Slide 44: Summary
SUMMARY i) ©/Russel Metals 44
Slide 45: 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 Prudent inventory managemen
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