Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (September 2022)
28 slides from Russel Metals's investor presentation, September 2022
Slide 1: Company Update September 2022
COMPANY UPDATE SEPTEMBER 2022
Slide 2: Forward-Looking Information
FORWARD-LOOKING INFORMATION Certain information contained in this presentation constitutes forward-looking information within the meaning of applicable securities laws. Forward-looking information relates to future events or future performance. All statements, other than statements of historical fac
Slide 3: Non-GAAP Measures
NON-GAAP MEASURES This presentation includes certain financial measures that do not comply with International Financial Reporting Standards (IFRS or GAAP) or have standardized meanings, and thus, may not be comparable to similar measures presented by other issuers, for example Adjusted EBIT and Adju
Slide 4: Business Highlights
BUSINESS HIGHLIGHTS Compelling Market Position with Strong Supplier Relationships and Market Insight • One of the largest metals distribution and processing companies in North America • Well-established relationships with North American steel producers and one of the largest independent steel import
Slide 5: Table of Contents
TABLE OF CONTENTS I. Market Trends II. Company Overview III. Financial Overview 5
Slide 6: I. Market Trends
Russel Metals Il. MARKET TRENDS
Slide 7: Business Conditions – Metal Pricing Trends
BUSINESS CONDITIONS – METAL PRICING TRENDS Scrap vs Coil & Plate Pricing Source: American Metal Market (AMM) $2,500 #1 Heavy Melt (Chicago) HR Sheet HR Plate $2,000 $1,500 US $ / ton $1,000 $500 $0 7
Slide 8: Business Conditions: Supply Chain Dynamics
BUSINESS CONDITIONS: SUPPLY CHAIN DYNAMICS Steel Mills/Imports: • Capacity utilization just below 80% • Imports are moving up Service Centers: • Supply chain inventories increased over the past several months, but have recently come back down 8
Slide 9: II. Company Overview
Russel Metals Il. COMPANY OVERVIEW
Slide 10: Russel Metals At-a-Glance
RUSSEL METALS AT-A-GLANCE Overview Key Segments • Distribution of steel and other metal products across North America • Three segments: Metal Service Centers, Energy Field Stores and Steel • Coast-to-coast in Canada Metals Service Distributors • Strong US presence in mid-west Centers • Founded in 19
Slide 11: Strong Market Position
STRONG MARKET POSITION • Russel is one of the largest service center companies in North America • Leading market position in Canada • Strong market position in the US South and US Mid-West $16,000 $14,000 Revenues – US$ millions $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Source: Metal Center New
Slide 12: Diversified Business
DIVERSIFIED BUSINESS Geography - 131 Locations Suppliers Product Mix Non- Ferrous Other 6% 4% United Others Bars 5% States - 36 51% Structurals and Pipe - 39% Flat Rolled 10% Flanges, Valves, etc. 11% Suppliers 1-10 49% Canada - 95 Plate - 24% Customers • >30,000 customers • Average invoice < $2,500
Slide 13: Countercyclical Cash Flows
COUNTERCYCLICAL CASH FLOWS • Strong EBITDA during upcycles; 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) $(200,000) Q2 2007 Q2 2008 Q2 2009 Q2 2010 Q2 2011
Slide 14: Working Capital Discipline
WORKING CAPITAL DISCIPLINE Inventory Turns Inventory $ millions 5.0 $1,200 4.7 4.0 4.5 $1,025 4.0 $1,008 $986 3.8 $1,000 $964 4.0 3.5 3.4 $124 $907 $894 $884 $190 $123 $862 3.0 $100 $228 3.5 3.0 3.2 $95 $790 $787 $95 $773 $153 3.0 $800 2.5 $716 $720 2.9 $87 3.0 $103 $121 $378 $64 $74 2.2 $334 $ mill
Slide 15: Variable Cost Model – Breakdown of Cash Costs
VARIABLE COST MODEL – BREAKDOWN OF CASH COSTS SIX MONTHS ENDED JUNE 30, 2022 YEAR ENDED DECEMBER 31, 2021 YEAR ENDED DECEMBER 31, 2020 $2,382 Million $3,570 Million $2,559 Million Other Fixed and Other Fixed and Other Fixed and Employee Variable Employee Variable Employee Variable Expenses, Variable
Slide 16: Investing in Value-Added Processing
INVESTING IN VALUE-ADDED PROCESSING • Value-added processing investments over multi-years • Typically have paybacks of <3 years 16
Slide 17: Investing in Value-Added Processing – Hub & Spoke Approach
INVESTING IN VALUE-ADDED PROCESSING – HUB & SPOKE APPROACH Wisconsin U.S. South Southern Ontario Western Canada Quebec and Atlantic Processing center Distribution center 17
Slide 18: ESG Focused
ESG FOCUSED Environmental • Divested OCTG/Line Pipe business • Low carbon emissions from operations • GHG emissions in 2021 were 51,024 tonnes CO2(e) – down 4% vs. 2020 • Equates to 0.00001 tonnes/dollar of revenue • Environment Management System Social • Structured H&S Program “Mission Zero” • Dash
Slide 19: III. Financial Overview
Russel Metals lil. FINANCIAL OVERVIEW
Slide 20: Strong Relative Performance
STRONG RELATIVE PERFORMANCE • Strong relative performance over the cycle. Very strong recent performance with portfolio changes. 20 Note: US Peers include: DistributionNOW, MRC Global, Olympic Steel, Reliance Steel & Aluminum Co., Ryerson Holding Corp. & Worthington Ind.; Cdn Peers include: Doman Bl
Slide 21: Return on Invested Capital: Historical
RETURN ON INVESTED CAPITAL: HISTORICAL $1,800 80% $1,600 $1,553 70% $1,453 $1,479 $1,462 $1,471 $1,435 $1,436 $1,424 $1,410 $1,400 $1,299 60% $1,242 $1,200 $1,132 $1,133 $1,148 $1,123 50% 51% $1,000 49% 48% $ millions 43% 40% $800 32% 30% $600 24% 23% 19% 20% $400 15% 16% 10% 10% $200 8% 8% 5% 5% $0
Slide 22: Return on Invested Capital: Sensitivity Analysis
RETURN ON INVESTED CAPITAL: SENSITIVITY ANALYSIS • The following illustrates the implied annual EBITDA under a range of invested capital and return scenarios. Implied Annual EBITDA (C$ mm) Invested Capital (C$ mm) $1,400 $1,500 $1,600 $1,700 $1,800 10% $204 $214 $224 $234 $244 15% $274 $289 $304 $31
Slide 23: Growing Equity Base
GROWING EQUITY BASE RUS - Book Value per Share: 2017 to Present $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 23
Slide 24: Q2 2022: Financial Results
Q2 2022: FINANCIAL RESULTS $ mm, unless otherwise stated Q2 2021 Q1 2022 Q2 2022 Q2 2022 Observations: Income Statement: Revenues $1,068 $1,339 $1,362 • Record quarterly revenues • Improvement in most key metrics for Q2 vs. Q1 Gross Margin ($ mm/%) $328 / 30.7% $290 / 21.7% $344 / 25.3% • Q2 results
Slide 25: Segment Breakdown: Operating Results
SEGMENT BREAKDOWN: OPERATING RESULTS Revenue (C$ millions) Gross Margins % $1,000 40% 35% $800 30% $600 25% 20% $400 15% 10% $200 5% $0 0% Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 MSC Energy Distri
Slide 26: Liquidity and Capital Structure Summary
LIQUIDITY AND CAPITAL STRUCTURE SUMMARY • Russel has significant liquidity and no debt maturities for several years. 12/31/21 3/31/22 6/30/22 (C$ mm) (C$ mm) (C$ mm) Cash $133 $146 $187 Bank Lines - Maturity 2025 -- -- -- 5.75% Notes - Due 2025 $147 $147 $147 6% Notes - Due 2026 $148 $148 $148 Total
Slide 27: Summary Observations
SUMMARY OBSERVATIONS • Capital Allocation Priorities • M&A deal flow remains active • Internal capital projects are being advanced • NCIB in place for up to 3.2 million shares (5% of shares outstanding) • Macro Market Factors • Inflation – We are a cost plus business and our operating cash costs are
Slide 28: Contact Information
6600 Financial Drive, Mississauga, Ontario L5N 7J6 Email: info@russelmetals.com Visit us at: www.russelmetals.com Investor Relations Line: 905.816.5178 28
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