Russel Metals Inc. · TSX:RUS

Russel Metals — Investor Presentation (September 2019)

43 slides from Russel Metals's investor presentation, September 2019

  1. Slide 1: September 2019

    SEPTEMBER 2019

  2. 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

  3. 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: Nine months ended 2019 - $2.8 billion Nine months ended 2018 - $3.0 billion Y

  4. Slide 4: EPS (2013 – 2019)

    EPS (2013 – 2019) $3.75 $3.53 $3.50 $3.25 $3.00 $2.79 $2.75 $2.50 $2.25 $2.01 $2.00 $2.00 $1.75 $1.37 $1.34 $1.50 $1.25 $1.02 $1.00 $0.75 $0.50 $0.25 $(1.42) $- 2013 2014 2015 2016 2017 2018 Nine months Nine months 2018 2019 5 Russel Metals

  5. 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-Sep 6 Russel Metals Note: 2013 and 2014 adjusted for convertible debentures

  6. Slide 6: Three Distinct Segments

    THREE DISTINCT SEGMENTS REVENUE EBIT NINE MONTHS ENDED 2019 (2018) NINE MONTHS ENDED 2019 (2018) Steel Steel Distributors Distributors 11% (10%) 12% (13%) Metals Service Metals Service Centers Centers 42% (51%) 55% (52%) Energy Products Energy 34% (38%) Products 46% (36%) 7 Russel Metals

  7. Slide 7: Operating Units

    OPERATING UNITS CANADA Metals Service Centers (49 units) Energy Products (48 units) Steel Distributors (2 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)

  8. Slide 8: Balance Sheet as of September 2019

    BALANCE SHEET AS OF SEPTEMBER 2019 (millions) ASSETS EMPLOYED Cash $ 129 6% Accounts Receivable 505 24% Inventories 964 47% Property, Plant and Equipment 266 13% Goodwill/Intangibles 81 4% Right of Use Assets and Other 130 6% $ 2,075 100% FINANCED BY Bank Indebtedness $ 135 7% Trade Creditors 364 18

  9. Slide 9: Broad Product Focus Breakdown for Nine Months Ended September 30, 2019

    BROAD PRODUCT FOCUS BREAKDOWN FOR NINE MONTHS ENDED SEPTEMBER 30, 2019 (2018) Flat Rolled Non Ferrous 8.0% (8.0%) 3.7% (3.3%) Other Bars 5.1% (4.8%) 5.2% (5.1%) Pipe Products 16.9% (22.2%) Plate 19.1% (18.7%) Flanges, Valves, Fittings & Other Energy 17.9% (16.7%) Structurals (Beams & HSS) 24.1% (21.

  10. Slide 10: Top Mill Suppliers

    TOP MILL SUPPLIERS NINE MONTHS ENDED SEPTEMBER 30, 2019 % of total purchased Products Purchased Supplier 1 7.6% Long Products Supplier 2 5.8% Long Prod / Plate / Pipe Supplier 3 5.2% Flat Roll / Plate / Long Products Supplier 4 4.5% Tubing Supplier 5 4.5% Plate Supplier 6 4.0% Pipe Supplier 7 3.9% L

  11. Slide 11: Service Center/Distribution Competitors

    SERVICE CENTER/ DISTRIBUTION COMPETITORS RANKED 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

  12. Slide 12: Market Trends

    MARKET TRENDS 13 Russel Metals

  13. Slide 13: Monthly Service Center Shipments – Steel Products

    14 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 Apr-16 Russel Metals May-16 Jun-16 Jul-16 Aug-16 Sep-16 US Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 STEEL PRODUCTS CANADA Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-

  14. Slide 14: Price of HR Sheet & HR Plate

    15 200 300 400 500 600 700 800 900 1,000 1,100 1,200 Jan-11 Mar-11 May-11 Jul-11 Sep-11 US$ per Ton Nov-11 Jan-12 Russel Metals 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-

  15. Slide 15: Scrap Pricing

    16 $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 Mar-14 SCRAP PRICING May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-

  16. Slide 16: Scrap vs Coil and Plate Pricing

    17 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 Mar-17 Apr-17 #1 Heavy Melt (Chicago) May-17 Jun-17 Jul-17 Aug-17 Sep-17 HR Sheet Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 HR Plate Apr-

  17. Slide 17: Carbon Plate, HR Sheet & Russel EBIT

    18 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 Q3-2014 Carbon Plate Q1-2015 Q3-2015 Q1-2016 HR Sheet Q3-2016 Q1-2017 Q3-2017 EBIT Q1-2018

  18. Slide 18: Mill Production Tons

    19 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 Jan-16 MILL PRODUCTION TONS Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-1

  19. 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 Sep-19 20 Russel Metals Source: Henry Hub

  20. 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 21 Russel Metals Source: Baker Hughes

  21. Slide 21: RMI Operations

    METALS STEEL SERVICE DISTRIBUTORS CENTERS ENERGY PRODUCTS RMI OPERATIONS

  22. 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% 6.3% 6.4% $800 6.1% 5.8% 5.6% 6% 5.4% 4.8% 4.8% 6.0% ($000,000's) 5.7% $600 4.6% 4.3% 4.0% 3.5% 4% 4.3% $400 2.6% 2.5% 2.6% 2% $200 924 893 1,039 1,013 904 761 773 673 662 624 639 654 804 817 851 825 931 978 1,140

  23. Slide 23: Metals Service Centers – Strong Canadian Franchise

    METALS SERVICE CENTERS – STRONG CANADIAN FRANCHISE  Nine months 2019 revenues of $1.5 billion, EBIT of $65 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.

  24. 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

  25. Slide 25: Metals Service Centers Location of Operations

    METALS SERVICE CENTERS LOCATION OF OPERATIONS 48 Locations 16 Locations 26 Russel Metals

  26. 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 27 Russel Metals

  27. Slide 27: Processing Capabilities

    PROCESSING CAPABILITIES • Shearing • Braking • Rolling • 3D and Tilt Cutting • Bundle Cutting • Shot Blasting 28 Russel Metals

  28. Slide 28: Top Metal Service Center Customers

    TOP METAL SERVICE CENTER CUSTOMERS – NINE MONTHS ENDED SEPTEMBER 30, 2019 % of Customer Sales Products Purchased Customer 1 Manufacturer-Transportation 1.1% Flat Rolled, Tubing, Structurals, Plate Customer 2 Structural Fabricator - Construction 0.7% Structurals (WF & I Beam, Structural Angles/Channe

  29. Slide 29: Metal Service Centers Revenues & EBIT as a % of Revenues

    METAL SERVICE CENTERS REVENUES & EBIT AS A % OF REVENUES $600 11% 10.2% 9.8% $550 10% $500 9% $450 8% $400 6.6% 7% 6.3% $350 6.1% 5.9% ($000,000's) 5.6% 6% 5.3% $300 5.0% 5.0% 5.4% 4.4% 5.4% 5% $250 3.9% 4.2% 3.4% 4% $200 2.8% 2.8% 3.8% 3% $150 3.3% 3.3% $100 2% 2.2% $50 1.4% 1% 392 419 417 403 400

  30. Slide 30: Energy Products

    ENERGY PRODUCTS  Nine months 2019 revenues of $968 million, EBIT of $71 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 & S

  31. 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

  32. Slide 32: Role of Value 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

  33. Slide 33: Energy Products - Well Positioned to Service North American Energy Sector

    ENERGY PRODUCTS - WELL POSITIONED TO SERVICE NORTH AMERICAN ENERGY SECTOR 48 Locations 28 Locations 34 Russel Metals

  34. Slide 34: Top Energy Product Customers

    TOP ENERGY PRODUCT CUSTOMERS – NINE MONTHS ENDED SEPTEMBER 30, 2019 % of Customer Sales Products Purchased Customer 1 Oil feeder lines, Gas feeder lines, Oil sands 6.9% OCTG, Linepipe, Pipe, Flanges & Fittings , Valves Customer 2 Oil drilling, Gas drilling 4.9% Pipe, Flanges & Fittings , Valves Cust

  35. Slide 35: Energy Products Revenues & EBIT as a % of Revenues

    ENERGY PRODUCTS REVENUES & EBIT AS A % OF REVENUES $500 11% 10.1% $450 10% 9.2% 8.8% 8.7% 9% $400 7.9% 7.9% 8.5% 8% $350 7.3% 7.4% 7.0% 7.3% 6.6% 6.8% 7.5% 6.5% 7% ($000,000's) $300 5.9% 5.9% 5.6% 6% $250 4.6% 5% $200 4% $150 2.7% 2.8% 3% 2.2% $100 2% $50 1% 0.4% 445 366 497 484 385 269 300 274 248

  36. Slide 36: Steel Distributors

    STEEL DISTRIBUTORS  Nine months 2019 revenues of $315 million, EBIT of $19 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 ste

  37. 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

  38. Slide 38: Top Steel Distributor Customers

    TOP STEEL DISTRIBUTOR CUSTOMERS – NINE MONTHS ENDED SEPTEMBER 30, 2019 % of Customer Sales Products Purchased Customer 1 Service Center 10.1% Plate Customer 2 Service Center 9.3% Beam, Bar Customer 3 Service Center 6.7% Plate, Beam Customer 4 Service Center 6.1% Plate, Beam Customer 5 Service Center

  39. Slide 39: Steel Distributors – Location of Operations

    STEEL DISTRIBUTORS – LOCATION OF OPERATIONS 2 Locations 3 Locations 40 Russel Metals

  40. 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% 12% 11.1% 10.8% $100 ($000,000's) 10.1% 9.6% 9.6% 9.2% 9.8% 9.1% 10% 8.3% $80 8.1% 7.4% 7.5% 7.2% 7.2% 8% 6.9% 6.4% 6.5% $60 5.3% 6% 3.9% $40 4% 1.8% $20 3.5% 2% 87 106 123 125 119 106 103 72 73 81 72 79 78

  41. Slide 41: Summary

    SUMMARY

  42. 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

  43. 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

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