Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (August 2021)
28 slides from Russel Metals's investor presentation, Aug 12, 2021
Slide 1: Company Update August 2021
COMPANY UPDATE AUGUST 2021
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 a number of measures that are not prescribed by GAAP and as such may not be comparable to similar measures presented by other companies. We believe these measures are commonly employed to measure performance in our industry and are used by analysts, inves
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: Russel Metals At-a-Glance
RUSSEL METALS AT-A-GLANCE Business Overview Key Segments • Russel Metals Inc. distributes steel and other metal products across North America Metals Service – One of the two largest metals service centers operating in Canada • Extensive metal products line with Centers value-added focus • The Compan
Slide 6: Table of Contents
TABLE OF CONTENTS I. Market Trends II. Company Overview III. Financial Overview 6
Slide 7: I. Market Trends
Il. MARKET TRENDS
Slide 8: Steel Prices vs. Russel EBIT
STEEL PRICES VS. RUSSEL EBIT HR Sheet, Plate & Russel EBIT(1) $1,800 $180 Carbon Plate HR Sheet EBIT $1,600 $160 $2,000 $1,400 $140 $1,800 Carbon Plate / HR Sheet (US$ per Ton) $1,600 $1,200 $120 $1,400 $1,000 $100 EBIT (millions) $1,200 $800 $80 $1,000 $600 $60 $800 $600 $400 $40 $400 Jul/03/20 Jul
Slide 9: Scrap and Steel Production
C$ / ton $150 $200 $250 $300 $350 $400 $450 $500 $550 $600 $650 Jan-11 Jul-11 Jan-12 Jul-12 AMM Scrap Values Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 SCRAP AND STEEL PRODUCTION Jan-21 Source: American Metal Market Jul-21 Net Tons
Slide 10: Service Center Business Conditions
SERVICE CENTER BUSINESS CONDITIONS Source: Metals Service Center Institute Source: Metals Service Center Institute 10
Slide 11: II. Company Overview
II. COMPANY OVERVIEW
Slide 12: Service Center / Distribution Landscape
SERVICE CENTER / DISTRIBUTION LANDSCAPE Russel is one of the largest service center companies in North America Ranked by Revenue (in US$ billions) 2019 2018 Reliance Steel & Aluminum Co. $11.0 $11.5 Ryerson Inc. $4.5 $4.4 Thyssenkrupp Materials NA Inc. $3.2 $3.2 Kloeckner Metals Corp. $3.0 $3.2 Russ
Slide 13: Value-Added Processing
VALUE-ADDED PROCESSING @Russel Metals
Slide 14: Value-Added Processing – Hub & Spoke Approach
VALUE-ADDED PROCESSING – HUB & SPOKE APPROACH Wisconsin U.S. South Southern Ontario Western Canada Quebec and Atlantic 15
Slide 15: Variable Cost Model – Breakdown of Cash Costs
VARIABLE COST MODEL – BREAKDOWN OF CASH COSTS QUARTER ENDED JUNE 30, 2021 QUARTER ENDED MARCH 31, 2021 YEAR ENDED DECEMBER 31, 2020 $890 Million $761 Million $2,559 Million Operating Employee Operating Employee Operating Employee Expenses - Expenses - Expenses - Expenses - Expenses - Expenses - Oper
Slide 16: Countercyclical Cash Flows
COUNTERCYCLICAL CASH FLOWS Adj. 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
Slide 17: Diversified Business
DIVERSIFIED BUSINESS Geography - 126 Locations Supplier by Products Type Product Mix Tubing & Flanges, Fittings Other 5% Non-Ferrous United OCTG, 2% & Valves, 1% Bars 6% Pipe, 3% 4% States - 31 Flat Roll, Plate, 4% Others, 51% Structurals - Long Products, Plate, Pipe, 5% 27% Flat Rolled 9% Tubing, 5
Slide 18: Energy Sub-Segments
ENERGY SUB-SEGMENTS Field Stores Line Pipe/OCTG Energy Strategy: • Reduce absolute and relative exposure • Continue to repatriate substantial working capital from OCTG/Line Pipe • Canada: closed transaction on July 6/21 • US: to be completed by end of 2021 • Distribution of highly engineered product
Slide 19: Canadian OCTG/Line Pipe Transaction
CANADIAN OCTG/LINE PIPE TRANSACTION • On July 6, 2021 Russel closed the transaction involving its Canadian OCTG/Line Pipe business • Merger of Russel’s business (“Triumph”) with the comparable business from Marubeni-Itochu (“Hallmark”) to form TriMark • Russel will realize a significant portion of i
Slide 20: Return (EBIT) on Net Assets - Over the Cycle
RETURN (EBIT) ON NET ASSETS - OVER THE CYCLE • The OCTG/line pipe segment generated an average annual 60% RONA of <5% • Russel’s historical RONA would 50% have averaged ~3%/year higher without the OCTG/Line pipe business 40% Pro Forma Average • Transaction between Triumph (Excl. OCTG/Line Pipe): and
Slide 21: Portfolio Realignment
PORTFOLIO REALIGNMENT $1,700 60% 57% • Objective: Return (EBIT) on Invested Capital of 15% $1,500 $1,495 $1,453 $1,479 $1,462 50% • 2020/2021: Doing More with Less $1,376 $1,435 $1,436 $1,424 • OCTG/Line Pipe capital repatriation (avg. 300 $1,299 40% bps/year drain on RONA) $1,300 $1,242 40% • Worki
Slide 22: ESG Focused
ESG FOCUSED Aggregate Emissions Sources: Environmental • Environment Management System • Low carbon emissions from operations Electricity • GHG emissions in 2020 were 53,345 23% CO2(e) - emission intensity of 0.00001984 Diesel Fuel tonnes CO2(e) per dollar of revenue 40% Governance Propane 3% • Inde
Slide 23: III. Financial Overview
III. FINANCIAL OVERVIEW
Slide 24: Summary Financial Results
SUMMARY FINANCIAL RESULTS $ mm, unless otherwise stated Q2 2020 Q1 2021 Q2 2021 Q2 2021 Observations: Income Statement: Revenues $588 $885 $1,068 • Momentum from Q1 continued throughout Q2 • Q2 was a record for EBIT, EPS and Service Centre EBIT/RONA Gross Margin ($ mm/%) $110 / 18.7% $255 / 28.8% $3
Slide 25: Segment Breakdown: Operating Results
SEGMENT BREAKDOWN: OPERATING RESULTS Revenue (C$ millions) Gross Margins % $800 $717 36% 35% 34% $700 $585 33% 33% 30% $600 25% $474 $500 $437 24% 21% 21% 21% $412 $419 $373 $393 19% 19% $400 18% 16% 17% 15% 19% 15% 17% $300 $343 17% $298 $316 $226 12% $205 14% 12% $200 $158 $176 11% $149 11% 10% 11
Slide 26: Inventory Realignment
INVENTORY REALIGNMENT Inventory Trends Portfolio Realignment $500 • $862 mm at 6/30/20…Q2/20 EBITDA $32 mm $470 • $653 mm at 6/30/21 (PF)…Q2/21 EBITDA $178 mm $450 $401 $400 MSC: • Tonnage remains low; values have increased $350 $329 $297 $317 • Inventory turns at 4.8 $300 $269 Million $ Distributor
Slide 27: Liquidity and Capital Structure Summary
LIQUIDITY AND CAPITAL STRUCTURE SUMMARY • Russel has over $500 mm of liquidity and no debt maturities for several years. 12/31/20 3/31/21 6/30/21 (C$ mm) (C$ mm) (C$ mm) Cash $26 $92 $175 Bank Lines - Maturity 2023 -- -- -- 5.75% Notes - Due 2025 $147 $147 $147 6% Notes - Due 2026 $147 $147 $147 Tot
Slide 28: 6600 Financial Drive, Mississauga, Ontario
6600 Financial Drive, Mississauga, Ontario L5N 7J6 Email: info@russelmetals.com Visit us at: www.russelmetals.com Investor Relations Line: 905.816.5178