Slide 1: Russel Metals September 2017
Russel Metals SEPTEMBER 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: Nine months ended 2017 - $2.5 billion Nine months ended 2016 - $1.9 billion Y
Slide 4: EPS – 2011 - 2017
EPS – 2011 - 2017 $2.50 $1.97 $2.01 $2.00 $1.63 $1.55 $1.50 $1.37 $1.02 $1.00 $0.65 $0.50 $(1.42) $- 2011 2012 2013 2014 2015 2016 Nine months Nine months 2016 2017 Notes: 2012 – restated due to adoption of IAS 19 (amended 2011) 4
Slide 5: Net Debt 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 - 2011 2012 2013 2014 2015 2016 Sep-17 Note: 2011 to 2014 adjusted for convertible debentures 6
Slide 7: Three Distinct Segments
THREE DISTINCT SEGMENTS REVENUES NINE MONTHS ENDED 2017 (YE - 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) Fedmet Tubulars Triumph Tubulars Man/Sask Ontario (Alberta) (Alberta) Quebec Atlantic (Acier Leroux) U.S. METALS SER
Slide 9: Balance Sheet as at September 30, 2017
BALANCE SHEET AS AT SEPTEMBER 30, 2017 (millions) ASSETS EMPLOYED Cash $ 146 8% Accounts Receivable 511 29% Inventories 776 43% Property, Plant and Equipment 241 13% Goodwill/Intangibles 92 5% Other 31 2% $ 1,797 100% FINANCED BY Bank Indebtedness $ 185 10% Trade Creditors 442 25% Long-term Debt 296
Slide 10: Broad Product Focus Breakdown
BROAD PRODUCT FOCUS BREAKDOWN FOR SIX MONTHS ENDED JUNE 30, 2017 (YE 2016) Flat Rolled Non Ferrous Bars 7.0% (6.6%) 3.5% (3.7%) Other 5.0% (6.0%) 5.0% (5.1%) Pipe Products Plate 27.0% (23.3%) 17.8% (17.9%) Structurals (Beams & HSS) 18.2% (21.7%) Flanges, Valves, Fittings & Other Energy 16.5% (15.7%)
Slide 11: Top Mill Suppliers for YTD June 2017
TOP MILL SUPPLIERS FOR YTD JUNE 2017 % of total purchased Products Purchased Supplier 1 6.3% Long Products Supplier 2 5.0% Flat Roll Steel Supplier 3 4.9% Plate 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 Sup
Slide 12: Service Center/Distribution Competitors
SERVICE CENTER/DISTRIBUTION COMPETITORS TOP 15 BY REVENUE Public/ (in billions) 2016 2015 2014 Private Headquarters Reliance Steel & Aluminum Co. $ 8.6 $ 9.4 $ 10.5 Public U.S Samuel, Son & Co. 3.6 3.7 3.7 Private Canada Ryerson Inc. 2.9 3.2 3.6 Public U.S Russel Metals Inc. 2.6 3.1 3.9 Public Canad
Slide 13: Market Trends
MARKET TRENDS 13
Slide 14: Monthly Service Center Shipments – Steel Products
MONTHLY SERVICE CENTER SHIPMENTS – STEEL PRODUCTS US CANADA 4000.0 900.0 800.0 3500.0 700.0 Canadian shipments - Tons in Thousands 3000.0 US Shipments- Tons in Thousands 600.0 2500.0 500.0 2000.0 400.0 1500.0 300.0 1000.0 200.0 500.0 100.0 0.0 0.0 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar
Slide 15: Price of HR Sheet & HR Plate
1020 1220 1420 1620 220 420 620 820 20 4-Jan-08 4-Apr-08 4-Jul-08 4-Oct-08 4-Jan-09 4-Apr-09 (US $ per ton) 4-Jul-09 4-Oct-09 4-Jan-10 4-Apr-10 4-Jul-10 4-Oct-10 4-Jan-11 4-Apr-11 4-Jul-11 4-Oct-11 4-Jan-12 4-Apr-12 4-Jul-12 4-Oct-12 4-Jan-13 4-Apr-13 4-Jul-13 4-Oct-13 4-Jan-14 4-Apr-14 4-Jul-14 HR
Slide 16: Carbon Plate and Russel Metals EBIT
CARBON PLATE AND RUSSEL METALS EBIT $1,600 $160 $150 Carbon Plate EBIT $1,400 $140 $130 $1,200 $120 $110 Carbon plate (US$ per ton) EBIT (millions of dollars) $1,000 $100 $90 $800 $80 $70 $600 $60 $50 $400 $40 $30 $200 $20 $10 $- $- Source: American Metal Market 16
Slide 17: Scrap Pricing
$- $400.00 $500.00 $600.00 $100.00 $200.00 $300.00 4-Jan-08 4-Apr-08 4-Jul-08 4-Oct-08 4-Jan-09 4-Apr-09 4-Jul-09 4-Oct-09 4-Jan-10 4-Apr-10 4-Jul-10 AMM Scrap Values 4-Oct-10 4-Jan-11 4-Apr-11 4-Jul-11 4-Oct-11 4-Jan-12 4-Apr-12 4-Jul-12 4-Oct-12 4-Jan-13 4-Apr-13 4-Jul-13 4-Oct-13 4-Jan-14 SCRAP P
Slide 18: Mill Production Tons
Net Tons (000's) 700 900 1,100 1,300 1,500 1,700 1,900 2,100 5-Jan-08 5-Mar-08 5-May-08 5-Jul-08 5-Sep-08 2008 5-Nov-08 5-Jan-09 5-Mar-09 5-May-09 5-Jul-09 5-Sep-09 5-Nov-09 2009 5-Jan-10 5-Mar-10 5-May-10 5-Jul-10 5-Sep-10 5-Nov-10 2010 5-Jan-11 5-Mar-11 5-May-11 5-Jul-11 5-Sep-11 5-Nov-11 5-Jan-12
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 Sep-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 Jul-13 Jan-14 U.S Jul-14 Canada 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 & Operating Profit
TOTAL REVENUE & OPERATING PROFIT AS A % OF REVENUES $1,400 9% 8.4% 8.2% $1,200 6.7% 6.8% 6.5% 6.6% 6.5% 6.5% 6.6% $1,000 6.0% 6.4% 5.8% 5.7% 6% 5.3% 6.0% $800 4.8% ($000,000's) 4.6% 5.0% 4.3% 4.8% 4.6% 4.3% $600 4.1% 2.6% 2.6% 3% 2.5% $400 2.5% $200 $658 $619 $705 $712 $803 $719 $713 $766 $822 $758
Slide 23: Metals Service Centers – Strong Canadian Franchise
METALS SERVICE CENTERS – STRONG CANADIAN FRANCHISE Nine months 2017 revenues of $1.2 billion, EBIT of $64 million. 2016 revenues of $1.4 billion, EBIT of $58 million. 52 Metals Service Centers in Canada. 14 Metals Service Centers in U.S. Broad customer base - 26,000 Canadian, 17,000 U.S.
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: Metals Service Centers - Units
OPERATIONS METALS SERVICE CENTERS - 66 UNITS Canada Alberta/Manitoba/Saskatchewan – 16 units British Columbia – 8 units Quebec – 13 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 SIX MONTH ENDED JUNE 30, 2017 % of Customer End Market Sales Products Purchased Customer 1 Transportation 1.0% Flat Rolled, Tubing Customer 2 Heavy Equipment Manufacturer 0.8% Plate (Discreet & Plate in Coil) Customer 3 Metals Distribution 0.7% Structurals (WF &
Slide 30: Metals Service Centers Revenue & Operating Profit
METALS SERVICE CENTERS REVENUE & OPERATING PROFIT AS A % OF REVENUES 10.0% $500 10% $450 8.6% $400 8% 7.5% 7.1% $350 6.6% 6.2% 6.1% 5.9% 5.9% $300 5.7% 5.6% 6% 5.4% 5.4% 5.4% 5.3% 5.0% 5.0% 5.0% ($000,000's) $250 4.4% 3.8% 3.8% $200 4% 3.3% 3.3% 2.8% $150 2.6% 2.2% $100 1.4% 2% $50 $364 $388 $390 $3
Slide 31: Energy Products
ENERGY PRODUCTS Nine months 2017 revenues of $970 million, EBIT of $79 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 &
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 - Units
ENERGY PRODUCTS - 68 UNITS Canada Alberta/B.C./Manitoba/Saskatchewan – 42 units Alberta/Manitoba/Ontario – 5 units Alberta – 1 unit Alberta – 1 unit United States East and Central U.S. – 13 units Colorado / Texas – 5 units Texas – 1 unit 35
Slide 36: Top Energy Products Customers
TOP ENERGY PRODUCTS CUSTOMERS SIX MONTHS ENDED JUNE 30, 2017 % of Customer End Market Sales Products Purchased Customer 1 Oil drilling, Gas drilling 6.2% OCTG Customer 2 Oil sands 6.0% Pipe, Flanges & Fittings , Valves Customer 3 Oil drilling, Gas drilling 6.0% Pipe, Flanges & Fittings , Valves Cust
Slide 37: Energy Products Revenue & Operating Profit
ENERGY PRODUCTS REVENUE & OPERATING PROFIT AS A % OF REVENUES $500 12% $450 10.1% 10% $400 $350 7.9% 8% 7.3% 7.2% 7.3% 7.4% 7.3% 6.9% 7.0% $300 6.8% ($000,000's) 6.6% 6.5% 6.3% 5.9% $250 5.6% 6% 5.4% 5.2% 5.4% 5.0% 5.5% 4.6% 4.6% $200 4% $150 2.7% 3.6% 2.8% 2.2% $100 2% 0.4% $50 $224 $145 $223 $234
Slide 38: Steel Distributors
STEEL DISTRIBUTORS Nine months 2017 revenues of $276 million, EBIT of $27 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 ste
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 - 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 SIX MONTHS ENDED JUNE 30, 2017 % of Customer End Market Sales Products Purchased Customer 1 Oil & Gas 8.4% Stucturals, Plate, Other (light rail) Customer 2 Service center - laser processor 7.0% Plate Customer 3 Service Centers 4.7% Stucturals, Plate, Other (light rail
Slide 43: Steel Distributors Revenue & Operating Profit
STEEL DISTRIBUTORS REVENUE & OPERATING PROFIT AS A % OF REVENUES $200 12.6%12.6% 12% 11.0% 11.1% $175 10.8% 10.1% 9.8% 9.8% 9.6% 9.6% 10% $150 9.2% 8.8% 8.3% 9.1% 8.0% 8.1% $125 7.7% 8% ($000,000's) 7.5% 6.7% 7.4% 7.2% $100 6.7% 6% 6.1% 5.3% 5.4% $75 4% $50 2.2% 2% $25 1.8% $70 $83 $90 $101 $99 $92
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