Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (May 2022)
28 slides from Russel Metals's investor presentation, May 2022
Slide 1: Company Update May 2022
Russel Metals COMPANY UPDATE MAY 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. Strategic Initiatives IV. 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 May-19 May-20 May-21 May-22 Mar-19 Mar-20 Mar-21 Mar-22 Jan-19 Nov-19 Jan-20 Nov-20 Jan-21 Nov-21 Jan-
Slide 8: Business Conditions – Supply Chain Dynamics
BUSINESS CONDITIONS – SUPPLY CHAIN DYNAMICS Steel Mills/Imports: US Raw Steel Output & Utilization Source: American Iron and Steel Institute Steel Import Volumes Source: GC, International Trade, Steel Import Monitoring Program & • Capacity USDOC, Census Bureau, Foreign Trade, Imports of Steel utiliz
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 $9,000 $8,000 $7,000 Revenues – US$ millions $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Source: Metal Center
Slide 12: Diversified Business
DIVERSIFIED BUSINESS Geography - 131 Locations Suppliers Product Mix Other 6% Non- Ferrous 4% United Others Bars 5% States - 36 51% Structurals and Pipe - 38% Flat Rolled 10% Flanges, Valves, etc. 11% Suppliers 1-10 49% Canada - 95 Plate - 25% 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: Variable Cost Model – Breakdown of Cash Costs
VARIABLE COST MODEL – BREAKDOWN OF CASH COSTS THREE MONTHS ENDED MARCH 31, 2022 YEAR ENDED DECEMBER 31, 2021 YEAR ENDED DECEMBER 31, 2020 $1,199 Million $3,570 Million $2,559 Million Other Fixed and Other Fixed and Other Fixed and Employee Variable Employee Variable Employee Variable Expenses, Varia
Slide 15: 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 16: III. Strategic Initiatives
Russel Metals Il. STRATEGIC INITIATIVES
Slide 17: Business Strategy/Recent Initiatives
BUSINESS STRATEGY/RECENT INITIATIVES $1,600 70% 1. Monetize $1,453 $1,479 $1,462 $1,435 $1,436 $1,471 $1,424 $1,410 OCTG/Line $1,400 Pipe $1,299 60% $1,242 Businesses $1,200 $1,132 $1,133 $1,148 $1,123 51% 49% 50% 43% $1,000 40% IMPACT: $ millions 2. Maintain 4. Target Top Decile $800 Working Select
Slide 18: 1. Monetize Non-Core OCTG/Line Pipe Businesses
1. MONETIZE NON-CORE OCTG/LINE PIPE BUSINESSES Core Business Non-Core Business • Reduced exposure to Energy Field Stores OCTG/Line Pipe Businesses through monetization of OCTG/Line Pipe businesses • Repatriated ~$300 mm of capital • Canada: sale closed on July 6 • US: liquidation is complete • Distr
Slide 19: 2. Working Capital Discipline
2. WORKING CAPITAL DISCIPLINE Inventory Turns Inventory Trends 5.0 $1,200 4.5 $1,031 $1,008 $986 $1,000 $964 4.0 $137 $124 $907 $884 $894 $123 $862 $100 $228 3.5 $95 $790 $787 $800 $95 $773 $153 $87 $716 $720 3.0 $103 $121 $429 $378 $64 $74 $334 $ million $295 $320 2.5 $600 $297 $267 $279 2.0 $329 $
Slide 20: 3. Invest in Value-Added Processing
3. INVEST IN VALUE-ADDED PROCESSING • Value-added processing investments over multi-years • Typically have paybacks of <3 years 20
Slide 21: 3. Invest in Value-Added Processing – Hub & Spoke Approach
3. INVEST IN VALUE-ADDED PROCESSING – HUB & SPOKE APPROACH Wisconsin U.S. South Southern Ontario Western Canada Quebec and Atlantic Processing center Distribution center 21
Slide 22: 4. Target Select Acquisitions: Boyd Metals Transaction Summary
4. TARGET SELECT ACQUISITIONS: BOYD METALS TRANSACTION SUMMARY • US$125 mm purchase price • Includes net working capital (C$85 mm) and PP&E (C$39 mm) • Strong margins/comparable to Russel service centers in the region • LTM revenues and Adj. EBITDA of US$244 mm and US$39 mm • Accretive to earnings a
Slide 23: 4. Target Select Acquisitions: Boyd Metals – Business Overview
4. TARGET SELECT ACQUISITIONS: BOYD METALS – BUSINESS OVERVIEW • Boyd operates five locations, with approximately 320,000 square feet of combined office, operations and warehouse space. Facility Landscape Value-Add Processing Processing Fort Little Joplin Service Smith OKC Tyler Joplin Rock (MO) Okl
Slide 24: IV. Financial Overview
Russel Metals IV. FINANCIAL OVERVIEW
Slide 25: Q1 2022 - Financial Results
Q1 2022 - FINANCIAL RESULTS $ mm, unless otherwise stated Q1 2021 Q4 2021 (1) Q1 2022 Q1 2022 Observations: Income Statement: Revenues $885 $1,147 $1,339 • Record quarterly revenues Gross Margin ($ mm/%) $255 / 28.8% $299 / 26.1% $290 / 21.7% • Margin % moderated from the records set in late 2021, b
Slide 26: Segment Breakdown: Operating Results
SEGMENT BREAKDOWN: OPERATING RESULTS Revenue (C$ millions) Gross Margins % $1,000 40% 35% $800 30% 25% $600 20% $400 15% 10% $200 5% $0 0% Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 MSC Energy Distri
Slide 27: Liquidity and Capital Structure Summary
LIQUIDITY AND CAPITAL STRUCTURE SUMMARY • Russel has significant liquidity and no debt maturities for several years. 12/31/21 3/31/22 (C$ mm) (C$ mm) Cash $133 $146 Bank Lines - Maturity 2025 -- -- 5.75% Notes - Due 2025 $147 $147 6% Notes - Due 2026 $148 $148 Total Debt $295 $295 Shareholders Equit
Slide 28: Contact details
6600 Financial Drive, Mississauga, Ontario L5N 7J6 Email: info@russelmetals.com Visit us at: www.russelmetals.com Investor Relations Line: 905.816.5178 28