Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (June 2018)
41 slides from Russel Metals's investor presentation, June 2018
Slide 1: Russel Metals June 2018
! Russel Metals JUNE 2018 Y
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: Six months ended 2018 - $1.9 billion Six months ended 2017 - $1.6 billion Yea
Slide 4: EPS (2013 – 2018)
EPS (2013 – 2018) $2.25 $2.01 $2.00 $2.00 $1.69 $1.75 $1.50 $1.37 $1.25 $1.02 $1.00 $1.00 $0.75 $0.50 $0.25 $(1.42) $- 2013 2014 2015 2016 2017 Six months 2017 Six months 2018 5 Russel Metals
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 Jun-18 6 Russel Metals Note: 2013 and 2014 adjusted for convertible debentures
Slide 6: Three Distinct Segments
THREE DISTINCT SEGMENTS REVENUE EBIT SIX MONTHS ENDED 2018 (2017) SIX MONTHS ENDED 2018 (2017) Steel Distributors Steel 10% (11%) Distributors 15% (17%) Metals Service Metals Service Centers Centers 53% (50%) 50% (42%) Energy Energy Products Products 37% (39%) 35% (41%) 7 Russel Metals
Slide 7: Operating Units
OPERATING UNITS CANADA Metals Service Centers (51 units) Energy Products (49 units) Steel Distributors (3 units) British Columbia Comco Pipe Apex Distribution Wirth Steel Alberta (A.J. Forsyth) (Alberta) (Alberta) (Montreal) Ontario Fedmet Tubulars Triumph Tubulars Man/Sask (Color Steels) (Alberta)
Slide 8: Balance Sheet as of June 2018
BALANCE SHEET AS OF JUNE 2018 (millions) ASSETS EMPLOYED Cash $ 117 6% Accounts Receivable 557 27% Inventories 1,009 49% Property, Plant and Equipment 262 13% Goodwill/Intangibles 89 4% Other 24 1% $ 2,058 100% FINANCED BY Bank Indebtedness $ 133 6% Trade Creditors 521 25% Long-term Debt 443 22% Oth
Slide 9: Broad Product Focus Breakdown for Six Months Ended June 30, 2018
BROAD PRODUCT FOCUS BREAKDOWN FOR SIX MONTHS ENDED JUNE 30, 2018 (2017) Flat Rolled 8.7% (7.0%) Non Ferrous Bars 3.5% (3.6%) Other 4.9% (5.0%) 4.8% (4.9%) Pipe Products 20.0% (23.7%) Plate 19.1% (17.9%) Flanges, Valves, Fittings & Structurals Other Energy (Beams & HSS) 18.0% (16.5%) 21.0% (21.4%) 10
Slide 10: Top Mill Suppliers for 2018
TOP MILL SUPPLIERS FOR 2018 % of total purchased Products Purchased Supplier 1 6.8% Long Products Supplier 2 5.5% Flat Roll Steel Supplier 3 5.3% Plate Supplier 4 4.8% Tubing Supplier 5 4.5% Long Products Supplier 6 4.0% Pipe Supplier 7 4.0% Long Prod / Plate Supplier 8 2.7% Flanges, Fittings & Valv
Slide 11: Service Center/Distribution Competitors
SERVICE CENTER/ DISTRIBUTION COMPETITORS TOP 15 BY REVENUE Public/ (in billions) 2017 2016 Private Headquarters Reliance Steel & Aluminum Co. $ 9.7 $ 8.6 Public U.S Samuel, Son & Co. 3.6 3.6 Private Canada * Worthington Steel Co. 3.6 3.0 Public U.S MRC Global 3.6 2.5 Public U.S Ryerson Inc. 3.4 2.9
Slide 12: Market Trends
MARKET TRENDS 13 Russel Metals
Slide 13: Monthly Service Center Shipments – Steel Products
MONTHLY SERVICE CENTER SHIPMENTS – STEEL PRODUCTS 4000 900 US CANADA 3500 800 700 3000 Canadian shipments - Tons in Thousands US Shipments- Tons in Thousands 600 2500 500 2000 400 1500 300 1000 200 500 100 0 0 14 Russel Metals
Slide 14: Price of HR Sheet & HR Plate
15 200 300 400 500 600 700 800 900 1000 1100 1200 7-Jan-11 7-Mar-11 7-May-11 7-Jul-11 US$ per ton 7-Sep-11 7-Nov-11 Russel Metals 7-Jan-12 7-Mar-12 7-May-12 7-Jul-12 7-Sep-12 7-Nov-12 7-Jan-13 7-Mar-13 7-May-13 7-Jul-13 7-Sep-13 7-Nov-13 7-Jan-14 7-Mar-14 7-May-14 7-Jul-14 7-Sep-14 7-Nov-14 7-Jan-15
Slide 15: Carbon Plate and Russel Metals EBIT
CARBON PLATE AND RUSSEL METALS EBIT $1,000 $160 $150 $900 $140 Carbon Plate Adjusted EBIT $800 $130 $120 $700 $110 EBIT (millions of dollars) Carbon plate (US$ per ton) $100 $600 $90 $500 $80 $70 $400 $60 $300 $50 $40 $200 $30 $20 $100 $10 $- $- 16 Russel Metals
Slide 16: Scrap Pricing
17 $100.00 $150.00 $200.00 $250.00 $300.00 $350.00 $400.00 $450.00 $500.00 7-Jan-11 7-Mar-11 7-May-11 7-Jul-11 7-Sep-11 7-Nov-11 Russel Metals 7-Jan-12 7-Mar-12 7-May-12 7-Jul-12 7-Sep-12 AMM Scrap Values 7-Nov-12 7-Jan-13 7-Mar-13 7-May-13 7-Jul-13 7-Sep-13 SCRAP PRICING 7-Nov-13 7-Jan-14 7-Mar-14
Slide 17: Mill Production Tons
18 Net Tons (000's) 700 900 1,100 1,300 1,500 1,700 1,900 2,100 1-Jan-11 1-Apr-11 1-Jul-11 1-Oct-11 Russel Metals 1-Jan-12 1-Apr-12 1-Jul-12 1-Oct-12 1-Jan-13 1-Apr-13 1-Jul-13 1-Oct-13 1-Jan-14 1-Apr-14 1-Jul-14 1-Oct-14 1-Jan-15 1-Apr-15 MILL PRODUCTION TONS 1-Jul-15 1-Oct-15 1-Jan-16 1-Apr-16 1-J
Slide 18: Oil and Natural Gas Prices
OIL AND NATURAL GAS PRICES $10 $120 $110 $9 $100 $8 $90 $7 $80 $6 $70 Gas Prices (CDN) Oil Prices (CDN) $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 May-18 19 Russel Metals Source: Index Mundi
Slide 19: North American Rig Count
20 250 500 750 0 1000 1250 1500 1750 2000 2250 Jan-02 Jul-02 Jan-03 Jul-03 Russel Metals 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 Canada Jan-13 Jul-13 Jan-14 U.S NORTH AMERICAN RIG COUNT Jul-14 Jan-15 Jul-15 Jan-16
Slide 20: RMI Operations
METALS STEEL SERVICE DISTRIBUTORS CENTERS ENERGY PRODUCTS RMI OPERATIONS
Slide 21: Total Revenues & EBIT as a % of Revenues
TOTAL REVENUES & EBIT AS A % OF REVENUES 9.9% $1,200 10% $1,000 8% 6.8% 6.6% 6.5% $800 6.3% 6.1% 6.0% 5.8% 6% 5.3% 5.0% 4.8% ($000,000's) 5.7% $600 4.6% 4.3% 4.8% 4% 4.3% 4.1% $400 3.9% 3.5% 2.6% 2.6% 2.5% 2% $200 822 758 797 811 924 893 1,039 1,013 904 761 773 673 662 624 639 654 804 817 851 825 93
Slide 22: Metals Service Centers – Strong Canadian Franchise
METALS SERVICE CENTERS – STRONG CANADIAN FRANCHISE Six months 2018 revenues of $1.0 billion, EBIT of $86 million. 2017 revenues of $1.6 billion, EBIT of $80 million. 51 Metals Service Centers in Canada. 16 Metals Service Centers in U.S. Broad customer base - 29,000 Canadian, 18,000 U.S.
Slide 23: 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
Slide 24: Metals Service Centers Location of Operations
METALS SERVICE CENTERS LOCATION OF OPERATIONS 51 Locations 16 Locations 25 Russel Metals
Slide 25: 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 26 Russel Metals
Slide 26: Processing Capabilities
PROCESSING CAPABILITIES • Shearing • Braking • Rolling • Shot Blasting • 3D and Tilt Cutting • Fabricating • Bundle Cutting 27 Russel Metals
Slide 27: Top Metal Service Center Customers
TOP METAL SERVICE CENTER CUSTOMERS – SIX MONTHS ENDED JUNE 30, 2018 % of Customer End Market Sales Products Purchased Customer 1 Manufacturer-Transportation 1.0% Flat Rolled, Tubing, Structurals, Plate Customer 2 Metals Fabricator 0.8% Plate (Discreet & Plate in Coil) Customer 3 Manufacturer-Agricul
Slide 28: Metal Service Centers Revenues & EBIT as a % of Revenues
METAL SERVICE CENTERS REVENUES & EBIT AS A % OF REVENUES $600 11% 10.2% $550 10% $500 9% $450 8% $400 6.6% 7% 6.3% $350 6.1% 5.9% ($000,000's) 5.4% 5.4% 5.6% 6% 5.4% 5.3% $300 5.0% 5% $250 5.0% 3.9% 4.4% 4% 3.4% $200 3.8% 2.8% 2.8% 3.8% 3% $150 3.3% 2% $100 2.2% $50 1.4% 1% 359 378 367 352 392 419 4
Slide 29: Energy Products
ENERGY PRODUCTS Six months 2018 revenues of $702 million, EBIT of $61 million. 2017 revenues of $1.3 billion, EBIT of $107 million. Apex Distribution, Apex Monarch & Apex Western Fiberglass - Western Canada Apex Remington - Central U.S. Fedmet Tubulars & Triumph Tubular – Calgary Comco Pipe & Su
Slide 30: 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
Slide 31: Role of Valve 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
Slide 32: Energy Products - Well Positioned to Service North American Energy Sector
ENERGY PRODUCTS - WELL POSITIONED TO SERVICE NORTH AMERICAN ENERGY SECTOR 49 Locations 21 Locations 33 Russel Metals
Slide 33: Top Energy Product Customers
TOP ENERGY PRODUCT CUSTOMERS – SIX MONTHS ENDED JUNE 30, 2018 % of Customer End Market Sales Products Purchased Customer 1 Oil drilling, Gas drilling 8.3% OCTG, Linepipe, Pipe, Flanges & Fittings , Valves Customer 2 Oil drilling, Gas drilling 4.3% OCTG, Linepipe,Flanges & Fittings , Valves Customer
Slide 34: Energy Products Revenues & EBIT as a % of Revenues
ENERGY PRODUCTS REVENUES & EBIT AS A % OF REVENUES $500 11% 10.1% $450 10% 8.8% 9% $400 9.2% 8.5% 8% $350 7.3% 7.4% 7.0% 6.6% 6.5% 6.8% 7% 6.3% 7.3% ($000,000's) $300 5.9% 5.6% 5.6% 6% 5.4% $250 4.6% 4.6% 5% $200 4% $150 2.8% 2.7% 3% 2.2% $100 2% $50 1% 0.4% 389 313 353 387 445 366 497 484 385 269 3
Slide 35: Steel Distributors
STEEL DISTRIBUTORS Six months 2018 revenues of $186 million, EBIT of $26 million. 2017 revenues of $380 million, EBIT of $34 million. Sunbelt Group, Arrow Steel – Houston, Texas; Wirth Steel – Montreal, Vancouver Arrow Steel provides coil processing in Houston, Texas Customers – other stee
Slide 36: 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
Slide 37: Top Steel Distributor Customers
TOP STEEL DISTRIBUTOR CUSTOMERS – SIX MONTHS ENDED JUNE 30, 2018 % of Customer End Market Sales Products Purchased Customer 1 Service center 8.8% Plate Customer 2 Service center 4.1% Plate Customer 3 Service Centers 3.1% Plate, Structurals Customer 4 Service Centers 2.8% Stucturals, Plate, Other (li
Slide 38: Steel Distributors – Location of Operations
STEEL DISTRIBUTORS – LOCATION OF OPERATIONS 3 Locations 3 Locations 39 Russel Metals
Slide 39: Steel Distributors Revenues & EBIT as a % of Revenues
STEEL DISTRIBUTORS REVENUES & EBIT AS A % OF REVENUES $125 18% 16.6% 16% $100 14% 11.4% 11.1% 12% 10.8% ($000,000's) 9.8% 10.1% $75 9.6% 9.6% 9.2% 10% 8.1% 7.7% 7.2% 8% 8.3% $50 6.5% 6.4% 7.4% 7.2% 6% 6.6% 6.1% 3.9% 5.3% 4% $25 1.8% 2% 74 65 74 70 87 106 123 125 119 106 103 72 73 81 72 79 78 101 97
Slide 40: Summary
SUMMARY
Slide 41: 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