Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (June 2021)
28 slides from Russel Metals's investor presentation, Jun 8, 2021
Slide 1: Company Update June 2021
COMPANY UPDATE JUNE 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. (“the Company”) is a metals distribution company which distributes steel and other metal products across North America Metals Service – One of the two largest metals service centers operating in Canada • Extensive metal pr
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) $1,400 $140 Carbon Plate HR Sheet EBIT $1,200 $120 $1,800 $1,600 Carbon Plate / HR Sheet (US$ per Ton) $1,000 $100 $1,400 $800 $80 $1,200 EBIT (millions) $1,000 $600 $60 $800 $400 $40 $600 $400 $200 $20 Jul/03/20 Jun/03/20 Aug/03/20 Sep/0
Slide 9: Scrap and Steel Production
C$ / ton $150 $200 $250 $300 $350 $400 $450 $500 $550 $600 Jan-11 Jul-11 Jan-12 Jul-12 AMM Scrap Values Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 SCRAP AND STEEL PRODUCTION Jul-20 Source: American Metal Market Jan-21 Net Tons (000's) 700
Slide 10: Service Center Business Conditions
SERVICE CENTER BUSINESS CONDITIONS Source: Metals Service Center Institute Source: Metals Service Center Institute 10
Slide 11: North American Rig Counts
NORTH AMERICAN RIG COUNTS 1000 2250 900 2000 Canada U.S 800 1750 700 1500 600 1250 500 1000 400 750 300 500 200 100 250 0 0 Source: Baker Hughes 11
Slide 12: II. Company Overview
II. COMPANY OVERVIEW
Slide 13: Service Center / Distribution Landscape
SERVICE CENTER / DISTRIBUTION LANDSCAPE Russel is one of the largest service center companies in North America Ranked by Revenue (in US$ 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 14: Value-Added Processing
VALUE-ADDED PROCESSING @Russel Metals
Slide 15: 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 16: Variable Cost Model – Breakdown of Cash Costs
VARIABLE COST MODEL – BREAKDOWN OF CASH COSTS QUARTER ENDED MARCH 31, 2021 YEAR ENDED DECEMBER 31, 2020 YEAR ENDED DECEMBER 31, 2019 $761 Million $2,559 Million $3,499 Million Operating Operating Employee Operating Employee Employee Expenses - Expenses - Operating Expenses - Expenses - Expenses - Ex
Slide 17: 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) Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011
Slide 18: 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 19: 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: recent JV announcement • US: to be completed by end of 2021 • Distribution of highly engineered products • Distr
Slide 20: Canadian OCTG/Line Pipe Transaction
CANADIAN OCTG/LINE PIPE TRANSACTION • On April 14, 2021 Russel announced an important 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 significan
Slide 21: Return (EBIT) on Net Assets - Over the Cycle
RETURN (EBIT) ON NET ASSETS - OVER THE CYCLE • The OCTG/line pipe segment 50% generated an average annual 45% RONA of <5% 40% • Russel’s historical RONA would have averaged ~3%/year higher 35% without the OCTG/Line pipe business 30% • Announcement of merger 25% Pro Forma Average between Triumph and
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 Q1 2020 Q4 2020 Q1 2021 Q1 2021 Observations: Income Statement: Revenues $815 $671 $885 • Substantial improvement for Q1 vs. Q4 Gross Margin ($ mm/%) $152 / 18.7% $139 / 20.8% $255 / 28.8% • Gross margin improving with market conditions • Q1 EB
Slide 25: Segment Breakdown: Operating Results
SEGMENT BREAKDOWN: OPERATING RESULTS Revenue (C$ millions) Gross Margins % $700 35% 34% $585 33% $600 $535 30% $474 25% $500 $437 25% $412 $419 21% 21% 21% $393 $373 19% 19% 19% $400 20% 16% 17% 15% 19% 15% 17% $300 $343 15% $298 $298 $316 17% $226 14% 14% 12% $200 $158 $176 10% 11% $149 11% 11% 10%
Slide 26: Segment Breakdown: Inventories
SEGMENT BREAKDOWN: INVENTORIES Inventory Trends MSC: $500 • Tonnage remains low; values have increased $470 • Inventory turns at 4.8x $450 Distributors: $400 • Inventory remains low; procurement lead $350 $329 $317 times are extended $300 $297 • Purchase orders have grown, with most committed on a b
Slide 27: Liquidity and Capital Structure Summary
LIQUIDITY AND CAPITAL STRUCTURE SUMMARY • Russel has over $400 mm of liquidity and no debt maturities for several years. 12/31/20 3/31/21 (C$ mm) (C$ mm) Cash $26 $92 Bank Lines - Maturity 2023 -- -- 5.75% Notes - Due 2025 $147 $147 6% Notes - Due 2026 $147 $147 Total Debt $294 $294 Shareholders Equ
Slide 28: Russel Metals 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