Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (February 2022)
30 slides from Russel Metals's investor presentation, February 2022
Slide 1: Company Update February 2022
COMPANY UPDATE FEBRUARY 2022 - ~Russel Metals
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 1 Russel Metals : 5
Slide 6: I. Market Trends
I. MARKET TRENDS - ~Russel Metals
Slide 7: Business Conditions – Metal Pricing Trends
BUSINESS CONDITIONS – METAL PRICING TRENDS Scrap vs Coil & Plate p Pricing Source: American Metal Market (AMM) $2,500 $2,000 - #1 Heavy Melt (Chicago) - HR Sheet - HR Plate $1,500 US $ / ton $1,000 $500 $0 Jan-19 Mar-19 Jan-20 Mar-20 Jan-21 Mar-21 Jan-22 Jul-19 Jul-20 Jul-21 May-19 May-20 May-21 Sep
Slide 8: Business Conditions – Supply Chain Dynamics
BUSINESS CONDITIONS – SUPPLY CHAIN DYNAMICS Steel Mills/Imports: US Raw St SteelI Ou Output pu & Utilization U iliz on SteelI lmpo St Import Volumes olu • Capacity Source: American Iron and Steel Institute Source: GC, International Trade, Steel Import Monitoring Program & USDOC, Census Bureau, Forei
Slide 9: II. Company Overview
II. COMPANY OVERVIEW - ~Russel Metals
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 ··•-•1111 : ~Russel M
Slide 12: Diversified Business
DIVERSIFIED BUSINESS Geography - 131 Locations Suppliers Product Mix Other 5% Bars 5% Non-Ferrous United Others 4% States - 36 51% II Flat Rolled 12% Structurals - 29% Pipe 13% Suppliers 1-10 49% Canada - 95 Plate - 22% Flanges 10% Customers • >30,000 customers • Average invoice < $2,500 • Top 10 cu
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 YEAR ENDED DECEMBER 31, 2021 YEAR ENDED DECEMBER 31, 2020 $3,570 Million $2,559 Million Other Fixed and Other Fixed and Employee Variable Employee Variable Expenses, Variable Expenses, $460 Variable $376 Incentive Incentive Compensation, Compensation, $1
Slide 15: ESG Focused
ESG FOCUSED Environmental • Divested OCTG/Line Pipe business • Low carbon emissions from operations • GHG emissions in 2020 were 53,345 CO2(e) = 0.00002 tonnes/ dollar of revenue • Environment Management System Social • Structured H&S Program “Mission Zero” • Dash cam roll out • Trailer fall prevent
Slide 16: III. Strategic Initiatives
III. STRATEGIC INITIATIVES - ~Russel Metals
Slide 17: Business Strategy/Recent Initiatives
BUSINESS STRATEGY/RECENT INITIATIVES $2,000 70% 64% 1. Monetize $1,800 60% 57% OCTG/Line Pipe Businesses $1,600 50% 47% $1,495 $1,479 $1,453 $1,462 $1,435 $1,436 $1,424 40% $1,412 $1,400 $1,376 40% IMPACT: 2. Maintain $ millions 4. Target Top Decile $1,299 Working Select Return on $1,242 Capital 28%
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 Trends $1,100 $1,052 $1,031 $1,008 $986 $964 $150 $137 $124 $907 $884 $900 $123 $862 $100 $228 $95 $790 $787 $95 $773 $87 $716 $720 $103 $121 $700 $427 $378 $64 $429 $334 $74 $295 $320 $297 $267 $500 $279 $329 $401 $639 $535 $300 $475 $506 $507 $494 $487 $470
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 : ~Russel Metals 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 • • • • : ~Russel Metals • - 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: Impact: Return (EBIT) on Net Assets Over the Cycle
IMPACT: RETURN (EBIT) ON NET ASSETS OVER THE CYCLE • Russel has generated an average RONA of ~20% over the cycle 60% • Russel’s historical RONA would have averaged ~3%/year higher 50% without the OCTG/Line pipe business 40% Pro Forma Average (Excl. OCTG/Line Pipe): 30% 24% 20% Actual Average: 21% 10
Slide 25: IV. Financial Overview
IV. FINANCIAL OVERVIEW - ~Russel Metals
Slide 26: 2021 Summary in Context
2021 SUMMARY IN CONTEXT Other Strong Years 2021 2018 2014 2008 Revenues $4.2 Billion $4.2 Billion $3.9 Billion $3.4 Billion Adj. EBITDA $667 Million $367 Million $276 Million $379 Million Adj. EBITDA Margin 16% 9% 7% 11% EPS $6.90 $3.53 $2.01 $3.67 Net Assets Employed (Year Avg.) $1.3 Billion $1.3 B
Slide 27: Q4 2021 - Financial Results
Q4 2021 - FINANCIAL RESULTS $ mm, unless otherwise stated Q4 2020 (1) Q3 2021 Q4 2021 (1) Q4 2021 Observations: Income Statement: Revenues $671 $1,108 $1,147 • The Q4 results moderated from the records set in Q3, but were Gross Margin ($ mm/%) $139 / 20.8% $330 / 29.8% $299 / 26.1% much higher than
Slide 28: Segment Breakdown: Operating Results
SEGMENT BREAKDOWN: OPERATING RESULTS Revenue (C$ millions) Gross Margins % $800 40% $700 35% $600 30% $500 25% $400 20% ~----==== $300 15% $200 $100 '------ ~ 10% 5% $0 0% Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021
Slide 29: Liquidity and Capital Structure Summary
LIQUIDITY AND CAPITAL STRUCTURE SUMMARY • Russel has $495 mm of liquidity and no debt maturities for several years. 12/31/20 9/30/21 12/31/21 (C$ mm) (C$ mm) (C$ mm) Cash $26 $337 $133 Bank Lines - Maturity 2025 -- -- -- 5.75% Notes - Due 2025 $147 $147 $147 6% Notes - Due 2026 $147 $148 $148 Total
Slide 30: ~R usse IM etas I
: •II '? 11111111 l1111111111l ~RusseIM etas 11 ► 1 I 6600 Financial Drive, Mississauga, Ontario L5N 7J6 Email: info@russelmetals.com Visit us at: www.russelmetals.com Investor Relations Line: 905.816.5178 30
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