Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (March 2017)
48 slides from Russel Metals's investor presentation, March 2017
Slide 1: Russel Metals March 2017
‘Russel Metals MARCH 2017
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Slide 3: 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 4: 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: Q1 2017 - $804 million Q1 2016 - $662 million Based on revenues for the qua
Slide 5: EPS – 2011 - 2017
EPS – 2011 - 2017 $2.50 $2.36 $1.97 $2.00 $1.63 $1.50 $1.37 $0.99 $1.02 $1.00 $0.48 $0.50 $0.13 $- 2011 2012 2013 2014 2015 2016 Q1 2016 Q1 2017 Notes: 2012 – restated due to adoption of IAS 19 (amended 2011) 2014 & 2015 – adjusted earnings per share 4
Slide 6: Net Cash Position 2015 - 2017
NET CASH POSITION 2015 - 2017 $0 ($100,000) ($200,000) ($300,000) ($400,000) ($500,000) 5
Slide 7: 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 Mar-17 6
Slide 8: Three Distinct Segments
THREE DISTINCT SEGMENTS REVENUES THREE MONTHS ENDED 2017 (2016) Steel Distributors 10% (12%) Metals Service Centers 48% (54%) Energy Products 42% (34%) 7
Slide 9: 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 10: Balance Sheet as at March 31, 2017
BALANCE SHEET AS AT MARCH 31, 2017 (millions) ASSETS EMPLOYED Cash $ 169 10% Accounts Receivable 466 29% Inventories 628 39% Property, Plant and Equipment 238 15% Goodwill/Intangibles 84 5% Other 26 2% $ 1,611 100% FINANCED BY Bank Indebtedness $ 78 5% Trade Creditors 360 22% Long-term Debt 296 18%
Slide 11: Broad Product Focus Breakdown
BROAD PRODUCT FOCUS BREAKDOWN FOR YEAR ENDED DECEMBER 31, 2016 (2015) Flat Rolled Non Ferrous Bars 6.6% (4.5%) 3.7% (3.0%) Other 6.0% (5.5%) 5.1% (4.2%) Pipe Products 23.3% (27.6%) Plate 17.9% (18.9%) Structurals Flanges, Valves, Fittings & (Beams & HSS) Other Energy 21.7% (20.1%) 15.7% (16.2%) 10
Slide 12: Top Mill Suppliers for 2016
TOP MILL SUPPLIERS FOR 2016 % of total purchased Products Purchased Supplier 1 8.7% Bars, Structurals Supplier 2 6.6% Plate Supplier 3 6.3% Flat Roll, Plate Supplier 4 5.9% Tubing / Pipe Supplier 5 5.8% Flat Roll, Plate Supplier 6 4.5% Bars, Structurals Supplier 7 3.3% Flat Roll, Plate Supplier 8 2.
Slide 13: Service Center/Distribution Competitors
SERVICE CENTER/DISTRIBUTION COMPETITORS TOP 14 BY REVENUE Public/ (in billions) 2016 2015 2014 Private Headquarters Reliance Steel & Aluminum Co. $ 8.6 $ 9.4 $ 10.5 Public U.S Ryerson Inc. 2.9 3.2 3.6 Public U.S Russel Metals Inc. 2.6 3.1 3.9 Public Canada Samuel, Son & Co. N/A 2.9 3.7 Private Canad
Slide 14: Market Trends
MARKET TRENDS 13
Slide 15: Monthly Service Center Shipments – Steel Products
MONTHLY SERVICE CENTER SHIPMENTS – STEEL PRODUCTS US CANADA 4000 900.0 800.0 3500 700.0 3000 Canadian shipments - Tons in Thousands US Shipments- Tons in Thousands 600.0 2500 500.0 2000 400.0 1500 300.0 1000 200.0 500 100.0 0 0.0 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16
Slide 16: 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 (US $ per ton) 4-Apr-09 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 HR Sheet 4-J
Slide 17: 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 $- $- Q1-2008 Q4-2008 Q3-2009 Q2-2010 Q1-2011 Q4-2011 Q3-2012 Q2-2013 Q1-
Slide 18: Scrap Pricing
$- $500.00 $600.00 $300.00 $400.00 $100.00 $200.00 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 AMM Scrap Values 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 SCRAP PRICING 4-
Slide 19: 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 2009 5-Nov-09 5-Jan-10 5-Mar-10 5-May-10 5-Jul-10 5-Sep-10 2010 5-Nov-10 5-Jan-11 5-Mar-11 5-May-11 5-Jul-11 5-Sep-11 2011 5-Nov-11 5-J
Slide 20: 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) $70 Oil Prices (CDN) 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 Mar-17 Source: Index Mundi 19
Slide 21: 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 U.S Jan-14 Canada Jul-14 NORTH AMERICA RIG COUNT Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 0 So
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Slide 23: RMI Operations
RMI OPERATIONS METALS STEEL SERVICE DISTRIBUTORS CENTERS ENERGY PRODUCTS 21
Slide 24: Metals Service Centers – Strong Canadian Franchise
METALS SERVICE CENTERS – STRONG CANADIAN FRANCHISE Q1 - 2017 revenues of $386 million, EBIT of $22 million. 2016 revenues of $1.4 billion, EBIT of $58 million. 50 Metals Service Centers in Canada. 14 Metals Service Centers in U.S. Broad customer base - 26,000 Canadian, 17,000 U.S. Averag
Slide 25: 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 26: Location of Operations: Metals Service Centers
LOCATION OF OPERATIONS METALS SERVICE CENTERS 24
Slide 27: Operations Metals Service Centers - Units
OPERATIONS METALS SERVICE CENTERS - 64 UNITS Canada Alberta/Manitoba/Saskatchewan – 16 units British Columbia – 8 units Quebec – 12 units Ontario – 9 units Atlantic – 5 units United States 3 units 1 unit 9 units 1 unit 25
Slide 28: 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 26
Slide 29: Processing Capabilities
PROCESSING CAPABILITIES • Shearing • Braking • Rolling • Shot Blasting • Sawing • Mitre Sawing • Bundle Cutting 27
Slide 30: Top Metals Service Centers Customers
TOP METALS SERVICE CENTERS CUSTOMERS YEAR ENDED DECEMBER 31, 2016 % of Segment Customer End Market Revenues Products Purchased Customer 1 Transportation 1.5% Flat Rolled, Tubing Customer 2 Steel Mill 1.0% Plate (Discreet & Plate in Coil) Customer 3 Mining 1.0% Structurals (WF & I Beam, Structural An
Slide 31: Metals Service Centers Revenue & Operating Profit as a % of Revenues
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% $300 5.7% 5.6% 6% 5.4% 5.4% 5.4% 5.3% 5.0% 5.0% 5.0% ($000,000's) $250 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 $375 $428 $4
Slide 32: Energy Products
ENERGY PRODUCTS Q1 - 2017 revenues of $339 million, EBIT of $24 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 & Supply
Slide 33: 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 34: 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 35: Well Positioned to Service North American Energy Sector
WELL POSITIONED TO SERVICE NORTH AMERICAN ENERGY SECTOR ENERGY PRODUCTS 25 33
Slide 36: 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. – 12 units Colorado / Texas – 6 units Texas – 1 unit 34
Slide 37: Top Energy Products Customers
TOP ENERGY PRODUCTS CUSTOMERS YEAR ENDED DECEMBER 31, 2016 % of Segment Customer End Market Revenue Products Purchased Customer 1 Oil drilling, Gas drilling 8.8% Pipe, Flanges & Fittings , Valves Customer 2 Oil drilling, Gas drilling 4.8% Pipe, Flanges & Fittings , Valves Customer 3 Oil feeder lines
Slide 38: Energy Products Revenue & Operating Profit as a % of Revenues
ENERGY PRODUCTS REVENUE & OPERATING PROFIT AS A % OF REVENUES $500 10% $450 7.9% $400 8% 7.3% 7.2% 7.3% 7.4% 6.9% 7.0% 6.8% $350 6.6% 6.5% 6.3% 5.9% $300 5.6% 6% ($000,000's) 5.4% 5.2% 5.4% 5.0% 5.5% $250 4.6% 4.6% $200 4% 3.6% 2.7% 2.8% $150 2.2% $100 2% 0.4% $50 $224 $145 $223 $234 $275 $192 $249
Slide 39: Steel Distributors
STEEL DISTRIBUTORS Q1 - 2017 revenues of $78 million, EBIT of $8 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 steel servic
Slide 40: 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 41: Location of Operations: Steel Distributors
LOCATION OF OPERATIONS STEEL DISTRIBUTORS 39
Slide 42: Steel Distributors - Units
STEEL DISTRIBUTORS - 6 UNITS Canada Wirth Steel – Montreal, Vancouver United States Sunbelt Group - Houston, Texas (2) 40
Slide 43: Top Steel Distributor Customers
TOP STEEL DISTRIBUTOR CUSTOMERS YEAR ENDED DECEMBER 31, 2016 % of Segment Customer End Market Revenues Products Purchased Customer 1 Service center - laser processor 13.9% Plate Customer 2 Other - Plumbing Supply 9.6% Tubing/Pipe (Standard, OCTG) Customer 3 Service center - processor 8.9% Stucturals
Slide 44: Steel Distributors Revenue & Operating Profit as a % of Revenues
STEEL DISTRIBUTORS REVENUE & OPERATING PROFIT AS A % OF REVENUES $200 12.6% 12.6% 12% 11.0% 11.1% $175 10.8% 9.8% 9.8% 9.6% 9.6% 10% $150 9.2% 8.8% 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 $78 $81 $7
Slide 45: Summary
SUMMARY ®) Russel Metals 43
Slide 46: 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
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Slide 48: 6600 Financial Drive, Mississauga, Ontario
6600 Financial Drive, Mississauga, Ontario L5N 7J6 Email: info@russelmetals.com Visit us at: www.russelmetals.com Tel: 905.819.7777 ║ Fax: 905.819.7409