Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (March 2023)
30 slides from Russel Metals's investor presentation, March 2023
Slide 1: Company Update March 2023
Russel Metals COMPANY UPDATE MARCH 2023
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: 2022 at a Glance
2022 AT A GLANCE • Record revenues • Very strong margins, earnings and returns - close to the records set in 2021 • Contributions were broad based across regions and business segments • Our capital structure is strong • We made strides in community involvement and diversity • Looking forward, we hav
Slide 6: Summary: Strategic Priorities
SUMMARY: STRATEGIC PRIORITIES Increase capital deployment with a target of >15% return over a cycle Hub and spoke model for Consolidate multi-site regions Completed three acquisitions processing centers into modern operations with over past several years Multiple new investment automated handling eq
Slide 7: Table of Contents
TABLE OF CONTENTS I. Market Trends II. Company Overview III. Financial Overview 7
Slide 8: I. Market Trends
Russel Metals Il. MARKET TRENDS
Slide 9: Business Conditions – Metal Pricing Trends
BUSINESS CONDITIONS – METAL PRICING TRENDS 9
Slide 10: Business Conditions: Supply Chain Dynamics
BUSINESS CONDITIONS: SUPPLY CHAIN DYNAMICS Steel Mills/Imports: • Capacity utilization recently picked up • Imports are consistent with 2021 and pre- Covid levels Service Centers: • Supply chain tonnage decreased over past several months 10
Slide 11: II. Company Overview
Russel Metals Il. COMPANY OVERVIEW
Slide 12: 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 13: 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 $16,000 $14,000 Revenues – US$ millions $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Source: Metal Center New
Slide 14: Diversified Business
DIVERSIFIED BUSINESS Geography - 131 Locations Suppliers Product Mix Non- Ferrous Other 6% 5% United Others Bars 5% States - 36 51% Structurals and Pipe - 40% Flat Rolled 10% Flanges, Valves, etc. 12% Suppliers 1-10 49% Canada - 95 Plate - 22% Customers • >30,000 customers • Average invoice < $2,500
Slide 15: 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 16: Working Capital Discipline
WORKING CAPITAL DISCIPLINE Inventory Turns Inventory $ MM 5.0 $1,200 4.7 4.5 $1,050 $1,025 $986 4.0 4.0 $1,000 $964 $957 3.8 3.4 4.0 3.5 $907 $211 3.8 $884 $894 $190 3.7 $123 $862 3.0 $228 $166 $100 3.5 3.2 $95 $790 $787 $95 $773 $153 $800 3.0 $87 $716 $720 2.9 2.5 3.0 $103 $121 2.2 $334 $64 $74 $ m
Slide 17: Variable Cost Model – Breakdown of Cash Costs
VARIABLE COST MODEL – BREAKDOWN OF CASH COSTS YEAR ENDED DECEMBER 31, 2022 YEAR ENDED DECEMBER 31, 2021 YEAR ENDED DECEMBER 31, 2020 Employee Other Fixed Other Fixed Other Fixed Variable and Variable and Variable and Variable Employee Employee Incentive Expenses $481 Expenses $460 Expenses $376 Vari
Slide 18: Investing in Value-Added Processing
INVESTING IN VALUE-ADDED PROCESSING • Value-added processing investments over multi-years • Typically have paybacks of <3 years 18
Slide 19: Investing in Value-Added Processing – Hub & Spoke Approach
INVESTING IN VALUE-ADDED PROCESSING – HUB & SPOKE APPROACH Wisconsin U.S. South Southern Ontario Western Canada Quebec and Atlantic Processing center Distribution center 19
Slide 20: 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 21: III. Financial Overview
Russel Metals lil. FINANCIAL OVERVIEW
Slide 22: Relative Performance Remains Strong
RELATIVE PERFORMANCE REMAINS STRONG 22
Slide 23: Portfolio Realignment: Return on Capital
PORTFOLIO REALIGNMENT: RETURN ON CAPITAL $1,800 80% $1,636 $1,600 $1,553 70% $1,492 $1,453 $1,479 $1,462 $1,435 $1,436 $1,424 $1,471 $1,410 $1,400 $1,299 60% $1,242 $1,200 $1,132 $1,133 $1,148 $1,123 50% 51% $1,000 49% 48% $ millions 43% 41% 40% $800 33% 32% 30% $600 24% 23% 19% 20% $400 15% 16% 10%
Slide 24: Return on Invested Capital: Sensitivity Analysis
RETURN ON INVESTED CAPITAL: SENSITIVITY ANALYSIS • The following illustrates the implied annual EBITDA under a range of invested capital and return scenarios. Implied Annual EBITDA (C$ mm) Invested Capital (C$ mm) $1,400 $1,500 $1,600 $1,700 $1,800 10% $204 $214 $224 $234 $244 15% $274 $289 $304 $31
Slide 25: Growing Equity Base
GROWING EQUITY BASE RUS - Book Value per Share - 10 Years $30.00 $25.00 2 Year Change: +$11.22/share $20.00 $15.00 $10.00 $5.00 $0.00 Dec. 31/12 Dec. 31/13 Dec. 31/14 Dec. 31/15 Dec. 31/16 Dec. 31/17 Dec. 31/18 Dec. 31/19 Dec. 31/20 Dec. 31/21 Dec. 31/22 25
Slide 26: Q4 2022 Financial Results
Q4 2022 FINANCIAL RESULTS $ mm, unless otherwise stated Q4 2021 Q3 2022 Q4 2022 Q4 2022 Observations: Income Statement: Revenues $1,147 $1,270 $1,100 • Revenues declined 13% from Q3 and 4% from Q4 2022 • Margins declined for service centers and distributors; improved for Gross Margin ($ mm/%) $299 /
Slide 27: Segment Breakdown: Operating Results
SEGMENT BREAKDOWN: OPERATING RESULTS Revenue (C$ millions) Gross Margins % $1,000 40% 35% $800 30% $600 25% 20% $400 15% 10% $200 5% $0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022
Slide 28: Service Center Results
SERVICE CENTER RESULTS Tons Shipped ('000's) 380 360 340 320 300 280 260 240 220 200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 Revenue and CGS/Ton Gross Margin and EBITDA/Ton $3,500
Slide 29: Liquidity and Capital Structure Summary
LIQUIDITY AND CAPITAL STRUCTURE SUMMARY • Russel has significant liquidity and no debt maturities for several years. 12/31/21 12/31/22 (C$ mm) (C$mm) Cash $133 $363 +$230 mm Bank Lines - Maturity 2025 -- -- 5.75% Notes - Due 2025 $147 $148 6% Notes - Due 2026 $148 $148 Total Debt $295 $296 Sharehold
Slide 30: 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 30