Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (December 2019)
44 slides from Russel Metals's investor presentation, December 2019
Slide 1: December 2019
DECEMBER 2019
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: Year ended 2019 - $3.7 billion Year ended 2018 - $4.2 billion Based on reve
Slide 4: EPS (2013 – 2019)
EPS (2013 – 2019) $3.75 $3.53 $3.50 $3.25 $3.00 $2.75 $2.50 $2.25 $2.01 $2.00 $2.00 $1.75 $1.37 $1.50 $1.23 $1.25 $1.02 $1.00 $0.75 $0.50 $0.25 $(1.42) $- 2013 2014 2015 2016 2017 2018 2019 4 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 2018 2019 5 Russel Metals Note: 2013 and 2014 adjusted for convertible debentures
Slide 6: Three Distinct Segments
THREE DISTINCT SEGMENTS REVENUE EBIT YEAR ENDED 2019 (2018) YEAR ENDED 2019 (2018) Steel Steel Distributors Distributors 11% (11%) 10% (14%) Metals Service Metals Service Centers Centers 53% (51%) 47% (48%) Energy Energy Products Products 43% (38%) 36% (38%) 6 Russel Metals
Slide 7: Operating Units
OPERATING UNITS CANADA Metals Service Centers (48 units) Energy Products (49 units) Steel Distributors (2 units) British Columbia Comco Pipe Apex Distribution Wirth Steel Alberta (A.J. Forsyth) (Alberta) (Alberta) (Montreal) Fedmet Tubulars Triumph Tubulars Man/Sask Ontario (Alberta) (Alberta) Quebe
Slide 8: Balance Sheet as of December 2019
BALANCE SHEET AS OF DECEMBER 2019 (millions) ASSETS EMPLOYED Cash $ 16 1% Accounts Receivable 458 24% Inventories 884 46% Property, Plant and Equipment 289 15% Goodwill/Intangibles 137 7% Right of Use Assets and Other 141 7% $ 1,925 100% FINANCED BY Bank Indebtedness $ 62 3% Trade Creditors 326 17%
Slide 9: Broad Product Focus Breakdown
BROAD PRODUCT FOCUS BREAKDOWN FOR YEAR ENDED DECEMBER 31, 2019 (2018) Flat Rolled Non Ferrous 7.9% (7.7%) 3.7% (3.2%) Other Bars 5.0% (4.7%) 5.2% (5.3%) Pipe Products 17.4% (22.3%) Plate 18.1% (19.0%) Flanges, Valves, Fittings & Structurals Other Energy (Beams & HSS) 18.9% (16.2%) 23.8% (21.6%) 9 Ru
Slide 10: Top Mill Suppliers
TOP MILL SUPPLIERS YEAR ENDED DECEMBER 31, 2019 % of total purchased Products Purchased Supplier 1 7.6% Long Products Supplier 2 5.2% Long Products / Plate / Pipe Supplier 3 4.8% Flat Roll / Plate / Long Products Supplier 4 4.4% Tubing Supplier 5 4.3% Plate Supplier 6 4.0% Pipe Supplier 7 3.8% Long
Slide 11: Service Center/Distribution Competitors
SERVICE CENTER/ DISTRIBUTION COMPETITORS RANKED BY REVENUE Public/ (in billions) 2018 2017 Private Headquarters Reliance Steel & Aluminum Co. $ 11.5 $ 9.7 Public U.S. Ryerson Inc. 4.4 3.4 Public U.S. MRC Global 4.2 3.6 Public U.S. Russel Metals Inc. 4.2 3.3 Public Canada * Samuel, Son & Co. 4.0 3.6
Slide 12: ESG Focused
ESG FOCUSED Environmental Diesel Fuel • Environment Management System Natural Gas • Low carbon emissions from operations Gasoline • Our GHG emissions in 2018 were Propane approximately 59,801 CO2 company wide which represents an emission Electricity intensity of 0.00001436 tonnes CO2 per dollar of r
Slide 13: Market Trends
MARKET TRENDS 13 Russel Metals
Slide 14: Monthly Service Center Shipments – Steel Products
14 US Shipments-Tons in Thousands 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Jan-16 Feb-16 Mar-16 Apr-16 Russel Metals May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 US Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 STEEL PRODUCTS CANADA May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-
Slide 15: Price of HR Sheet & HR Plate
15 200 300 400 500 600 700 800 900 1,000 1,100 1,200 Jan-11 Mar-11 May-11 Jul-11 Sep-11 US$ per Ton Nov-11 Jan-12 Russel Metals Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-
Slide 16: Scrap Pricing
16 $100 $150 $200 $250 $300 $350 $400 $450 $500 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Russel Metals Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 AMM Scrap Values May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 SCRAP PRICING Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-
Slide 17: Scrap vs Coil and Plate Pricing
17 US $ / Ton $0 $200 $400 $600 $800 $1,000 $1,200 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Russel Metals Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 #1 Heavy Melt (Chicago) Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 HR Sheet Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18
Slide 18: Carbon Plate, HR Sheet & Russel EBIT
18 Carbon Plate / HR Sheet (US$ per Ton) $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 Q1-2008 Q3-2008 Russel Metals Q1-2009 Q3-2009 Q1-2010 Q3-2010 Q1-2011 Q3-2011 Q1-2012 Q3-2012 Q1-2013 Q3-2013 Q1-2014 Q3-2014 Carbon Plate Q1-2015 Q3-2015 Q1-2016 Q3-2016 HR Sheet Q1-2017 Q3-2017 EBIT Q1-2018
Slide 19: Mill Production Tons
19 Net Tons (000's) 1,100 1,300 1,500 1,700 1,900 2,100 700 900 Jan-11 Apr-11 Jul-11 Oct-11 Russel Metals Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 MILL PRODUCTION TONS Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-1
Slide 20: Oil and Natural Gas Prices
OIL AND NATURAL GAS PRICES $10 $120 $110 $9 $100 $8 $90 $7 $80 $6 Gas Prices (CDN) Oil Prices (CDN) $70 $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 2018 2019 20 Russel Metals Source: Henry Hub
Slide 21: North American Rig Count
NORTH AMERICAN RIG COUNT 1,000 2,250 900 2,000 Canada U.S 800 1,750 700 1,500 600 1,250 500 1,000 400 750 300 500 200 100 250 0 0 21 Russel Metals Source: Baker Hughes
Slide 22: RMI Operations
METALS STEEL SERVICE DISTRIBUTORS CENTERS ENERGY PRODUCTS RMI OPERATIONS
Slide 23: Total Revenues & EBIT as a % of Revenues
TOTAL REVENUES & EBIT AS A % OF REVENUES 9.9% $1,200 10% 8.9% $1,000 8% 6.8% 6.6% 6.5% 6.3% 6.4% $800 6.1% 5.8% 5.6% 6% 5.4% 4.8% 4.8% 6.0% ($000,000's) 5.7% $600 4.6% 4.6% 4.3% 3.5% 4% 4.3% 3.1% $400 2.6% 2.5% 2.6% 2% $200 924 893 1,039 1,013 904 761 773 673 662 624 639 654 804 817 851 825 931 978
Slide 24: Metals Service Centers – Strong Canadian Franchise
METALS SERVICE CENTERS – STRONG CANADIAN FRANCHISE 2019 revenues of $2.0 billion, EBIT of $74 million. 2018 revenues of $2.1 billion, EBIT of $169 million. 48 Metals Service Centers in Canada. 16 Metals Service Centers in U.S. Broad customer base - 19,000 Canadian, 14,000 U.S. Average in
Slide 25: 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 26: Metals Service Centers Location of Operations
METALS SERVICE CENTERS LOCATION OF OPERATIONS 48 Locations 16 Locations 26 Russel Metals
Slide 27: 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 • Tube Laser Cutting 27 Russel Metals
Slide 28: Processing Capabilities
PROCESSING CAPABILITIES • Shearing • Braking • Rolling • 3D and Tilt Cutting • Bundle Cutting • Shot Blasting 28 Russel Metals
Slide 29: Top Metal Service Center Customers
TOP METAL SERVICE CENTER CUSTOMERS – YEAR ENDED DECEMBER 31, 2019 % of Customer Sales Products Purchased Customer 1 Manufacturer-Transportation 1.1% Flat Rolled, Tubing, Structurals, Plate Customer 2 Manufacturer-Heavy Equipment 0.6% Flat Rolled, Tubing, Structural, Plate (Discreet & Plate in coil)
Slide 30: Metal Service Centers Revenues & EBIT as a % of Revenues
METAL SERVICE CENTERS REVENUES & EBIT AS A % OF REVENUES $600 11% 10.2% 9.8% $550 10% $500 9% $450 8% $400 6.6% 7% 6.3% $350 6.1% 5.9% ($000,000's) 5.6% 6% 5.3% $300 5.0% 5.0% 5.4% 4.4% 5.4% 5% $250 3.9% 4.2% 3.4% 4% $200 2.8% 2.8% 3.8% 3% $150 3.3% 3.3% 2.1% $100 2% 2.2% $50 1.4% 1% 392 419 417 403
Slide 31: Energy Products
ENERGY PRODUCTS 2019 revenues of $1.3 billion, EBIT of $69 million. 2018 revenues of $1.6 billion, EBIT of $134 million. Apex Distribution, Apex Monarch & Apex Western Fiberglass - Western Canada Elite Supply Partners - Oklahoma/ Texas/ North Dakota Fedmet Tubulars & Triumph Tubular - Calgary Co
Slide 32: 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 33: Role of Value 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 34: Energy Products - Well Positioned to Service North American Energy Sector
ENERGY PRODUCTS - WELL POSITIONED TO SERVICE NORTH AMERICAN ENERGY SECTOR 49 Locations 24 Locations 34 Russel Metals
Slide 35: Top Energy Product Customers
TOP ENERGY PRODUCT CUSTOMERS – YEAR ENDED DECEMBER 31, 2019 % of Customer Sales Products Purchased Customer 1 Oil feeder lines, Gas feeder lines, Oil sands 7.7% OCTG, Linepipe, Pipe, Flanges & Fittings , Valves Customer 2 Oil drilling, Gas drilling 4.8% Pipe, Flanges & Fittings , Valves Customer 3 G
Slide 36: Energy Products Revenues & EBIT as a % of Revenues
ENERGY PRODUCTS REVENUES & EBIT AS A % OF REVENUES $500 11% 10.1% $450 10% 9.2% 8.8% 8.7% 9% $400 7.9% 7.9% 8.5% 7.5% 8% $350 7.3% 7.4% 7.0% 7.3% 6.6% 6.8% 7.5% 6.5% 7% ($000,000's) $300 5.9% 5.6% 5.2% 6% $250 4.6% 5% $200 4% $150 2.7% 2.8% 3% 2.2% $100 2% $50 1% 0.4% 445 366 497 484 385 269 300 274
Slide 37: Steel Distributors
STEEL DISTRIBUTORS 2019 revenues of $396 million, EBIT of $16 million. 2018 revenues of $457 million, EBIT of $47 million. Sunbelt Group, Arrow Steel – Houston, Texas; Wirth Steel – Montreal, Vancouver Arrow Steel provides coil processing in Houston, Texas Customers – other steel service c
Slide 38: 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 39: Top Steel Distributor Customers
TOP STEEL DISTRIBUTOR CUSTOMERS – YEAR ENDED DECEMBER 31, 2019 % of Customer Sales Products Purchased Customer 1 Service center 8.0% Beam, bar Customer 2 Service center 7.8% Plate Customer 3 Service center 6.2% Plate, beam Customer 4 Service center 5.5% Beam, bar Customer 5 Service center 5.0% Beam,
Slide 40: Steel Distributors – Location of Operations
STEEL DISTRIBUTORS – LOCATION OF OPERATIONS 2 Locations 3 Locations 40 Russel Metals
Slide 41: Steel Distributors Revenues & EBIT as a % of Revenues
STEEL DISTRIBUTORS REVENUES & EBIT AS A % OF REVENUES $160 18% 16.6% $140 16% 14% $120 11.4% 12% 11.1% 10.8% $100 ($000,000's) 10.1% 9.6% 9.6% 9.2% 9.8% 9.1% 10% 8.3% $80 8.1% 7.4% 7.5% 7.2% 7.2% 8% 6.9% 6.4% 6.5% $60 5.3% 6% 3.9% $40 4% 4.2% 1.8% 1.2% $20 2% 87 106 123 125 119 106 103 72 73 81 72 7
Slide 42: Summary
SUMMARY
Slide 43: 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
Slide 44: Contact details
6600 Financial Drive, Mississauga, Ontario L5N 7J6 Email: info@russelmetals.com Visit us at: www.russelmetals.com Tel: 905.819.5178 ║ Fax: 905.819.7409
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