Russel Metals Inc. · TSX:RUS
Russel Metals — Debt Investor Presentation (October 2020)
29 slides from Russel Metals's debt investor presentation, Oct 6, 2020
Slide 1: Fixed Income Investor Update
FIXED INCOME INVESTOR UPDATE OCTOBER 2020
Slide 2: Disclaimer
DISCLAIMER This presentation is for informational purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any securities of Russel Metals Inc. (“Russel Metals”, “we”, “us” or “our”). This presentation does not, and does not purport to, provide all disclosure tha
Slide 3: Introductions: Presenting Team
INTRODUCTIONS Presenting Team Chief Executive Officer since May 2018 Previously President & Chief Operating Officer since 2016 Joined JMS Metals Services in 1991 (President from 1994 to 2007), which was acquired by Russel Metals in 2007 John Reid Chief Executive Officer, President & Director
Slide 4: 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 • Centers – One of the two largest metals service centers operating in Canada Extensive
Slide 5: Credit Highlights
CREDIT 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 importer
Slide 6: Table of Contents
TABLE OF CONTENTS I. Market Trends II. Company Overview III. Financial Overview 6
Slide 7: I. Market Trends
rant 43) Russel Metals 1. MARKET TRENDS
Slide 8: Steel Prices vs. Russel EBIT
STEEL PRICES VS. RUSSEL EBIT HR Sheet, Plate & Russel EBIT(1) $1,200 $120 Carbon Plate HR Sheet EBIT $625 $1,000 $100 $600 Carbon Plate / HR Sheet (US$ per Ton) $575 $800 $80 $550 $525 $600 $60 EBIT (millions) $500 $400 $40 $475 $450 $200 $20 $425 03/Apr/20 17/Apr/20 01/May/20 15/May/20 29/May/20 12
Slide 9: Scrap and Steel Production
C$ / ton $150 $200 $250 $300 $350 $400 $450 $500 Jan-11 Jul-11 Jan-12 Jul-12 AMM Scrap Values Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 SCRAP AND STEEL PRODUCTION Jan-20 Source: American Metal Market Jul-20 Net Tons (000's) 1,100 1,300 1,500 1,
Slide 10: North American Rig Counts
NORTH AMERICAN RIG COUNTS 1000 2250 Canada U.S 900 2000 800 1750 700 1500 600 1250 500 1000 400 750 300 500 200 100 250 0 0 Source: Baker Hughes 10
Slide 11: II. Company Overview
rant 43) Russel Metals ll. COMPANY OVERVIEW
Slide 12: Service Center / Distribution Landscape
SERVICE CENTER / DISTRIBUTION LANDSCAPE Russel is one of the largest service center companies in North America Ranked by Revenue (in US$ 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 13: Value-Added Processing
VALUE-ADDED PROCESSING @ Russel Metals 13
Slide 14: Variable Cost Model – Breakdown of Cash Costs
VARIABLE COST MODEL – BREAKDOWN OF CASH COSTS THREE MONTHS ENDED JUNE 30, 2020 YEAR ENDED DECEMBER 31, 2019 $562 Million $3,499 Million Employee Operating Employee Operating Expenses - Expenses - Expenses - Expenses - Fixed, $50 Fixed, $19 Operating Fixed, $265 Fixed, $109 Expenses - Variable, $14 O
Slide 15: 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) $(150,000) Q2 2007 Q2 2008 Q2 2009 Q2 2010 Q2 2011
Slide 16: Diversified Business
DIVERSIFIED BUSINESS Geography - 141 Locations Supplier by Products Type Product Mix Tubing, OCTG, Other 5% OCTG, 3% 2% Bars 6% Non-Ferrous United Pipe, 3% 4% States - 42 Plate, 5% Others, 51% Structurals - Flat Roll, Plate, 26% 5% Flat Rolled 8% Tubing, 5% Long Product, Plate, Pipe, 5% Pipe 16% Pip
Slide 17: Return on Capital Employed Over the Cycle
RETURN ON CAPITAL EMPLOYED OVER THE CYCLE 25% 23% 20% 17% 15% Target: 15% 12% 10% 10% 6% 5% 0% 2016 2017 2018 2019 June 2020 YTD Annualized 17
Slide 18: Segment Breakdown: Net Identifiable Assets
SEGMENT BREAKDOWN: NET IDENTIFIABLE ASSETS(1) At December 31, 2019 ($millions) At March 31, 2020 ($millions) At June 30, 2020 ($millions) Metals Steel Distributors Metals Service Steel Distributors Steel Distributors Metals $121 8% Service Centers $122 8% $115 9% Service Centers $581 40% Centers $61
Slide 19: Energy Sub-Segments
ENERGY SUB-SEGMENTS Field Stores Line Pipe/OCTG Energy Strategy: • Reduce absolute and relative exposure • Repatriate substantial working capital over the next 12-18 months • Rationalize operations and reduce costs • Distribution of highly engineered products • Distribution of steel pipe and oil cou
Slide 20: III. Financial Overview
rant 43) Russel Metals lil. FINANCIAL OVERVIEW
Slide 21: Financial Highlights
FINANCIAL HIGHLIGHTS $million, unless otherwise stated Q2 2019 Q1 2020 Q2 2020 Q2 2020 Observations: Income Statement: Revenues $937 $815 $588 Gross Margin ($million/ %) $176 / 18.8% $152 / 18.7% $110 / 18.7% • Gross margin % holding steady, but lower total $ EBITDA ($million/ %) $65 / 6.9% $36 / 4.
Slide 22: Segment Breakdown: Operating Results
SEGMENT BREAKDOWN: OPERATING RESULTS Revenue Breakdown (C$ millions) Gross Margins % $600 25% $538 $535 21% 21% $474 $500 19% 19% 19% 19% $437 20% $412 $373 19% 19% 16% $400 15% 17% 15% $373 $300 $343 14% $316 14% 14% $298 $298 10% 11% $200 11% 10% $149 5% $100 $122 $100 $94 $81 $62 $64 4% $0 0% Q1
Slide 23: Note Redemption: Pro Forma Capitalization
NOTE REDEMPTION: PRO FORMA CAPITALIZATION Pro Forma Capitalization Free cash flow positive through recent As at June 30, 2020 market volatility, allowing the Company to (C$ millions, unless otherwise noted) Historical Partial Redemption Pro Forma continue to de-lever the balance sheet Cash and Cash
Slide 24: Strong Financial Position
STRONG FINANCIAL POSITION Capital Expenditures Adj. EBITDA(1,2) $41 $367 $36 $35 $33 $241 $203 $17 $126 $133 2016 2017 2018 2019 LTM 2016 2017 2018 2019 LTM Q2 2020 Q2 2020 Total Debt(3) $579 $508 $512 $461 $335 $372 2016 2017 2018 2019 LTM PF Q2 2020 Q2 2020 1) Effective January 1, 2019, the Compan
Slide 25: Strong Leverage Profile and Liquidity Position
STRONG LEVERAGE PROFILE AND LIQUIDITY POSITION Total Debt / Adj. EBITDA(1,2) Adj. EBITDA / Net Interest(2,3) 3.5x 11.6x 2.6x 2.8x 10.1x 2.5x 2.1x 1.6x 5.8x 5.0x 3.5x 4.3x 2016 2017 2018 2019 LTM PF 2016 2017 2018 2019 LTM PF Q2 2020 Q2 2020 Q2 2020 Q2 2020 Total Debt / Total Capitalization(1,4) 38.0
Slide 26: Credit Highlights
CREDIT 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 importer
Slide 27: 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 28: 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 29: 6600 Financial Drive, Mississauga, Ontario
6600 Financial Drive, Mississauga, Ontario L5N 7J6 Email: info@russelmetals.com Visit us at: www.russelmetals.com Investor Relations Line: 905.816.5178
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