Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (March 2018)
41 slides from Russel Metals's investor presentation, March 2018
Slide 1: Russel Metals March 2018
! Russel Metals MARCH 2018 Xt WA
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: Q1 2018 - $931 million Q1 2017 - $804 million Based on revenues for the qua
Slide 4: EPS (2013 – 2018)
EPS (2013 – 2018) $2.25 $2.01 $2.00 $2.00 $1.75 $1.50 $1.37 $1.25 $1.02 $1.00 $0.75 $0.62 $0.48 $0.50 $0.25 $(1.42) $- 2013 2014 2015 2016 2017 Q1 2017 Q1 2018 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 Mar-18 5 Russel Metals Note: 2013 and 2014 adjusted for convertible debentures
Slide 6: Three Distinct Segments
THREE DISTINCT SEGMENTS REVENUE EBIT THREE MONTHS ENDED 2018 (2017) THREE MONTHS ENDED 2018 (2017) Steel Distributors Steel 10% (10%) Distributors 15% (16%) Metals Service Centers Metals Service 49% (48%) Centers 40% (40%) Energy Products Energy 41% (42%) Products 45% (44%) 6 Russel Metals
Slide 7: Operating Units
OPERATING UNITS CANADA Metals Service Centers (52 units) Energy Products (48 units) Steel Distributors (3 units) British Columbia Comco Pipe Apex Distribution Wirth Steel Alberta (A.J. Forsyth) (Alberta) (Alberta) (Montreal) Ontario Fedmet Tubulars Triumph Tubulars Man/Sask (Color Steels) (Alberta)
Slide 8: Balance Sheet as of March 2018
BALANCE SHEET AS OF MARCH 2018 (millions) ASSETS EMPLOYED Cash $ 136 7% Accounts Receivable 549 28% Inventories 870 45% Property, Plant and Equipment 249 13% Goodwill/Intangibles 89 5% Other 31 2% $ 1,924 100% FINANCED BY Bank Indebtedness $ 116 6% Trade Creditors 467 24% Long-term Debt 443 23% Othe
Slide 9: Broad Product Focus Breakdown for Three Months Ended March 2018
BROAD PRODUCT FOCUS BREAKDOWN FOR THREE MONTHS ENDED MARCH 31, 2018 (2017) Flat Rolled 8.3% (7.5%) Non Ferrous Bars 3.3% (3.4%) Other 4.5% (4.8%) 4.0% (4.4%) Pipe Products 23.6% (26.5%) Plate 17.9% (17.3%) Structurals (Beams & HSS) Flanges, Valves, Fittings & 19.9% (19.4%) Other Energy 18.5% (16.7%)
Slide 10: Top Mill Suppliers for 2017
TOP MILL SUPPLIERS FOR 2017 % of total purchased Products Purchased Supplier 1 6.3% Long Products Supplier 2 5.0% Plate Supplier 3 4.9% Flat Roll Steel Supplier 4 4.5% Tubing Supplier 5 3.7% Pipe Supplier 6 3.5% Long Products Supplier 7 3.3% Tubing & OCTG Supplier 8 3.3% Flat Roll Steel Supplier 9 3
Slide 11: Service Center/Distribution Competitors
SERVICE CENTER/ DISTRIBUTION COMPETITORS TOP 15 BY REVENUE Public/ (in billions) 2017 2016 Private Headquarters Reliance Steel & Aluminum Co. $ 9.7 $ 8.6 Public U.S Samuel, Son & Co. 3.6 3.6 Private Canada * Ryerson Inc. 3.4 2.9 Public U.S Russel Metals Inc. 3.3 2.6 Public Canada * Klockner (North A
Slide 12: Market Trends
MARKET TRENDS 12 Russel Metals
Slide 13: Monthly Service Center Shipments – Steel Products
MONTHLY SERVICE CENTER SHIPMENTS – STEEL PRODUCTS 4000 900 US CANADA 3500 800 700 3000 Canadian shipments - Tons in Thousands US Shipments- Tons in Thousands 600 2500 500 2000 400 1500 300 1000 200 500 100 0 0 13 Russel Metals
Slide 14: Price of HR Sheet & HR Plate
14 1000 1100 1200 200 300 400 500 600 700 800 900 7-Jan-11 7-Mar-11 7-May-11 7-Jul-11 7-Sep-11 US$ per ton 7-Nov-11 7-Jan-12 Russel Metals 7-Mar-12 7-May-12 7-Jul-12 7-Sep-12 7-Nov-12 7-Jan-13 7-Mar-13 7-May-13 7-Jul-13 7-Sep-13 7-Nov-13 7-Jan-14 7-Mar-14 7-May-14 7-Jul-14 7-Sep-14 7-Nov-14 7-Jan-15
Slide 15: Carbon Plate and Russel Metals EBIT
CARBON PLATE AND RUSSEL METALS EBIT $1,000 $160 $150 $900 $140 Carbon Plate Adjusted EBIT $800 $130 $120 $700 $110 Carbon plate (US$ per ton) EBIT (millions of dollars) $100 $600 $90 $500 $80 $70 $400 $60 $300 $50 $40 $200 $30 $20 $100 $10 $- $- 15 Russel Metals
Slide 16: Scrap Pricing
16 $450.00 $500.00 $350.00 $400.00 $250.00 $300.00 $100.00 $150.00 $200.00 7-Jan-11 7-Mar-11 7-May-11 7-Jul-11 7-Sep-11 7-Nov-11 7-Jan-12 Russel Metals 7-Mar-12 7-May-12 7-Jul-12 7-Sep-12 AMM Scrap Values 7-Nov-12 7-Jan-13 7-Mar-13 7-May-13 7-Jul-13 7-Sep-13 7-Nov-13 7-Jan-14 SCRAP PRICING 7-Mar-14
Slide 17: Mill Production Tons
17 Net Tons (000's) 700 900 1,100 1,300 1,500 1,700 1,900 2,100 1-Jan-11 1-Apr-11 1-Jul-11 1-Oct-11 1-Jan-12 Russel Metals 1-Apr-12 1-Jul-12 1-Oct-12 1-Jan-13 1-Apr-13 1-Jul-13 1-Oct-13 1-Jan-14 1-Apr-14 1-Jul-14 1-Oct-14 1-Jan-15 1-Apr-15 1-Jul-15 1-Oct-15 MILL PRODUCTION TONS 1-Jan-16 1-Apr-16 1-J
Slide 18: Oil and Natural Gas Prices Low
OIL AND NATURAL GAS PRICES LOW $10 $120 $110 $9 $100 $8 $90 $7 $80 Gas Prices (CDN) $6 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 Mar-18 18 Russel Metals Source: Index Mundi
Slide 19: North American Rig Count
19 1000 1250 1500 1750 2000 2250 250 500 750 0 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Russel Metals 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 Canada Jan-13 Jul-13 Jan-14 U.S Jul-14 Jan-15 Jul-15 Jan-16 NORTH AMERICAN RIG COUNT
Slide 20: RMI Operations
METALS STEEL SERVICE DISTRIBUTORS CENTERS ENERGY PRODUCTS RMI OPERATIONS
Slide 21: Total Revenues & EBIT as a % of Revenues
TOTAL REVENUES & EBIT AS A % OF REVENUES $1,200 6.8% 7% 6.6% 6.3% 6.1% 6.5% 6.0% 5.8% $1,000 5.3% 5.0% 5.7% 4.8% 5% 4.6% 4.8% 4.3% $800 4.3% 4.1% 3.9% ($000,000's) 3.5% $600 3% 2.6% 2.6% 2.5% $400 1% $200 822 758 797 811 924 893 1,039 1,013 904 761 773 673 662 624 639 654 804 817 851 825 931 $- -1%
Slide 22: Metals Service Centers – Strong Canadian Franchise
METALS SERVICE CENTERS – STRONG CANADIAN FRANCHISE Q1 - 2018 revenues of $455 million, EBIT of $29 million. 2017 revenues of $1.6 billion, EBIT of $80 million. 51 Metals Service Centers in Canada. 14 Metals Service Centers in U.S. Broad customer base - 29,000 Canadian, 17,000 U.S. Averag
Slide 23: Role of Metal Service Centers
ROLE OF METAL 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 custome
Slide 24: Metals Service Centers Location of Operations
METALS SERVICE CENTERS LOCATION OF OPERATIONS 52 Locations 16 Locations 24 Russel Metals
Slide 25: 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 25 Russel Metals
Slide 26: Processing Capabilities
PROCESSING CAPABILITIES • Shearing • Braking • Rolling • Shot Blasting • 3D and Tilt Cutting • Fabricating • Bundle Cutting 26 Russel Metals
Slide 27: Top Metal Service Center Customers – YE December 31, 2017
TOP METAL SERVICE CENTER CUSTOMERS – YE DECEMBER 31, 2017 % of Segment Customer Revenues Products Purchased Customer 1 Manufacturer-Transportation 0.9% Flat Rolled, Tubing, Structurals, Plate Customer 2 Metals Fabricator 0.7% Plate (Discreet & Plate in Coil) Customer 3 Service Center 0.6% Structural
Slide 28: Metal Service Centers Revenues & EBIT as a % of Revenues
METAL SERVICE CENTERS REVENUES & EBIT AS A % OF REVENUES $500 7% 6.6% 6.3% $450 6.1% 5.9% 6% 5.6% 5.4% 5.4% 5.4% $400 5.3% 5.0% $350 5% 5.0% $300 3.9% 4.4% 4% ($000,000's) 3.4% $250 3.8% 3.8% 3.3% 2.8% 2.8% 3% $200 $150 2% 2.2% $100 1.4% 1% $50 359 378 367 352 392 419 417 403 400 385 369 326 341 364
Slide 29: Energy Products
ENERGY PRODUCTS Q1 - 2018 revenues of $382 million, EBIT of $32 million. 2017 revenues of $1.3 billion, EBIT of $107 million. Apex Distribution, Apex Monarch & Apex Western Fiberglass - Western Canada Apex Remington - Central U.S. Fedmet Tubulars & Triumph Tubular - Calgary Comco Pipe & Supply C
Slide 30: 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 31: Role of Valve and Fitting Field Stores
ROLE OF VALUE 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 32: Energy Products - Well Positioned to Service North American Energy Sector
ENERGY PRODUCTS - WELL POSITIONED TO SERVICE NORTH AMERICAN ENERGY SECTOR 48 Locations 20 Locations 32 Russel Metals
Slide 33: Top Energy Product Customers – YE December 31, 2017
TOP ENERGY PRODUCT CUSTOMERS – YE DECEMBER 31, 2017 % of Segment Customer Revenues Products Purchased Customer 1 Oil drilling, Gas drilling 6.8% OCTG, Linepipe,Flanges & Fittings , Valves Customer 2 Oil drilling, Gas drilling 6.6% OCTG, Linepipe,Flanges & Fittings , Valves Customer 3 Oil drilling, G
Slide 34: Energy Products Revenues & EBIT as a % of Revenues
ENERGY PRODUCTS REVENUES & EBIT AS A % OF REVENUES $500 11% 10.1% $450 10% 8.5% 9% $400 9.2% 8% $350 7.3% 7.4% 7.0% 6.6% 6.5% 6.8% 7% ($000,000's) 6.3% 7.3% $300 5.9% 5.6% 5.6% 6% 5.4% $250 4.6% 4.6% 5% $200 4% $150 2.8% 2.7% 3% 2.2% $100 2% $50 1% 0.4% 389 313 353 387 445 366 497 484 385 269 300 27
Slide 35: Steel Distributors
STEEL DISTRIBUTORS Q1-2018 revenues of $94 million, EBIT of $11 million. 2017 revenues of $380 million, EBIT of $34 million. Sunbelt Group, Arrow Steel – Houston, Texas; Wirth Steel – Montreal, Vancouver Arrow Steel provides coil processing in Houston, Texas Customers – other steel service
Slide 36: 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 37: Top Steel Distributor Customers – YE December 31, 2017
TOP STEEL DISTRIBUTOR CUSTOMERS – YE DECEMBER 31, 2017 % of Segment Customer Revenue Products Purchased Customer 1 Service center 8.9% Plate Customer 2 Service center 5.7% Tubing/Pipe , plate, beam, coils Customer 3 Service center 5.0% Stucturals, Plate, Other (light rail) Customer 4 Service center
Slide 38: Steel Distributors – Location of Operations
STEEL DISTRIBUTORS – LOCATION OF OPERATIONS 3 Locations 3 Locations 38 Russel Metals
Slide 39: Steel Distributors Revenues & EBIT as a % of Revenues
STEEL DISTRIBUTORS REVENUES & EBIT AS A % OF REVENUES $125 11.4% 12% 11.1% 10.8% 10.1% $100 9.6% 9.6% 10% 9.2% 9.8% 8.1% ($000,000's) 7.7% 7.2% 8% $75 8.3% 6.5% 6.4% 7.4% 7.2% 6.6% 6% 6.1% $50 5.3% 3.9% 4% $25 2% 1.8% 74 65 74 70 87 106 123 125 119 106 103 72 73 81 72 79 78 101 97 104 94 $- - Q1-13
Slide 40: Summary
SUMMARY
Slide 41: 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