Russel Metals Inc. · TSX:RUS
Russel Metals — Q3 2024 Earnings Presentation
24 slides from Russel Metals's earnings presentation, Nov 7, 2024
Slide 1: Information Package for Investor Conference Call
~ 11111111 "= r•1 1•1 ~ 11 iiiiiiii 11~ Russel Metals INFORMATION PACKAGE FOR INVESTOR CONFERENCE CALL NOVEMBER 7, 2024
Slide 2: Index
INDEX 1. Cautionary Statement on Forward-Looking Information 3 2. Notes (Non-GAAP Measures) 4 3. Q3 2024 Observations 5-21 4. Financial Highlights 22 5. Other Financial Information 23-24 Russel Metals 2
Slide 3: Cautionary Statement on Forward-Looking Information
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION Certain statements contained in this presentation 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 fu
Slide 4: Notes (Non-GAAP Measures)
NOTES (NON-GAAP MEASURES) In this Information Package we use certain financial measures that do not comply with IFRS Accounting Standards (IFRS or GAAP) or have standardized meanings, and thus, may not be comparable to similar measures presented by other issuers, for example EBIT and EBITDA and Othe
Slide 5: Market Conditions
MARKET CONDITIONS • Prices moderated down in Q3 Carbon Steel: Inventory (Canada) • Supply chain inventories remain modest; suppliers are taking downtime in Q4 Source: Metals Service Center Institute (MSG} • Demand is steady, but is impacted by seasonal factors 1,600,000 - INDUSTRY INVENTORY 6.0 5.5
Slide 6: Q3 2024 at a Glance
Q3 2024 AT A GLANCE • Revenues were up vs. Q2; contribution from Samuel acquisition • Slight decrease in gross margins; EBITDA down due to steel price volatility • Solid earnings and returns in a challenging steel market; diversification across our segments was beneficial • Our capital structure rem
Slide 7: Summary: Financial Results
SUMMARY: FINANCIAL RESULTS $ mm, unless otherwise stated Q3 2023 Q2 2024 Q3 2024 Q3 2024 Observations: Income Statement: Revenues $1,110 $1,072 $1,089 • Revenues were up 2% vs. Q2 due to Samuel acquisition (it contributed $69 mm of revenue) Gross Margin ($ mm/%) $225 / 20% $225 / 21% $215 / 20% • Co
Slide 8: Variance Analysis: EBITDA Q2 2024 vs. Q3 2024
VARIANCE ANALYSIS: EBITDA Q2 2024 VS. Q3 2024 $100 $90 $86 $80 $2 $3 ($0) ($2) $70 $67 ($10) ($11) $60 Service Center Segment ($10) a C: .Q ·- $50 E <.I} • Mark-to-market expense on stock- u based comp $5 in Q3 vs. $8 mm $40 recovery in vs. Q2 $30 $20 $10 $0 Russel Metals Service Centers 8
Slide 9: Segment Breakdown: Operating Results
SEGMENT BREAKDOWN: OPERATING RESULTS ______ Revenue {C$ millions) Gross Margins% Earnings from Operations {C$ millions) $1,000 $800 ~ - -=-- -.... ............___- - - - - - - - 30% 25% 20% - ............___ $80 $70 $60 $600 $50 15% $40 $400 $30 10% $20 $200 5% $10 $0 0% $0 - MSC - Energy - Distribu
Slide 10: Service Center Results
SERVICE CENTER RESULTS • Q3 2024 tons were up 4% vs. Q2 due to Samuel – down 5% Tons Shipped {000's) on a same store basis due to seasonality. 360 340 • Price realizations decreased $95/ton and CGS decreased 320 $41/ton -- margin of $371/ton in Q3 ($389/ton on a same 300 280 store basis) vs. $424/to
Slide 11: Inventory Turns
INVENTORY TURNS • Total inventory turns in Q3 were comparable with recent quarters. Inventory Turns 5.0 4.5 -- -- -- -- - -- - ~\ 4.7 -- -- -- ·-I 4.0 3.8 ;,,-"'I 4.( 4.0 3. L 4.0 -- -- -- -- -- -- ~~ 3.9 3.9 - 13.9 -- 3.8 13.8 3. 8 3.5 ~ 3. '-- ~ ~ ~~ 3.5 -- -- -- -- 3.( ~ - - - - - -- -- -- -- --
Slide 12: Working Capital Management: Inventory
WORKING CAPITAL MANAGEMENT: INVENTORY Inventory Trends $1,200 $1,025 $1,050 $1,000 $964 $800 $773 C: .Q $600 E 'II'} $400 $200 $0 Sept. Dec. March June Sept. Dec. March June Sept. Dec. March June Sept. Dec. March June Sept. Dec. March June Sept. 30/19 31/19 31/20 30/20 30/20 31/20 31/21 30/21 30/21
Slide 13: Return on Capital
RETURN ON CAPITAL $1,800 80% $1,636 $1,600 $1,553 $1,531 $1 492 $1,512 70% J $1,471 ' $1,466 $1,435 $1,436 $1,424 $1,410 $1,400 $1,418 $1,388 $1,400 $1,308 60% $1,299 $1,242 $1,200 $1,132 $1,133 $l, 148 $1,123 50% ~ $1,000 • 48% 41% .Q 43 40% E ¼ $800 $600 $400 10% $200 $0 0% Q3 Q4 Ql Q2 Q3 Q4 Ql Q2
Slide 14: Liquidity and Capital Structure Summary
LIQUIDITY AND CAPITAL STRUCTURE SUMMARY • Significant balance sheet flexibility. • Redeemed legacy high yield notes and established an investment grade bank structure. 9/30/23 6/30/24 9/30/24 9/30/24 (C$ mm) (C$ mm) (C$ mm) (C$ mm) Pro forma Note Redemption Cash $569 $386 $222 $72 New $600 mm bank f
Slide 15: Capital Allocation Priorities Going Forward
CAPITAL ALLOCATION PRIORITIES GOING FORWARD Increase capital deployment with a target of >15% Flexible approach to returning capital to return over a cycle shareholders LTM Activity = Share Buy $134 mm Backs • Q3: 1.2 mm acquired for $46 mm (avg. $37.93/share) + tax Facility • Since NCIB established
Slide 16: Capex Program: Summary
CAPEX PROGRAM: SUMMARY • The recent capex activity is at a level that is in excess of historical levels due to the opportunities for value-added projects and facility modernizations. Russel Historical Capex By Quarter - $ mm $30 2023 total $72 mm $28 $25 $24 $24 $21 $20 2015 total $38 mm 2018 total
Slide 17: Capex Program: Modernizations
CAPEX PROGRAM: MODERNIZATIONS • The five modernizations equate to a 5% increase in Russel’s service center footprint. Texarkana: 60,000 sq ft Joplin: 40,000 sq ft Little Rock: 40,000 sq ft Saskatoon: 60,000 sq ft Green Bay: 40,000 sq ft 17
Slide 18: Acquisitions: Summary
ACQUISITIONS: SUMMARY • We have completed several acquisitions over the past few years and continue to focus on new opportunities that can be tuck- ins with our existing business units (e.g. Samuels, Alliance) or standalone/complementary units (e.g. Boyd). $268 $167 $157 $139 $113 $70 $36 $39 $37 $2
Slide 19: Acquisitions: Samuel
ACQUISITIONS: SAMUEL • A key initial objective on the Samuel transaction was to reduce the invested capital (primarily working capital) in the business. Our initial target of $50 mm was exceeded as of Sept. 30/24. Changes in Samuel's Net Working Capital {C$ mm) - Sept 30/23 vs. Sept. 30/24 Net worki
Slide 20: Dividend and Share Buy Back Summary
DIVIDEND AND SHARE BUY BACK SUMMARY Historical (and Projected Q4'24) Quarterly Dividends Return of Capital to Shareholders (millions) $0.42 $80 $0.40 $69 $71 $0.38 $45 $40 $41 $39 $35 $24 $24 $0.35 II III III III II II III III III I vvvv~~~~©©©©~~~~rorororommmmoooo~~~~NNNNnnnn~~~~ ~~~~~~~~~~~~~~~~~~
Slide 21: Capital Reallocation Evolution
CAPITAL REALLOCATION EVOLUTION • Between Jan. 2020 to Sept 2024, we have generated ~$1.9 billion of cash and substantially changed our business and capital structure profile. Cash Generation 1/1/20 to 9/30/24 ($ mm) Capital Deployment 1/1/20 to 9/30/24 ($ mm) Asset Sales; $403 Reduce NCIB;$229 Debt/
Slide 22: Financial Highlights
FINANCIAL HIGHLIGHTS Nine Months Ended Years Ended December 31 September 30 2024 2023 2023 2022 2021 2020 OPERATING RESULTS (millions) Revenues $3,222.0 $3,485.8 $4,505.1 $5,070.6 $4,208.5 $2,688.3 EBITDA (1) 237.2 343.4 425.6 578.9 664.0 125.2 Adjusted EBITDA (1) 237.2 343.4 425.6 578.9 666.6 159.0
Slide 23: Consolidated Statements of Earnings on an Adjusted Basis
CONSOLIDATED STATEMENTS OF EARNINGS ON AN ADJUSTED BASIS Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 ($ millions) 2024 2024 2024 2023 2023 2023 2023 2022 2022 2022 2022 2021 2021 2021 2021 2020 2020 2020 2020 METALS SERVICE CENTERS Tons Shipped ('000's) 340.0 328.4 322.4 306.7 310.1 332
Slide 24: Consolidated Statements of Earnings on an Adjusted Basis
CONSOLIDATED STATEMENTS OF EARNINGS ON AN ADJUSTED BASIS Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 ($ millions) 2024 2024 2024 2023 2023 2023 2023 2022 2022 2022 2022 2021 2021 2021 2021 2020 2020 2020 2020 Quarter ended: Revenue 1,089.4 1,071.5 1,061.1 1,019.3 1,109.5 1,189.5 1,186.7