Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (May 2023)
30 slides from Russel Metals's investor presentation, May 2023
Slide 1: Company Update May 2023
Russel Metals COMPANY UPDATE MAY 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: Q1 2023 at a Glance
Q1 2023 AT A GLANCE • Revenues picked up vs. Q4 2022 • Very strong margins, earnings and returns • Contributions were broad based across regions and business segments • Our capital structure is strong • Looking forward, we have a series of initiatives underway to grow the business Revenue (millions)
Slide 6: Strategic Initiatives Update
STRATEGIC INITIATIVES UPDATE Increase capital deployment with a target of >15% return over a cycle A large number of projects are Multiple projects underway Deal pipeline remains active underway in both Canada and (Saskatoon, Joplin and Little the US Rock) with more to come Value-Added Facility Acqu
Slide 7: Dividend Increase – June 2023
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Slide 8: Table of Contents
TABLE OF CONTENTS I. Market Trends II. Company Overview III. Financial Overview 1 Russel Metals : 8
Slide 9: I. Market Trends
Russel Metals Il. MARKET TRENDS
Slide 10: Business Conditions – Metal Pricing Trends
BUSINESS CONDITIONS – METAL PRICING TRENDS Scrap vs Coil & Plate Pricing Source: American Metal Market {AMM) $2,500 $2,000 - # 1 Heavy Melt (Chicago) HR Sheet - HR Plate § $1,500 +-' --- V'} Vl ::J $1,000 $500 $0 Note: Information as of April 30, 2023 : ~Russel Metals 10
Slide 11: Business Conditions: Supply Chain Dynamics
BUSINESS CONDITIONS: SUPPLY CHAIN DYNAMICS Steel Mills/Imports: US Raw Steel Output & Utilization Steel Import Volumes • Capacity Source: American Iron and Steel Institute Source: GC, International Trade, Steel Import Monitoring Program & USD0C, Census Bureau, Foreign Trade, Imports of Steel utiliza
Slide 12: II. Company Overview
Russel Metals Il. COMPANY OVERVIEW
Slide 13: 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 14: 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 15: Diversified Business
DIVERSIFIED BUSINESS Geography - 131 Locations Suppliers Product Mix Non- Ferrous Other 6% 5% United Others Bars 5% States - 36 51% ( Flat Rolled 10% Structurals and Pipe - 40% I Flanges, Valves, etc. 12% Suppliers 1-10 49% Canada - 95 Plate - 22% Customers • >30,000 customers • Average invoice < $2
Slide 16: 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 $- 11.I1 - I I I.I I I I ll 1111I. 11l1[. I • I I I ■ • tlIII1111 ii I111IIIIIlI II I
Slide 17: Working Capital Discipline
WORKING CAPITAL DISCIPLINE Inventory Turns Inventory Levels ($ mm) 5.0 $1,200 4.7 4.5 $1,050 $1,025 4.0 $986 4.0 3.4 $1,000 $957 3.8 3.9 $941 4.0 3.5 3.7 $907 3.8 $894 $190 $211 3.0 $862 $228 $166 $123 3.5 $100 $790 $773 $787 $153 $800 $95 2.9 2.5 $716 $720 $87 3.0 $103 $121 2.2 $64 $74 $ million $3
Slide 18: 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 19: Investing in Value-Added Processing
INVESTING IN VALUE-ADDED PROCESSING • Value-added processing investments over multi-years • Typically have paybacks of <3 years : ~Russel Metals 19
Slide 20: 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 • • • • : ~Russel Metals • - 20
Slide 21: ESG Focused
ESG FOCUSED Inaugural Sustainability Report Published April, 2023 https://www.russelmetals.com/wp-content/uploads/Sustainability-Report-Final-2022-1.pdf Environmental GHG Emission Intensity • Divested OCTG/Line Pipe business • Low carbon emissions from operations 2500 • GHG emissions in 2022 were 54
Slide 22: III. Financial Overview
Russel Metals lil. FINANCIAL OVERVIEW
Slide 23: Relative Performance Remains Strong
RELATIVE PERFORMANCE REMAINS STRONG • Russel’s margins have been top quartile/decile versus 35% Gross Margin% Canadian and US peers. • The relative performance has improved since the 3rt'/o OCTG/line pipe monetization in mid-2021. 25% 2rt'/o 15% RONA 7rt'/o lrt'/4 6rt'/o Srt'/4 2018 2019 2020 202 1
Slide 24: Portfolio Realignment: Return on Capital
PORTFOLIO REALIGNMENT: RETURN ON CAPITAL $1,800 80% $1,636 $1,600 $1,553 $1,512 70% $1,479 $1,471 $1,492 $1,453 $1,462 $1,435 $1,436 $1,424 $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% 41% $ millions 43% 40% $800 33% 31% 32% 30% $600 24% 23% 20% 19% $400
Slide 25: Return on Invested Capital: Sensitivity Analysis
RETURN ON INVESTED CAPITAL: SENSITIVITY ANALYSIS • The following illustrates the implied annual EBITDA under a range of invested capital and return scenarios. Implied Annual EBITDA (C$ 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 26: Summary: Financial Results
SUMMARY: FINANCIAL RESULTS $ mm, unless otherwise stated Q1 2022 Q4 2022 Q1 2023 Q1 2023 Observations: Income Statement: Revenues $1,339 $1,100 $1,187 • Revenues increased 8% from Q4 • Overall margins improved, led by service centers and steel Gross Margin ($ mm/%) $290 / 22% $218 / 20% $260 / 22% d
Slide 27: Segment Breakdown: Operating Results
SEGMENT BREAKDOWN: OPERATING RESULTS Revenue (C$ millions) Gross Margins % Earnings from Operations (C$ millions) $1,000 40% $140 35% $120 $800 30% $100 25% $600 $80 20% $60 $400 15% 10% $40 $200 5% $20 $0 0% $0 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q1 2021 Q2 2021
Slide 28: Service Center Results
SERVICE CENTER RESULTS • Q1 2023 realized a 16% pickup in tonnage vs. Q4 2022. Tons Shipped ('000's) • CGS/ton (-$206/ton) come down by more than price 380 360 realizations/ton (-$184), resulting in higher margins for Q1 340 2023 vs. Q4 2022. 320 • Selling prices showed modest recovery late in the q
Slide 29: Liquidity and Capital Structure Summary
LIQUIDITY AND CAPITAL STRUCTURE SUMMARY • Russel’s cash position and book value continued to grow in Q1 2023. 3/31/22 12/31/22 3/31/23 Russel - Book Value per Share (C$ mm) (C$ mm) (C$ mm) $30.00 $25.90 Cash $146 $363 $401 2 Year $25.00 Change Bank Lines - Maturity 2025 -- -- -- +$10.94 5.75% Notes
Slide 30: Contact
: •II '? 11111111 l1111111111l ~RusseIM etas 11 ► 1 I 6600 Financial Drive, Mississauga, Ontario L5N 7J6 Email: info@russelmetals.com Visit us at: www.russelmetals.com Investor Relations Line: 905.816.5178