Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (February 2025)
44 slides from Russel Metals's investor presentation, February 2025
Slide 1: Company Update - February 2025
~ 111 11111 "= r•1 1•1 ~ 11 iiiiiiii 11~ Russel Metals COMPANY UPDATE - FEBRUARY 2025
Slide 2: 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 3: Non-GAAP Measures
NON-GAAP MEASURES In this Information Package we use 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 EBIT and EBITD
Slide 4: Table of Contents
TABLE OF CONTENTS I. Overview II. Market Trends III. Capital Allocation Priorities IV. Financial Overview F'1 ~ ~ 1l"11 ,J RusseI M eta Is ""I~1 4
Slide 5: I. Overview
Il. OVERVIEW
Slide 6: 2024 in Review
2024 IN REVIEW Russel Metals 6
Slide 7: 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 8: Russel Metals At-A-Glance
RUSSEL METALS AT-A-GLANCE Overview Key Segments • Distribution of various industrial products across North America • Coast-to-coast in Canada • Three segments: Metal Service Centers, Energy Field Stores and • Strong US presence in mid-west Metals Service Steel Distributors and south Centers • Founde
Slide 9: Market Position
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 2023 Revenues (US$ billion} $16 $14 $12 $10 $8 $6 $4 $2 $0 __ .. ___ _ (1) Russel results are pro forma for the acquis
Slide 10: Diversified Business
DIVERSIFIED BUSINESS Locations – 140 Branches Suppliers Product Mix Total of 6-10, 12% Plate, 19% Flanges, Valves, Fittings, Canada, 71% Others, 57% 16% Flat Rolled, 11% Bars, 5% St ainless. Aluminum& Ot her Non- Ferrous, 9% U.S., 29% Total of 1-5, 31% Structurals, 36% Transactional Business Model:
Slide 11: Incentive Compensation Tied to Return on Capital
INCENTIVE COMPENSATION TIED TO RETURN ON CAPITAL • A large number of our employees Variable Compensation vs. Operating Profit participate in a profit-sharing program, $700 $130 with bonus pools tied to their local $120 returns on net assets. $600 • This approach is a significant element of $110 $100
Slide 12: Business Transformation
BUSINESS TRANSFORMATION Illustration of Historical Results Illustration of Expected Impact from New Approach u u ·;:: ·;:: +-' +-' Q) Q) 2 2 -~ -~ u u C C (Cl (Cl C C LL LL Time Time Actions Objectives • Divested underperforming business units • Raise the cycle floor and ceiling • Reinvested in valu
Slide 13: Portfolio Changes and Impact
PORTFOLIO CHANGES AND IMPACT • The portfolio changes Business Segment Relative Performance - 2020 significantly reduced 80% our free cash flow 60% Business improvement/reorganization ' \ . Capital limits cha ged and variable • • volatility. Improvement in C 40% 20% program in 2021/22 Mostly liquidat
Slide 14: ESG Focus
ESG FOCUS Sustainability Report Updated April, 2024 Environmental • Divested OCTG/Line Pipe business GHG Emission Intensity • Low carbon emissions from operations 63 .0 1600 1475 • GHG emissions in 2023 were Cl :::, C: 1400 1232 54,206 tonnes CO2(e), which was a Cl > 1200 - Cl 1% reduction from 2022
Slide 15: II. Market Trends
II. MARKET TRENDS
Slide 16: Business Conditions: Metal Pricing Trends
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Slide 17: Business Conditions: Supply Chain Dynamics
BUSINESS CONDITIONS: SUPPLY CHAIN DYNAMICS Steel Mills/Imports: US Raw Steel Output & Utilization Steel Import Volumes • Capacity utilization has Source: American Iron and Steel Institute Source: G/obol Affairs Canada, US Census Bureau remained low due to 2,000 90% 50 curtailments by producers, 1,80
Slide 18: Revenue Volatility vs. Indexes
REVENUE VOLATILITY VS. INDEXES • Russel Metals’ revenue is less volatile than underlying steel prices. Relative Volatility Absolute Volatility Coefficient of Variation (%) Revenue Volatility - Russel vs Benchmarks Russel Metals Service Centres - Avg Price 300% .______ _I 30% Realization (C$)/Ton [J
Slide 19: III. Capital Allocation Priorities
III. CAPITAL ALLOCATION PRIORITIES
Slide 20: Capital Allocation Summary
CAPITAL ALLOCATION SUMMARY Increase capital deployment with a target of >15% Flexible approach to returning capital to return over a cycle shareholders 2024 NCIB Activity = $131 Share Buy mm Backs Facility • Q4: 330k acquired for $14 mm • Since NCIB established in Modernizations Aug/22: 6.5 mm acqui
Slide 21: Capital Reallocation Evolution
CAPITAL REALLOCATION EVOLUTION • In the five-year period of 2020-2024, we have generated >$2 billion of cash and substantially changed our business and capital structure profile. Cash Generation 1/1/20 to 12/31/24 {$ mm) Capital Deployment 1/1/20 to 12/31/24 {$ mm) Reduce Asset Sales; $403 Debt/Incr
Slide 22: Dividend and Share Buy Back Summary
DIVIDEND AND SHARE BUY BACK SUMMARY Historical (and Projected Q1'25) Quarterly Dividends Return of Capital to Shareholders (millions) $0.42 $80 $0.40 $69 $71 $0.38 $45 $41 $39 $38 $011 III III III II III III I ~~~~~~~~~~~~~~~~rorororommmmoooo~~~~NNNNMMMM~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Slide 23: 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 2024 tota l $90 mm $30 2023 tota l $ 72 mm $28 $25 ~24 $24 $21 21 $20 ,- 20
Slide 24: Capex Program: Value-Added Equipment
CAPEX PROGRAM: VALUE-ADDED EQUIPMENT • Multi-year program to expand operations and increase value-added equipment – Completed ~15 tube laser/flat laser installations over past two years – more on the come for 2025/26. • Most recent projects have generated paybacks of ~2-4 years Tube Lasers Flat Lase
Slide 25: Capex Program: Modernizations
CAPEX PROGRAM: MODERNIZATIONS • Five modernizations were completed in 2024. They equate to a 5% increase in Russel’s service center footprint. Texarkana: 60,000 sq ft Joplin: 40,000 sq ft Little Rock: 40,000 sq ft Saskatoon: 60,000 sq ft Green Bay: 40,000 sq ft
Slide 26: Acquisitions: Summary
ACQUISITIONS: SUMMARY • We have completed several acquisitions over the past few years and continue to focus on tuck-in opportunities for our existing business units (e.g. Samuels, Alliance, Sanborn) or standalone/complementary businesses (e.g. Boyd, Tampa Bay). Acquisition History {C$ mm) $268 $167
Slide 27: Samuel Acquisition: Summary
SAMUEL ACQUISITION: SUMMARY • Closed on August 12, 2024. • Five locations in Western Canada and two locations in the US Northeast. • Samuel retained its Delta, BC location, and conducted an orderly shut-down. Russel acquired the Delta inventory and equipment at net book value and relocated it to oth
Slide 28: Samuel Acquisition: Complementary Fit in W. Canada
SAMUEL ACQUISITION: COMPLEMENTARY FIT IN W. CANADA • The combined footprint in Western Canada should create opportunities to reconfigure the equipment/locations, enhance operating efficiencies and reduce the combined capital. e Russe l Location e Samue l Location • • # of Locations BC Alberta Sask.
Slide 29: Samuel Acquisition: Extends Russel into US Northeast
SAMUEL ACQUISITION: EXTENDS RUSSEL INTO US NORTHEAST • Samuel’s US NE operations provide an opportunity to extend Russel’s geography and increase economies of scale in plate processing. Russel - • Ru sse l Location • Sa mu el Location .....• • •••• ••••••••• •••• ~ •••• • • •• •••• •···· --·- ••••••
Slide 30: Samuel Acquisition: Implied Multiples
SAMUEL ACQUISITION: IMPLIED MULTIPLES • Based on an illustrative range of EBITDA and invested capital scenarios, the following summarizes the implied purchase price multiples. Implied Purchase Price Multiple Annual EBITDA ($mm) $27 $30 $33 $36 $39 $225 8.3x 7.5x 6.8x 6.3x 5.8x Net $200 7.4x 6.7x 6.1
Slide 31: Tampa Bay Steel: Summary
TAMPA BAY STEEL: SUMMARY • Closed on December 4, 2024. • Final purchase price of US$75 mm. • Average sales and adjusted EBITDA of US$115 mm and US$13 mm, respectively, over the past five years • Invested US$20 mm in capex over past three years – significant value-added processing with capacity to gr
Slide 32: IV. Financial Overview
IV. FINANCIAL OVERVIEW
Slide 33: Q4 2024 at a Glance
Q4 2024 AT A GLANCE • Revenues were down 5% vs. Q3; full quarter contribution from Samuel offset by seasonal factors • Slight increase in gross margins; slight decrease in EBITDA margin • Solid earnings, returns and free cash flow in a challenging steel market; diversification remains beneficial • O
Slide 34: Summary: Financial Results
SUMMARY: FINANCIAL RESULTS $ mm, unless otherwise stated Q4 2023 Q3 2024 Q4 2024 Q4 2024 Observations: Income Statement: • Revenues were down 5% vs. Q3 due to seasonal impact Revenues $1,019 $1,089 $1,039 (somewhat offset by a full quarter of the Samuel and partial quarter of Tampa Bay acquisitions)
Slide 35: Variance Analysis: EBITDA Q3 2024 vs. Q4 2024
VARIANCE ANALYSIS: EBITDA Q3 2024 VS. Q4 2024 $90 Service Center Segment $1 $80 $70 $1 $67 $61 $60 ($4) C $50 .Q E -\I} u $40 • Mark-to-market expense on stock-based comp $5 in Q3 vs. $2 mm in Q4 • Thunder Bay flat $30 $20 $10 $0 Q3 2024 Volumes Gross Margin Op Costs Energy Field Stores Distributors
Slide 36: Segment Breakdown: Operating Results
SEGMENT BREAKDOWN: OPERATING RESULTS Revenue {C$ 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'/4 $0 (\,'\, (\,,,, (\,,,
Slide 37: Service Center Results
SERVICE CENTER RESULTS • Q4 2024 tons were up 6% vs. Q3 due to full quarter of Tons Shipped {000's) Samuel and partial quarter from Tampa Bay – down 1% on 380 a same store basis due to seasonality. 360 340 • Price realizations and CGS per ton decreased by similar 320 amounts vs. Q3. On a same store
Slide 38: Inventory Turns
INVENTORY TURNS • Total inventory turns in Q4 were comparable with previous Q4 patterns. Inventory Turns 5.0 ~ 4.7 ~~ 4.5 -- -- -- - -- -- -- -- -- ·-I 4.0 4.( 4.0 ,_ 3.5 3.8 ~,,,,- --- ~ r-,..... ~ . - 3.8 ~ 3.9 3.9 - 4.0 --- 3.8 13.9 3.9 - -~~ 3.6 3.8 3.5 -- -- -- 3.( ~ - ~ - - - ,~ ,- - -- -- --
Slide 39: Working Capital Management: Inventory
WORKING CAPITAL MANAGEMENT: INVENTORY • Total inventory was down slightly vs. Q3. The Q4 inventory included $14 mm related to Tampa Bay. On a same store basis, inventory was down 2% vs. end of Q3. Inventory Trends $1,200 $1,025 $1,050 $1,000 $907 $884 $800 $773 $720 C: .Q $600 E <fl. $400 $200 $0 De
Slide 40: Liquidity and Capital Structure Summary
LIQUIDITY AND CAPITAL STRUCTURE SUMMARY • Significant balance sheet flexibility. • Redeemed all legacy high yield notes and have an investment grade bank structure. • Grew book value per share. 12/31/23 12/31/24 (C$ mm) (C$ mm) (Cash) $(629) $(45) Bank Lines ($600 mm) - Maturity July 2026/28 -- $13
Slide 41: Pension Plan Migration
PENSION PLAN MIGRATION • The following summarizes the shift in the defined benefit plans’ surplus over the past several years. Defined Pension Plans - Surplus/{Deficit) $60 $50 $40 $30 E E ~s20 $10 $0 ($10) Imm Dec.31/19 - Dec. 31/20 Dec. 31/21 Dec. 31/22 Dec. 31/23 Dec. 31/24 ■ Surplus/(Deficit) ■
Slide 42: Return on Capital
RETURN ON CAPITAL • Our total capital deployed grew in 2024 and our return on capital remained strong. Invested Capital at End of Year($ millions) Avg. Annual Return on Invested Capital -Trailing 3 Years $2,000 50% $1,800 $1,626 40% 36% $1,600 $1,400 30% $1,200 20% $1,000 $800 10% $600 $400 0% 2019
Slide 43: Relative Return on Capital
RELATIVE RETURN ON CAPITAL • Russel’s returns remain industry leading. Return on Invested Capital (Average Annual) - Last Two Years Ended 12/31/24 25% 20% Return on Invested Capital - Last Twelve Months Ended 12/31/24 20% 15% 10% 15% 5% 10% Russel Competitor# 1 Competitor #2 Competitor #3 5% Return
Slide 44: Russel Metals
~ 111 11111 "= r•1 1•1 ~ 11 iiiiiiii 11~ Russel Metals 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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