Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (September 2023)
30 slides from Russel Metals's investor presentation, September 2023
Slide 1: Company Update September 2023
COMPANY UPDATE SEPTEMBER 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: Q2 2023 at a Glance
Q2 2023 AT A GLANCE • Revenues were comparable with Q1 • Improvement in margins, earnings and returns • Contributions were broad based across regions and business segments • Our capital structure is strong, especially with the expected closing of the TriMark sale in Q3 Revenue (millions) Adj. EBITDA
Slide 6: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES Increase capital deployment with a target of >15% return over a cycle Over 30 equipment projects are Multiple modernizations Deal pipeline remains active underway in Canada and the US underway Acquiring Alliance Supply as a Value-Added Recently approved new projects Acq
Slide 7: TriMark Investment: Continuity Analysis
TRIMARK INVESTMENT: CONTINUITY ANALYSIS • TriMark declared/paid common and preferred dividends to Russel of $10 mm in Q2. As of June 30, we are net cash positive (ie. $36 mm of cumulative dividends vs. $32 mm face value of the carried interest). • The ~$60 mm sale of the retained equity interest sho
Slide 8: Table of Contents
TABLE OF CONTENTS I. Market Trends II. Company Overview III. Financial Overview 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 #1 Heavy Melt (Chicago) HR Sheet HR Plate $2,000 $1,500 US $ / ton $1,000 $500 $0 Note: Information as of July 2023. 10
Slide 11: Business Conditions: Supply Chain Dynamics
BUSINESS CONDITIONS: SUPPLY CHAIN DYNAMICS Steel Mills/Imports: • Capacity utilization <80% • Imports are consistent with pre-Covid levels Service Centers: • Supply chain tonnage remains at a modest level Note: Information as of July 2023 11
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 various industrial 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 1916
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% Structurals and Pipe - 40% Flat Rolled 10% Flanges, Valves, etc. 12% Suppliers 1-10 49% Canada - 95 Plate - 22% Customers • >30,000 customers • Average invoice < $2,500
Slide 16: Countercyclical Cash Flows
COUNTERCYCLICAL CASH FLOWS • Strong EBITDA during upcycles; working capital repatriation during market downturns. Quarterly EBITDA vs. Change in Non-Cash Working Capital ($000’s) $250,000 $200,000 $150,000 $100,000 $50,000 $- $(50,000) $(100,000) $(150,000) $(200,000) Q2 2007 Q2 2008 Q2 2009 Q2 2010
Slide 17: Working Capital Discipline
WORKING CAPITAL DISCIPLINE Inventory Turns Inventory Levels 5.0 $1,200 4.7 4.5 $1,031 $1,025 $1,050 $1,008 4.0 $986 4.0 $1,000 $964 $957 $948 3.8 $941 4.0 3.4 3.9 3.9 137 124 $907 211 3.5 3.8 3.7 $894 190 $884 123 $862 228 166 123 125 3.0 100 3.5 3.3 95 $790 $787 95 $773 153 $800 3.0 3.2 87 $716 $72
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 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 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 • Divested OCTG/Line Pipe business • Low carbon emissions from operations • GHG emissions in 2022 were 54,806 tonnes CO2(e) Social •
Slide 22: III. Financial Overview
Russel Metals lil. FINANCIAL OVERVIEW
Slide 23: Strong Relative Performance
STRONG RELATIVE PERFORMANCE • Russel’s margins have been top quartile/decile versus Canadian and US peers. • The relative performance has improved since the OCTG/line pipe monetization in mid-2021. 23
Slide 24: Return on Capital Focus
RETURN ON CAPITAL FOCUS $1,800 80% $1,636 $1,600 $1,553 70% $1,479 $1,462 $1,471 $1,492 $1,512 $1,466 $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% $ millions 43% 41% 40% $800 33% 31% 32% 27% 30% $600 23% 19% 20% $400 15% 16% 10% 10% $
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 Q2 2022 Q1 2023 Q2 2023 Q2 2023 Observations: Income Statement: Revenues $1,362 $1,187 $1,189 • Revenues were comparable with Q1 • Overall margins improved, led by service centers and steel Gross Margin ($ mm/%) $344 / 25% $260 / 22% $275 / 23
Slide 27: Segment Breakdown: Operating Results
SEGMENT BREAKDOWN: OPERATING RESULTS Revenue (C$ millions) Gross Margins % Earnings from Operations (C$ millions) $1,000 40% $130 35% $800 $110 30% 25% $90 $600 20% $70 $400 15% $50 10% $30 $200 5% $10 $0 0% ($10) MSC Energy Distributors MSC Energy Distributors MSC Energy Distributors MSC: • Strong
Slide 28: Service Center Results
SERVICE CENTER RESULTS • Q2 2023 tons shipped were comparable vs. Q1 2023 and Tons Shipped ('000's) Q2 2022. 380 360 • Price realizations/ton increased (+$96) more than the 340 CGS/ton increase (+$43/ton), resulting in higher margins in 320 Q2 vs. Q1. 300 280 • Selling prices and margins showed some
Slide 29: Liquidity and Capital Structure Summary
LIQUIDITY AND CAPITAL STRUCTURE SUMMARY • The cash position and book value per share grew further in Q2. • Proceeds from the sale of our TriMark investment are expected in Q3. 6/30/22 3/31/23 6/30/23 Russel - Book Value per Share (C$ mm) (C$ mm) (C$ mm) $30.00 3 Month Change +$49 mm $26.41 Cash $187
Slide 30: Contact Information
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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