Russel Metals Inc. · TSX:RUS
Russel Metals — Investor Presentation (February 2021)
26 slides from Russel Metals's investor presentation, Feb 11, 2021
Slide 1: Company Update February 2021
COMPANY UPDATE FEBRUARY 2021
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 a number of measures that are not prescribed by GAAP and as such may not be comparable to similar measures presented by other companies. We believe these measures are commonly employed to measure performance in our industry and are used by analysts, inves
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: Russel Metals At-A-Glance
RUSSEL METALS AT-A-GLANCE Business Overview Key Segments • Russel Metals Inc. (“the Company”) is a metals distribution company which distributes steel and other metal products across North America Metals Service – One of the two largest metals service centers operating in Canada • Extensive metal pr
Slide 6: Table of Contents
TABLE OF CONTENTS I. Market Trends II. Company Overview III. Financial Overview 6
Slide 7: I. Market Trends
I. MARKET TRENDS
Slide 8: Steel Prices vs. Russel EBIT
STEEL PRICES VS. RUSSEL EBIT HR Sheet, Plate & Russel EBIT(1) $1,200 $120 Carbon Plate HR Sheet EBIT $1,200 $1,000 $100 $1,100 Carbon Plate / HR Sheet (US$ per Ton) $1,000 $800 $80 $900 EBIT (millions) $600 $800 $60 $700 $400 $40 $600 $500 $200 $20 $400 May/01/20 May/15/20 May/29/20 Jun/12/20 Jun/26
Slide 9: Scrap and Steel Production
C$ / ton $150 $200 $250 $300 $350 $400 $450 $500 $550 $600 Jan-11 Jul-11 Jan-12 Jul-12 AMM Scrap Values Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 SCRAP AND STEEL PRODUCTION Jul-20 Source: American Metal Market Jan-21 Net Tons (000's) 1,1
Slide 10: North American Rig Counts
NORTH AMERICAN RIG COUNTS 1000 2250 Canada U.S 900 2000 800 1750 700 1500 600 1250 500 1000 400 750 300 500 200 100 250 0 0 Source: Baker Hughes 10
Slide 11: II. Company Overview
II. COMPANY OVERVIEW
Slide 12: Service Center / Distribution Landscape
SERVICE CENTER / DISTRIBUTION LANDSCAPE Russel is one of the largest service center companies in North America Ranked by Revenue (in US$ billions) 2019 2018 Reliance Steel & Aluminum Co. $11.0 $11.5 Ryerson Inc. $4.5 $4.4 Thyssenkrupp Materials NA Inc. $3.2 $3.2 Kloeckner Metals Corp. $3.0 $3.2 Russ
Slide 13: Value-Added Processing
VALUE-ADDED PROCESSING @Russel Metals 13
Slide 14: Value-Added Processing – Hub & Spoke Approach
VALUE-ADDED PROCESSING – HUB & SPOKE APPROACH Wisconsin U.S. South Southern Ontario Western Canada Quebec and Atlantic 14
Slide 15: Variable Cost Model – Breakdown of Cash Costs
VARIABLE COST MODEL – BREAKDOWN OF CASH COSTS YEAR ENDED DECEMBER 31, 2020 YEAR ENDED DECEMBER 31, 2019 $2,559 Million $3,499 Million Employee Operating Operating Employee Expenses - Expenses - Expenses - Expenses - Fixed, $207 Fixed, $112 Fixed, $109 Operating Fixed, $265 Expenses - Variable, $58 O
Slide 16: Countercyclical Cash Flows
COUNTERCYCLICAL CASH FLOWS Adj. EBITDA positive throughout the cycles; 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 $- $(50,000) $(100,000) $(150,000) Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011
Slide 17: Diversified Business
DIVERSIFIED BUSINESS Geography - 126 Locations Supplier by Products Type Product Mix Tubing & Flanges, Fittings Other 5% Non-Ferrous United OCTG, 2% & Valves, 1% Bars 6% Pipe, 3% 4% States - 31 Flat Roll, Plate, 4% Others, 51% Structurals - Long Products, Plate, Pipe, 5% 27% Flat Rolled 9% Tubing, 5
Slide 18: Return (Adj. EBIT) on Invested Capital Over the Cycle
RETURN (Adj. EBIT) ON INVESTED CAPITAL OVER THE CYCLE 25% 23% 20% 17% 15% Target: 15% 12% 10% 10% 9% 5% 0% 2016 2017 2018 2019 2020 18
Slide 19: Segment Breakdown: Inventories
SEGMENT BREAKDOWN: INVENTORIES At December 31, 2019 ($millions) At June 30, 2020 ($millions) At December 31, 2020 ($millions) Metals Metals Steel Distributors Steel Distributors Steel Distributors Service Service $64 Metals $95 $95 Centers Centers Service $295 $297 Centers $279 Total Total Total $88
Slide 20: Energy Sub-Segments
ENERGY SUB-SEGMENTS Field Stores Line Pipe/OCTG Energy Strategy: • Reduce absolute and relative exposure • Continue to repatriate substantial working capital from OCTG/Line Pipe over balance of 2021 • Rationalize operations and reduce costs • Distribution of highly engineered products • Distribution
Slide 21: ESG Focused
ESG FOCUSED Environmental Aggregate Emissions Sources: • Environment Management System • Low carbon emissions from operations Electricity • Our GHG emissions in 2019 were 30% Diesel Fuel approximately 56,346 CO2(e) company 41% wide which represents an emission intensity of 0.00001533 tonnes CO2(e) p
Slide 22: III. Financial Overview
III. FINANCIAL OVERVIEW
Slide 23: Summary Financial Results
SUMMARY FINANCIAL RESULTS $ mm, unless otherwise stated Q4 2019 Q3 2020 Q4 2020 Q4 2020 Observations: Income Statement: Revenues $837 $615 $671 • Gradual improvement in “core results” for Q4 vs. Q3 • Gross margin improving with market conditions Gross Margin ($ mm/%) $122 / 14.6% $117 / 19.0% $139 /
Slide 24: Liquidity and Capital Structure Summary
LIQUIDITY AND CAPITAL STRUCTURE SUMMARY • Following completion of the recent refinancing, Russel has over $400 mm of liquidity and no debt maturities for several years. 12/31/19 12/31/20 (C$ mm) (C$ mm) Cash $16 $26 Bank Lines - Maturity 2023 $62 -- 6% Notes - Due 2022 $298 -- 5.75% Notes - Due 2025
Slide 25: Segment Breakdown: Operating Results
SEGMENT BREAKDOWN: OPERATING RESULTS Revenue Breakdown (C$ millions) Gross Margins % $600 30% $538 $535 25% $474 $500 25% $437 21% 21% $412 $419 21% $393 $373 19% 19% 19% 19% $400 20% 19% 19% 16% $373 15% $300 $343 15% 17% 17% 15% $316 $298 $298 14% 14% 14% $200 $176 10% 11% 12% $158 11% $149 11% 10
Slide 26: 6600 Financial Drive, Mississauga, Ontario
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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