CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

Transcription

1 JUNE 2018

2 CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION Certain statements contained in this document 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 future financing and our ability to pay dividends. Forward-looking statements relate to future events or our future performance. All statements, other than statements of historical fact, are forward-looking statements. Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by us, inherently involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Our actual results could differ materially from those anticipated in our forward-looking statements including as a result of the risk factors described in our MD&A and Annual Information Form. While we believe that the expectations reflected in our forward-looking statements are reasonable, no assurance can be given that these expectations will prove to be correct, and our forward-looking statements included in this document should not be unduly relied upon. These statements speak only as of the date of this document and, except as required by law, we do not assume any obligation to update our forwardlooking statements. RISK FACTORS: Such risks and uncertainties include, but are not limited to: the volatility in metal prices; volatility in oil and natural gas prices; cyclicality of the metals industry and the industries that purchase our products; decreased capital and other expenditures in the energy industry; product claims from customers; significant competition that could reduce our market share; the interruption in sources of metals supply; manufacturers selling directly to our customer base; material substitution; credit risk of our customers; lack of credit availability; change in our credit ratings; currency exchange risk; restrictive debt covenants; non-cash asset impairments; the unexpected loss of key individuals; decentralized operating structure; the availability of future acquisitions and their integration; the failure of our key computer-based systems, including our enterprise resource and planning systems; failure to renegotiate any of our collective agreements and work stoppages; litigious business environment; environmental liabilities; environmental concerns or changes in government regulations; legislation on carbon emissions; workplace health and safety laws and regulations; significant changes in laws and governmental regulations; fluctuation of our common share price; dilution; and variability of dividends. 3

3 OVERVIEW OF RUSSEL METALS We are one of the largest metals distribution and processing companies in North America. We are one of the largest pipe, valve and fittings companies in North America. Consolidated Revenues: Six months ended $1.9 billion Six months ended $1.6 billion Year ended $3.3 billion Based on revenues for the quarter ended June 30, 2018: 65% Canada 35% U.S. Declared dividend of $0.38 per share payable September 15, Dividend yield 5.7%. Market cap based on $26.87 per share is $1.7 billion. Listed on TSX. 4

4 EPS ( ) $2.25 $2.00 $2.01 $2.00 $1.75 $1.69 $1.50 $1.37 $1.25 $1.00 $1.02 $1.00 $0.75 $0.50 $0.25 $- $(1.42) Six months 2017 Six months

5 DEBT EQUITY RATIO Jun-18 6 Note: 2013 and 2014 adjusted for convertible debentures

6 THREE DISTINCT SEGMENTS REVENUE SIX MONTHS ENDED 2018 (2017) EBIT SIX MONTHS ENDED 2018 (2017) Steel Distributors 10% (11%) Metals Service Centers 53% (50%) Steel Distributors 15% (17%) Metals Service Centers 50% (42%) Energy Products 37% (39%) Energy Products 35% (41%) 7

7 CANADA OPERATING UNITS Metals Service Centers (51 units) Energy Products (49 units) Steel Distributors (3 units) British Columbia (A.J. Forsyth) Alberta Comco Pipe (Alberta) Apex Distribution (Alberta) Wirth Steel (Montreal) Man/Sask Ontario (Color Steels) Fedmet Tubulars (Alberta) Triumph Tubulars (Alberta) Quebec (Acier Leroux) Atlantic UNITED STATES Metals Service Centers (16 units) Energy Products (21 units) Steel Distributors (3 units) South East (JMS ) Wisconsin (Williams Bahcall) Pioneer (Colorado) Spartan (Colorado) Sunbelt (Texas) Ohio (Baldwin) North Carolina (DuBose) Apex Remington (Oklahoma) 8

8 BALANCE SHEET AS OF JUNE 2018 (millions) ASSETS EMPLOYED Cash $ 117 6% Accounts Receivable % Inventories 1,009 49% Property, Plant and Equipment % Goodwill/Intangibles 89 4% Other 24 1% FINANCED BY $ 2, % Bank Indebtedness $ 133 6% Trade Creditors % Long-term Debt % Other 43 2% Shareholders Equity % 9 $ 2, %

9 BROAD PRODUCT FOCUS BREAKDOWN FOR SIX MONTHS ENDED JUNE 30, 2018 (2017) Bars 4.9% (5.0%) Flat Rolled 8.7% (7.0%) Non Ferrous 3.5% (3.6%) Other 4.8% (4.9%) Pipe Products 20.0% (23.7%) Plate 19.1% (17.9%) Flanges, Valves, Fittings & Other Energy 18.0% (16.5%) Structurals (Beams & HSS) 21.0% (21.4%) 10

10 TOP MILL SUPPLIERS FOR 2018 % of total purchased Products Purchased Supplier 1 6.8% Long Products Supplier 2 5.5% Flat Roll Steel Supplier 3 5.3% Plate Supplier 4 4.8% Tubing Supplier 5 4.5% Long Products Supplier 6 4.0% Pipe Supplier 7 4.0% Long Prod / Plate Supplier 8 2.7% Flanges, Fittings & Valves Supplier 9 2.5% Pipe Supplier % Flat Roll Steel Top 10 Suppliers 42.4% 11

11 SERVICE CENTER/ DISTRIBUTION COMPETITORS TOP 15 BY REVENUE Public/ (in billions) Private Headquarters Reliance Steel & Aluminum Co. $ 9.7 $ 8.6 Public U.S Samuel, Son & Co Private Canada * Worthington Steel Co Public U.S MRC Global Public U.S Ryerson Inc Public U.S Inc Public Canada * Klockner (North America) Public U.K. NOW Inc Public U.S ThyssenKrupp Materials NA, Inc Public U.S. Steel Technologies LLC Private U.S O'Neal Steel Inc Private U.S Alro Steel Corp Private U.S Toyota Tsusho America Public U.S Olympic Steel Inc Public U.S Coilplus Inc Private U.S * Noted in Canadian Funds 12 Source: Metals Center News or public data 2017 private company data noted as 2016 Metals Center News amounts

12 MARKET TRENDS 13

13 MONTHLY SERVICE CENTER SHIPMENTS STEEL PRODUCTS US CANADA US Shipments- Tons in Thousands Canadian shipments - Tons in Thousands

14 PRICE OF HR SHEET & HR PLATE US$ per ton HR Sheet Carbon Plate Jan-11 7-Mar-11 7-May-11 7-Jul-11 7-Sep-11 7-Nov-11 7-Jan-12 7-Mar-12 7-May-12 7-Jul-12 7-Sep-12 7-Nov-12 7-Jan-13 7-Mar-13 7-May-13 7-Jul-13 7-Sep-13 7-Nov-13 7-Jan-14 7-Mar-14 7-May-14 7-Jul Source: American Metal Market 7-Sep-14 7-Nov-14 7-Jan-15 7-Mar-15 7-May-15 7-Jul-15 7-Sep-15 7-Nov-15 7-Jan-16 7-Mar-16 7-May-16 7-Jul-16 7-Sep-16 7-Nov-16 7-Jan-17 7-Mar-17 7-May-17 7-Jul-17 7-Sep-17 7-Nov-17 7-Jan-18 7-Mar-18 7-May-18

15 CARBON PLATE AND RUSSEL METALSEBIT $1,000 $160 Carbon plate (US$ per ton) $900 $800 $700 $600 $500 $400 $300 $200 Carbon Plate Adjusted EBIT $150 $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 EBIT (millions of dollars) $100 $20 $10 $- $- 16

16 SCRAP PRICING $ AMM Scrap Values $ $ $ $ $ $ $ $ Jan-11 7-Mar-11 7-May-11 7-Jul-11 7-Sep-11 7-Nov-11 7-Jan-12 7-Mar-12 7-May-12 7-Jul-12 7-Sep-12 7-Nov-12 7-Jan-13 7-Mar-13 7-May-13 7-Jul-13 7-Sep-13 7-Nov-13 7-Jan-14 7-Mar-14 7-May-14 7-Jul-14 7-Sep-14 7-Nov-14 7-Jan-15 7-Mar-15 7-May-15 7-Jul-15 7-Sep-15 7-Nov-15 7-Jan-16 7-Mar-16 7-May-16 7-Jul-16 7-Sep-16 7-Nov-16 7-Jan-17 7-Mar-17 7-May-17 7-Jul-17 7-Sep-17 7-Nov-17 7-Jan-18 7-Mar-18 7-May Source: American Metal Market

17 MILL PRODUCTION TONS 2,100 1,900 1,700 1,500 1,300 1, Jan-11 1-Apr-11 1-Jul-11 1-Oct-11 Net Tons (000's) 1-Jan-12 1-Apr-12 1-Jul-12 1-Oct-12 1-Jan-13 1-Apr-13 1-Jul-13 1-Oct-13 1-Jan-14 1-Apr-14 1-Jul-14 1-Oct-14 1-Jan-15 1-Apr-15 1-Jul-15 1-Oct-15 1-Jan-16 1-Apr-16 1-Jul-16 1-Oct-16 1-Jan-17 1-Apr-17 1-Jul-17 1-Oct-17 1-Jan-18 1-Apr-18 1-Jul Source: American Metal Market

18 OIL AND NATURAL GAS PRICES $10 $9 $8 $7 $120 $110 $100 $90 $80 Gas Prices (CDN) $6 $5 $4 $70 $60 $50 Oil Prices (CDN) $3 $40 $30 $2 $1 Natural Gas Crude Oil $20 $10 $ May-18 $- 19 Source: Index Mundi

19 NORTH AMERICAN RIG COUNT Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Canada U.S Source: Baker Hughes

20 METALS SERVICE CENTERS STEEL DISTRIBUTORS ENERGY PRODUCTS RMI OPERATIONS

21 TOTAL REVENUES & EBIT AS A % OF REVENUES $1, % 10% $1,000 8% ($000,000's) $800 $600 $ % 5.3% 3.9% 4.1% 5.8% 6.3% 6.1% 4.8% 4.3% 4.6% 3.5% 4.8% 4.3% 6.0% 6.6% 6.8% 5.7% 6.5% 6% 4% $ % 2.5% 2.6% 2% $ ,039 1, Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 0% 22 Adjusted for Inventory Write Downs of Q1-15 $2.5, Q2-15 $3.7, Q3-15 $8.4 and Q4-15 $46.8

22 METALS SERVICE CENTERS STRONG CANADIAN FRANCHISE Six months 2018 revenues of $1.0 billion, EBIT of $86 million revenues of $1.6 billion, EBIT of $80 million. 51 Metals Service Centers in Canada. 16 Metals Service Centers in U.S. Broad customer base - 29,000 Canadian, 18,000 U.S. Average invoice 2017 $1,846 (2016: $1,603) Approximately ,514 invoices per day (2016: 3,405) 23 Information unless otherwise noted as of June 30, 2018

23 ROLE OF METAL SERVICE CENTERS SUPPLIERS METALS SERVICE CENTERS CUSTOMERS Mills producing base metal products Processing includes pickling, blanking, tube production from sheet coating Limited ability service multiple customer needs Long lead time order to delivery Large volumes Source material and purchase in large quantity Process material to meet specific customer requirements Arrange logistics for delivery where and when customer needs Processing includes cut-to-length, cut parts using laser, oxy fuel or plasma, sawing, blanking, welding Some processors provide pickling and coating Manufacturers, fabricators Focused on design assembly, marketing Want just-in-time completed parts to production line Some eliminating first stage processing Some end users continue to process parts but source material from service centers 24

24 METALS SERVICE CENTERS LOCATION OF OPERATIONS 51 Locations 16 Locations 25

25 METAL SERVICE CENTERS PROCESSING CAPABILITIES Cutting-to-Length Stretcher Leveling Blanking Leveling Edge Trimming Slitting Oxygen Fuel Cutting Plasma Cutting Hi-definition Plasma Cutting Laser Cutting Drilling, Tapping, Beveling 26

26 PROCESSING CAPABILITIES Shearing Braking Rolling Shot Blasting 3D and Tilt Cutting Fabricating Bundle Cutting 27

27 TOP METAL SERVICE CENTER CUSTOMERS SIX MONTHS ENDED JUNE 30, 2018 Customer End Market % of Sales Products Purchased Customer 1 Manufacturer-Transportation 1.0% Flat Rolled, Tubing, Structurals, Plate Customer 2 Metals Fabricator 0.8% Plate (Discreet & Plate in Coil) Customer 3 Manufacturer-Agriculture & Other 0.7% Structurals (WF & I Beam, Structural Angles/Channels) Customer 4 Heavy Equipment Manufacturer 0.7% Flat Rolled, Tubing, Structural Customer 5 Construction - Metals Fabricator 0.6% Structurals, Wire Products, Beams Customer 6 Service Center 0.5% Structurals (WF & I Beam, Structural Angles/Channels) Customer 7 Metals Fabricator 0.4% Structurals (WF & I Beam, Structural Angles/Channels) Customer 8 Manufacturer-Heavy Equipment 0.4% Plate (Discreet & Plate in Coil) Customer 9 Manufacturer-Agriculture 0.4% Plate (Discreet & Plate in Coil),Structurals, Tube Customer 10 Service Center 0.3% Structurals (WF & I Beam, Structural Angles/Channels) 28

28 $600 $550 $500 $450 METAL SERVICE CENTERS REVENUES & EBIT AS A % OF REVENUES 11% 10.2% 10% 9% 8% ($000,000's) $400 $350 $300 $250 $200 $ % 5.4% 5.4% 3.8% 5.4% 6.1% 5.3% 3.3% 3.9% 3.4% 2.8% 2.8% 6.6% 5.0% 5.6% 5.9% 4.4% 3.8% 6.3% 7% 6% 5% 4% 3% $ % 2% $50 $- 1.4% Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 1% $- 29 Adjusted for Inventory Write Downs of Q1-15 $0.5, Q2-15 $0.5, Q3-15 $0.5 and Q4-15 $0.5

29 ENERGY PRODUCTS Six months 2018 revenues of $702 million, EBIT of $61 million revenues of $1.3 billion, EBIT of $107 million. Apex Distribution, Apex Monarch & Apex Western Fiberglass -Western Canada Apex Remington - Central U.S. FedmetTubulars & Triumph Tubular Calgary Comco Pipe & Supply Company - Edmonton Pioneer Pipe - Denver/ Houston Spartan Energy Tubulars Houston Distributes pipe, tube, valves and fittings to energy sector in Western Canada and the United States. Primarily store pipe in third party yards near end user. Comco Pipe focuses on supplying capital, MRO and sustaining projects to the energy sector including the oil sands. Apex Distribution, Apex Monarch & Apex Remington small retail type units located near rig activity. Highly variable compensation plans enable financial flexibility over the cycle 30

30 ROLE OF PIPE DISTRIBUTORS SUPPLIERS PIPE DISTRIBUTORS CUSTOMERS Mills producing pipe, valves and fittings Source material and purchase in large quantity Oil and gas producers/distributors Processing includes coating Arrange coating if required Focused on production Limited ability to service multiple customer needs Long led time order to delivery Service large volume projects Arrange logistics for delivery where and when customer needs Store product at third party yards, coaters, trucking companies Want just in time finished pipe to site/field Pipe represents small portion of project. Typically contract drilling, etc. 31

31 ROLE OF VALUE AND FITTING FIELD STORES SUPPLIERS PIPE DISTRIBUTORS CUSTOMERS Mills producing pipe valves and fittings Limited ability to service multiple customer needs Service large volume projects High service model Located close to customer base Inventory management programs and MRO business Repeat business due to maintenance and repair Oil and gas producers/distributors Focused on production and rig down time 32

32 ENERGY PRODUCTS - WELL POSITIONED TO SERVICE NORTH AMERICAN ENERGY SECTOR 49 Locations 21 Locations 33

33 TOP ENERGY PRODUCT CUSTOMERS SIX MONTHS ENDED JUNE 30, 2018 Customer End Market % of Sales Products Purchased Customer 1 Oil drilling, Gas drilling 8.3% OCTG, Linepipe, Pipe, Flanges & Fittings, Valves Customer 2 Oil drilling, Gas drilling 4.3% OCTG, Linepipe,Flanges & Fittings, Valves Customer 3 Oil drilling, Gas drilling 3.8% OCTG, Linepipe,Flanges & Fittings, Valves Customer 4 Gas drilling, Gas feeder lines 3.3% OCTG, Linepipe- small OD, Flanges & Fittings, Valves Customer 5 Oil drilling, Gas drilling 2.1% OCTG, Linepipe, Pipe, Flanges & Fittings, Valves Customer 6 Oil drilling, Gas drilling 1.9% OCTG, Linepipe, Pipe, Flanges & Fittings, Valves Customer 7 Oil drilling, Gas drilling 1.7% OCTG, Pipe, Flanges & Fittings, Valves Customer 8 Oil drilling, Gas drilling 1.5% OCTG, Linepipe,Flanges & Fittings, Valves Customer 9 Oil drilling, Gas drilling 1.4% OCTG, Pipe, Flanges & Fittings, Valves Customer 10 Oil drilling, Gas drilling 1.2% OCTG, Linepipe,Flanges & Fittings, Valves 34

34 ENERGY PRODUCTS REVENUES & EBIT AS A % OF REVENUES $500 11% 10.1% $450 10% $ % 8.8% 9% $ % 7.4% 7.0% 8.5% 8% ($000,000's) $300 $ % 5.4% 4.6% 5.6% 6.6% 6.5% 5.9% 6.8% 5.6% 4.6% 7.3% 7% 6% 5% $200 4% $150 $ % 2.8% 2.2% 3% 2% $50 $- 0.4% Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 1% - 35 Adjusted for Inventory Write Downs of Q1-15 $2.0, Q2-15 $2.1, Q3-15 $6.1 and Q4-15 $27.0

35 STEEL DISTRIBUTORS Six months 2018 revenues of $186 million, EBIT of $26 million revenues of $380 million, EBIT of $34 million. Sunbelt Group, Arrow Steel Houston, Texas; Wirth Steel Montreal, Vancouver Arrow Steel provides coil processing in Houston, Texas Customers other steel service centers, large OEM s, fabricators. Uses third party facilities to store product. Synergy with metals service center business Visibility into worldwide pricing trends 36 Flexible product sourcing

36 ROLE OF STEEL DISTRIBUTORS SUPPLIERS STEEL DISTRIBUTORS CUSTOMERS Mills producing base metal products Processing includes pickling blanking, tube production from sheet coating Limited ability to service multiple customer needs Long lead time order to delivery Large volumes Source material and purchase in large quantity Arrange logistics for delivery where and when customer needs Processing includes cut-tolength Focused primarily on import product Truck load quantities Use third party yards Large original equipment manufactures Smaller service centers Service Centers 37

37 TOP STEEL DISTRIBUTOR CUSTOMERS SIX MONTHS ENDED JUNE 30, 2018 Customer End Market % of Sales Products Purchased Customer 1 Service center 8.8% Plate Customer 2 Service center 4.1% Plate Customer 3 Service Centers 3.1% Plate, Structurals Customer 4 Service Centers 2.8% Stucturals, Plate, Other (light rail) Customer 5 Manufacturer- Energy 2.3% Plate, HR Plate Customer 6 Service Centers 2.2% Tubing/Pipe, plate, beam, coils Customer 7 Service Centers 2.2% Plate Customer 8 Service Centers 1.9% Plate, Pipe, wfb, Other Customer 9 Service Centers 1.8% Plate, Structurals, wfb, Other Customer 10 Service Centers 1.6% Plate, Structurals 38

38 STEEL DISTRIBUTORS LOCATION OF OPERATIONS 3 Locations 3 Locations 39

39 STEEL DISTRIBUTORS REVENUES & EBIT AS A % OF REVENUES $ % 18% 16% $100 14% 11.1% 11.4% 12% $75 8.1% 9.6% 9.2% 9.8% 9.6% 10.8% 10.1% 10% $50 6.5% 7.7% 6.6% 6.1% 7.2% 6.4% 7.4% 8.3% 7.2% 8% 6% $25 5.3% 3.9% 4% 1.8% 2% $ Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 ($000,000's) Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q Adjusted for Inventory Write Downs of Q2-15 $1.0, Q3-15 $1.8 and Q4-15 $19.2

40 SUMMARY

41 42 SUMMARY Leading market position Strong supplier relationships and unique market insight Successful acquisition strategy to deploy capital Multiple business segments Diversified service center and energy customer base Superior service and product availability Strong value-added processing Prudent inventory management Experienced management team High dividend yield Strong balance sheet, low leverage