CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

Transcription

1 MARCH 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 forward-looking 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. 2

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: Q $931 million Q $804 million Based on revenues for the quarter ended March 31, 2018: 71% Canada 29% U.S. Declared dividend of $0.38 per share payable June 15, Dividend yield 5.4%. Market cap based on $28.06 per share is $1.7 billion. Listed on TSX. 3

4 EPS ( ) $2.25 $2.00 $2.01 $2.00 $1.75 $1.50 $1.37 $1.25 $1.02 $1.00 $0.75 $0.62 $0.50 $0.48 $0.25 $- $(1.42) Q Q

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

6 THREE DISTINCT SEGMENTS REVENUE THREE MONTHS ENDED 2018 (2017) EBIT THREE MONTHS ENDED 2018 (2017) Steel Distributors 10% (10%) Metals Service Centers 49% (48%) Steel Distributors 15% (16%) Metals Service Centers 40% (40%) Energy Products 41% (42%) Energy Products 45% (44%) 6

7 OPERATING UNITS CANADA Metals Service Centers (52 units) Energy Products (48 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 (20 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) 7

8 BALANCE SHEET AS OF MARCH 2018 (millions) ASSETS EMPLOYED Cash $ 136 7% Accounts Receivable % Inventories % Property, Plant and Equipment % Goodwill/Intangibles 89 5% Other 31 2% FINANCED BY $ 1, % Bank Indebtedness $ 116 6% Trade Creditors % Long-term Debt % Other 39 2% Shareholders Equity % 8 $ 1, %

9 BROAD PRODUCT FOCUS BREAKDOWN FOR THREE MONTHS ENDED MARCH 31, 2018 (2017) Bars 4.5% (4.8%) Flat Rolled 8.3% (7.5%) Non Ferrous 3.3% (3.4%) Other 4.0% (4.4%) Pipe Products 23.6% (26.5%) Plate 17.9% (17.3%) 9 Flanges, Valves, Fittings & Other Energy 18.5% (16.7%) Structurals (Beams & HSS) 19.9% (19.4%)

10 TOP MILL SUPPLIERS FOR 2017 % of total purchased Products Purchased Supplier 1 6.3% Long Products Supplier 2 5.0% Plate Supplier 3 4.9% Flat Roll Steel Supplier 4 4.5% Tubing Supplier 5 3.7% Pipe Supplier 6 3.5% Long Products Supplier 7 3.3% Tubing & OCTG Supplier 8 3.3% Flat Roll Steel Supplier 9 3.1% Long Prod / Plate Supplier % Pipe Top 10 Suppliers 39.8% 10

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 * Ryerson Inc Public U.S Inc Public Canada * Klockner (North America) Public U.K. MRC Global Public U.S ThyssenKrupp Materials NA, Inc Public U.S. NOW Inc Public U.S O'Neal Steel Inc Private U.S Steel Technologies LLC Private U.S Worthington Steel Co Public U.S Toyota Tsusho America Public U.S Alro Steel Corp Private U.S Coilplus Inc Private U.S Olympic Steel Inc Public U.S * Noted in Canadian Funds 11 Source: Metals Center News or public data 2017 private company data noted as 2016 Metals Center News amounts

12 MARKET TRENDS 12

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-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 Source: American Metal Market

15 CARBON PLATE AND RUSSEL METALS EBIT $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 $- $- 15

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 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 Source: American Metal Market

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

19 NORTH AMERICAN RIG COUNT Canada U.S 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 Source: Baker Hughes

20 METALS SERVICE CENTERS STEEL DISTRIBUTORS ENERGY PRODUCTS RMI OPERATIONS

21 TOTAL REVENUES & EBIT AS A % OF REVENUES $1, % 6.8% 7% 6.3% 6.1% 6.0% 6.5% $1, % 5.3% 5.8% 4.6% 4.8% 5.7% 5% $ % 4.3% ($000,000's) $600 $ % 4.1% 4.3% 3.5% 2.6% 2.5% 2.6% 3% 1% $200 $ ,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 Q % 21 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 Q revenues of $455 million, EBIT of $29 million revenues of $1.6 billion, EBIT of $80 million. 51 Metals Service Centers in Canada. 14 Metals Service Centers in U.S. Broad customer base - 29,000 Canadian, 17,000 U.S. Average invoice 2017 $1,846 (2016: $1,603) Approximately ,514 invoices per day (2016: 3,405) 22 Information unless otherwise noted as of March 31, 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 to service multiple customer needs Long lead time order to delivery 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 cutto-length; cut parts using laser, oxy fuel or plasma; sawing, blanking, drilling, beveling, welding Manufacturers, fabricators Focused on design, assembly, marketing Want just-in time completed parts to production line Some eliminating first stage processing 23 Large volumes Some processors provide pickling and coating Some end users continue to process parts but source material from service centers

24 METALS SERVICE CENTERS LOCATION OF OPERATIONS 52 Locations 16 Locations 24

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 25

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

27 TOP METAL SERVICE CENTER CUSTOMERS YE DECEMBER 31, 2017 Customer % of Segment Revenues Products Purchased Customer 1 Manufacturer-Transportation 0.9% Flat Rolled, Tubing, Structurals, Plate Customer 2 Metals Fabricator 0.7% Plate (Discreet & Plate in Coil) Customer 3 Service Center 0.6% Structurals (WF & I Beam, Structural Angles/Channels) Customer 4 Manufacturer-Agriculture & other 0.6% Structurals (WF & I Beam, Structural Angles/Channels) Customer 5 Manufacturer-Heavy Equipment 0.5% Flat Rolled, Tubing, Structural Customer 6 Manufacturer-Heavy Equipment 0.5% Plate (Discreet & Plate in Coil) Customer 7 Manufacturer-Agriculture 0.5% Plate (Discreet & Plate in Coil),Structurals, Tube Customer 8 Metals Fabricator 0.4% Structurals (WF & I Beam, Structural Angles/Channels) Customer 9 Steel Mill 0.4% Plate (Discreet & Plate in Coil), FR Processing, Other Customer 10 Metals Fabricator 0.4% Structurals (WF & I Beam, Structural Angles/Channels) Largest customer less than 1% of total revenue 27

28 $500 $450 $400 $350 METAL SERVICE CENTERS REVENUES & EBIT AS A % OF REVENUES 6.6% 6.3% 6.1% 5.9% 5.6% 5.4% 5.4% 5.4% 5.3% 5.0% 5.0% 7% 6% 5% ($000,000's) $300 $250 $ % 3.3% 3.9% 3.4% 2.8% 2.8% 4.4% 3.8% 4% 3% $ % 2% $100 $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 1% $- 28 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 Q revenues of $382 million, EBIT of $32 million revenues of $1.3 billion, EBIT of $107 million. Apex Distribution, Apex Monarch & Apex Western Fiberglass - Western Canada Apex Remington - Central U.S. Fedmet Tubulars & Triumph Tubular - Calgary 29 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 ROLE OF PIPE DISTRIBUTORS Suppliers Pipe Distributors Customers Mills producing pipe, valves and fittings Processing includes coating Limited ability to service multiple customer needs Long lead time order to delivery Service large volume projects Source material and purchase in large quantity Arrange coating if required Arrange logistics for delivery where and when customer needs Store product at third party yards, coaters, trucking companies Oil and gas producers/distributors Focused on production Want just-in time finished pipe to site/field Pipe represents small portion of project. Typically contract drilling, etc. 30

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

32 ENERGY PRODUCTS - WELL POSITIONED TO SERVICE NORTH AMERICAN ENERGY SECTOR 48 Locations 20 Locations 32

33 TOP ENERGY PRODUCT CUSTOMERS YE DECEMBER 31, 2017 Customer % of Segment Revenues Products Purchased Customer 1 Oil drilling, Gas drilling 6.8% OCTG, Linepipe,Flanges & Fittings, Valves Customer 2 Oil drilling, Gas drilling 6.6% OCTG, Linepipe,Flanges & Fittings, Valves Customer 3 Oil drilling, Gas drilling 4.5% OCTG, Linepipe, Pipe, Flanges & Fittings, Valves Customer 4 Oil drilling, Gas drilling 3.9% OCTG, Pipe, Flanges & Fittings, Valves Customer 5 Oil feeder lines, Gas feeder lines, Oil sands 3.5% Pipe, Flanges & Fittings, Valves Customer 6 Gas drilling, Gas feeder lines 1.8% OCTG, Linepipe- small OD, Flanges & Fittings, Valves Customer 7 Oil drilling, Gas drilling 1.8% OCTG, Linepipe, Pipe, Flanges & Fittings, Valves Customer 8 Oil drilling, Gas drilling 1.7% OCTG, Pipe, Flanges & Fittings, Valves Customer 9 Oil feeder lines 1.6% Pipe, Flanges & Fittings, Valves Customer 10 Oil drilling, Gas drilling 1.5% OCTG, Linepipe, Flanges & Fittings, Valves Largest customer less than 3% of total revenue 33

34 $500 $450 ENERGY PRODUCTS REVENUES & EBIT AS A % OF REVENUES 10.1% 11% 10% $ % 8.5% 9% $ % 7.4% 7.0% 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 1% - 34 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 Q revenues of $94 million, EBIT of $11 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 Flexible product sourcing 35

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 Source material and purchase in large quantity Arrange logistics for delivery where and when customer needs Processing includes cutto-length Focused primarily on import product Large original equipment manufacturers Smaller service centers Service Centers Large volumes Truck load quantities Use third party yards 36

37 TOP STEEL DISTRIBUTOR CUSTOMERS YE DECEMBER 31, 2017 Customer % of Segment Revenue Products Purchased Customer 1 Service center 8.9% Plate Customer 2 Service center 5.7% Tubing/Pipe, plate, beam, coils Customer 3 Service center 5.0% Stucturals, Plate, Other (light rail) Customer 4 Service center 4.8% Plate, Pipe, wfb, Other Customer 5 Manufacturer- Energy 4.1% Plate, HR Plate Customer 6 Service center 2.5% Plate Customer 7 Service center 2.1% HR Coils, Sheets, Plate, HR Plate Customer 8 Service center 2.0% Plate, Structurals Customer 9 Manufacturer- Fencing 1.9% Pipe, tubing, nuts and bolts Customer 10 Service center 1.9% Plate, Structurals Largest customer less than 2% of total revenue 37

38 STEEL DISTRIBUTORS LOCATION OF OPERATIONS 3 Locations 3 Locations 38

39 STEEL DISTRIBUTORS REVENUES & EBIT AS A % OF REVENUES $125 $ % 9.2% 9.8% 11.1% 9.6% 10.8% 10.1% 11.4% 12% 10% 8.1% $75 $50 6.5% 7.7% 6.6% 6.1% 7.2% 5.3% 6.4% 3.9% 7.4% 8.3% 7.2% 8% 6% 4% $25 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 Q Adjusted for Inventory Write Downs of Q2-15 $1.0, Q3-15 $1.8 and Q4-15 $19.2

40 SUMMARY

41 41 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