Loop Capital Metals & Mining Conference. March 2017

Transcription

1 Loop Capital Metals & Mining Conference March

2 IMPORTANT INFORMATION ABOUT RYERSON HOLDING CORPORATION These materials do not constitute an offer or solicitation to purchase or sell securities of Ryerson Holding Corporation ( Ryerson ) and no investment decision should be made based upon the information provided herein. Ryerson strongly urges you to review its filings with the Securities and Exchange Commission, which can be found at This site also provides additional information about Ryerson. SAFE HARBOR PROVISION Certain statements made in this presentation and other written or oral statements made by or on behalf of the Company constitute forward-looking statements within the meaning of the federal securities laws, including statements regarding our future performance, as well as management s expectations, beliefs, intentions, plans, estimates, or projections relating to the future. Such statements can be identified by the use of forward-looking terminology such as believes, expects, may, estimates, will, should, plans, or anticipates or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. The Company cautions that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. Among the factors that significantly impact the metals distribution industry and our business are: the cyclicality of our business; the highly competitive, volatile, and fragmented market in which we operate; fluctuating metal prices; our substantial indebtedness and the covenants in instruments governing such indebtedness; the integration of acquired operations; regulatory and other operational risks associated with our operations located inside and outside of the United States; work stoppages; obligations under certain employee retirement benefit plans; the ownership of a majority of our equity securities by a single investor group; currency fluctuations; and consolidation in the metals producer industry. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth above and those set forth under Risk Factors in our annual report on Form 10-K for the year ended December 31, 2016, and in our other filings with the Securities and Exchange Commission. Moreover, we caution against placing undue reliance on these statements, which speak only as of the date they were made. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events or circumstances, new information or otherwise. NON-GAAP MEASURES Certain measures contained in these slides or the related presentation are not measures calculated in accordance with generally accepted accounting principles ( GAAP ). They should not be considered a replacement for GAAP results. Non-GAAP financial measures appearing in these slides are identified in the footnotes. A reconciliation of these non-gaap measures to the most directly comparable GAAP financial measures is included in the Appendix. 2

3 BUSINESS OVERVIEW EDDIE LEHNER PRESIDENT AND CHIEF EXECUTIVE OFFICER 3

4 Ryerson Highlights Iconic industry leader offering a broad range of metal products, services, & solutions to a diversified customer base Built for all market cycles as evidenced by market share growth, strong margins, & cash generation in challenging 2016 Differentiated by an interconnected service center network driven by speed, scale, value-add, culture, & analytics Growth through increased value-added processing, innovative sales channels, supply chain mapping, & accretive M&A Improved capital structure by deleveraging the balance sheet & extending our significant debt maturities to

5 A Market Leading North American Service Center with Scale & Broad Strategic Footprint: The Basis for a Branded, Connected, Industrial Metals Network Founded in 1842; relisted on NYSE in 2014 Approximately 100 interconnected locations in North America and China One of North America s largest metals processors and distributors, with 2016 sales of $2.9 billion and shipments of 1.9 million tons Distributes 65,000 products to 40,000 active customers Other 2% Stainless 24% Aluminum 24% Carbon 50% % of 2016 Revenue 5

6 Exposure to Diverse, Growing, and Recovering End-Markets All Other, 7% Oil & Gas, 5% Commercial Ground Transportation, 16% Food Processing & Ag., 9% Construction Equipment, 9% Metal Fabrication & Machine Shops, 18% HVAC, 7% Consumer Durable, 11% Industrial Machinery & Equipment, 18% Percentages are based on 2016 sales as disclosed in Ryerson s Annual 10-K Report for the year ended December 31,

7 Macro Outlook: Improving but Volatile Industrial Metal Prices, with Potential Positive Demand Inflection COMMODITY PRICES U.S. INDUSTRIAL PRODUCTION POTENTIAL INFLECTION IN EARLY Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Price index to Dec. 31, 2015 CRU HRC LME Nickel LME Aluminum + Midwest Premium performance +79% +22% +21% Sources: Bloomberg; prices through March 15, 2017; Federal Reserve. 7

8 Expected Significant Market Upside: Under-Investment Since 2009 Leaves Potential for Secular Industrial Recovery 6,000 U.S. CARBON and STAINLESS MONTHLY SHIPMENTS Peak Tons = 5,400 5,500 5,000 Tons in Thousands 4,500 4,000 3,500 Average Tons Jan. '93 - Oct. '08 = 4,200 Average Tons Nov. '08 - Present = 3,200 3,000 2,500 2,000 Source: Metals Service Center Institute. 8

9 Ryerson s DNA The How Really Matters ANALYTICS SPEED CULTURE VALUE-ADD SCALE 9

10 Ryerson s Periodic Table : How We Deliver Value to Customers Understanding the Elements is Vital to Profitable Growth CARBON STAINLESS FABRICATION BURN/CUT AS IS BURN/CUT FABRICATION ALUMINUM AS IS FLAT LONG PLATE METAL SHAPE PROCESSING 10

11 Our Strategic Priorities Step-by-Step: A Differentiated Approach Renewed emphasis on coil / sheet Grow stainless products market share through supply chain leverage Develop and diversify vertical markets Scale prospecting and call centers Ryerson online store Build out long products depots and inventory profile Ryerson virtual warehouse Ryerson advanced processing 11

12 Leveraging Scale and Integrated Network An Integrated and Decentralized Network of Intelligent Service Centers Service Center 12 Multi-Markets Ryerson Integrated Network of Approximately 100 Locations BENEFITS Better asset utilization: Shared and optimized inventory Shared processing equipment Shared human resources More responsive customer service and prospecting: Local service center Ryerson.com / e-commerce After-hours call centers 12

13 AN INDUSTRY-LEADING PERFORMANCE OPERATIONAL EFFICIENCY Expense and working capital leadership Significant operating leverage Best practice talent management Speed MARGIN EXPANSION Optimize product and customer mix Value-added processing Value-driven pricing Supply chain innovation, architecture, and leadership PROFITABLE GROWTH Growing share by leveraging scale in highly fragmented market Multi-channel sales and distribution platform Investment in capabilities Bolt-on acquisitions Expanding use of analytics Our culture: contributing meaningfully to our customers success 13

14 Driving Profitable Growth: Growing Market Share and Margins TONNAGE MARKET SHARE & GROSS MARGIN Ryerson's U.S. MSCI Volume Market Share - All Metals Gross Margin Gross Margin Excl. LIFO 4.17% 4.17% 4.16% 4.10% 3.68% 17.3% 15.9% 3.75% 3.79% 3.81% 19.7% 19.0% 16.8% 16.3% 15.3% 15.2% 21.0% 18.9% 22.0% 21.1% 20.0% 19.8% 18.8% 16.8% Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Source: Metals Service Center Institute. A reconciliation of non-gaap financial measures to the comparable GAAP measure is included in the Appendix. 14

15 Proven Operational Efficiency and Industry Leadership: Consistent Execution of Fundamentals DAYS OF SUPPLY EXPENSE PERCENTAGE EXCLUDING D&A AND ONE- TIME ITEMS % 12.5% 15.6% 11.9% 17.0% 12.9% 18.9% 13.8% Ryerson Competitor Averages Competitor averages are based on Ryerson s analysis of financial information disclosed in competitors SEC filings. Competitor averages include Reliance Steel & Aluminum, Olympic Steel, Kloeckner Metals, and Russel Metals. Expense % excluding D&A and one-time items is a non-gaap financial measure; A reconciliation of this non-gaap financial measure to the comparable GAAP measure is included in the Appendix. 15

16 Expand valueadded processing: More than 75% of metals are processed to customer specifications with growth in high margin fabrication Optimizing Mix to Drive Margin Expansion: Value-Add, Speed, and Attributes Emphasis 2010 SALES MIX As-Is Long & Plate 19.5% Cut Long & Plate 3.0% Fabrication 6.7% Cut to Length Sheet 70.8% 2016 SALES MIX Cut Long & Plate 4.8% Fabrication 9.2% As-Is Long & Plate 21.1% Cut to Length Sheet 64.9% Understand margins, cost to serve, asset efficiency, and industry math Gross margin: 13.9% +610bps 20.0% 16

17 Example: Significant Growth Potential Around Smart Use of Analytics Commercial Bandwidth is the Key Ryerson s existing customer base External We have a large database of customer accounts Using data analytics and advanced sales techniques, we are targeting attractive account opportunities potentially increasing both margin & market share ~930k 70k...but on average we only sell to 57% of them each year 25k 65k 40k Attractive pool of profitable prior customers Unique accounts served ( ) Avg. unique accounts / yr ( ) Estimated universe of metal buying customers from Ryerson analysis of Metals Service Center Institute data. Targeted customer opportunity Potential unique accounts / yr Estimated universe of metal buying customers 17

18 FINANCIAL OVERVIEW RUSS JEWETT SENIOR FINANCE DIRECTOR 18

19 Ryerson Financial Priorities Deleveraging Propel growth, invest in high return capital projects, and bolt-on acquisitions Maximize free cash flow for investment while maintaining a strong balance sheet Expense management leadership Continue industry-leading working capital management 19

20 Quarterly Financial Highlights: Strong Performance Despite Challenging Industry Conditions ADJ. EBITDA, EXCL. LIFO ($M) NET INCOME (LOSS) ATTRIBUTABLE TO RYERSON HOLDING ($M) $56.0 $37.2 $48.8 $36.0 $13.5 $5.6 $8.2 $14.2 ($8.6) ($20.5) Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 A reconciliation of non-gaap financial measures to the comparable GAAP measure is included in the Appendix. 20

21 Quarterly Financial Highlights: Strong Performance Despite Challenging Industry Conditions TONS SHIPPED (000 S) AVERAGE SELLING PRICE PER TON 505 $1,517 $1,531 $1, $1,470 $1, Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 ' % GROSS MARGIN % 21.0% 22.0% 19.8% 16.8% GROSS MARGIN, EXCL. LIFO % 21.1% 20.0% 18.9% 18.8% 16.8% Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 A reconciliation of non-gaap financial measures to the comparable GAAP measure is included in the Appendix. 21

22 Material Deleveraging Increases Value for All Investors 1,242.1 TOTAL DEBT ($M) 1,023.5 Total debt reduced by $279M Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2016 Issued $650M of Senior Secured Notes due 2022 in May 2016 Issued common stock in July 2016 with net proceeds of $71.5M used to reduce our debt balance Amended our credit facility in November 2016, thereby reducing interest expense and fees and extending the maturity date to November 16,

23 Ample Liquidity to Fund Operations and Investments LIQUIDITY ($M) North American Availability Foreign Availability Cash & Equivalents $ $162.9 $ Dec. 31, 2015 Dec. 31,

24 Investing in the Business Smart Decisions Well Executed More than $100 million in growth capital invested since 2010, expanding value-added capabilities Enhanced intelligent systems for connecting people, supply chains, inventory, fixed assets, and logistics Eight bolt-on acquisitions since 2010 Accretive to gross margin and adjusted EBITDA Focus on value-added processing Broaden transactional customer portfolio Strategically expand network to better service customers 24

25 CONCLUSION EDDIE LEHNER PRESIDENT AND CHIEF EXECUTIVE OFFICER 25

26 Ryerson s Differentiated Approach: Connectivity, Speed, Scale, Value-Add, Culture, and Analytics Well Executed Creates Value for Investors ONE RYERSON Single franchise / one brand Great customer experiences Decentralized AND connected GEOGRAPHIC SCALE United States, Canada, Mexico, and China Local, regional, national, intercontinental RYERSON Leveraging Scale and Integrated Network CONNECTIVITY Technical knowledge Processing & fabrication Logistics Inventory MULTI-CHANNEL SALES Local sales and service Customer service prospecting centers Ryerson.com / e-commerce 26

27 Our Commitment, Our Culture SAY YES, FIGURE IT OUT 27

28 28 APPENDIX

29 Metal Service Center Supply Chain SUPPLIERS Manufacture metals Produce & ship large volumes Have long lead times with high variance delivery times RYERSON SERVICE CENTERS Purchase in scale; ship smaller quantities Distribute 65,000+ aluminum, carbon and stainless products Process 75% of products sold Deliver same/next day Provide product and end-market expertise CUSTOMERS Purchase smaller quantities Require a variety of products and services Can leverage Ryerson to reduce processing and inventory investment needs 29

30 Executive Experienced Management Team Title Years at Position Years at Ryerson Years in Industry Eddie Lehner* President & Chief Executive Officer Erich Schnaufer** Chief Financial Officer Mark Silver Executive Vice President, General Counsel & Secretary Kevin Richardson President - South / East Region Mike Burbach President - North / West Region Leong Fang Executive Vice President - Operations and Chief Executive Officer - Asia *Eddie Lehner previously served as Ryerson's Executive Vice President and Chief Financial Officer. **Erich Schnaufer previously served as Ryerson's Controller and Chief Accounting Officer. 30

31 Strong U.S. Dollar Contributes to Highest Trade Deficit Since Appreciation of U.S. Dollar US Balance of Trade Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 DXY Index Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar Source: Bloomberg Source: U.S. Census Bureau, $ in Billions 31

32 The U.S. Trails Other OECD Member Countries in Investment Gross capital formation (% of GDP) United States OECD members BRIC Source: World Bank 32

33 Industry Math: 2016 MSCI Shipped Tonnage Mix Industry Tons Mix Total Shapes 100% Flat 69% Carbon Flat Rolled 64% Stainless Sheet & Coil 3% Aluminum Sheet & Coil 2% Long 21% Key Long 11% All Other Long 10% Plate 11% Carbon Plate 9% Stainless Plate 1% Aluminum Plate 1% Key Long: aluminum and stainless, carbon bar, carbon pipe and tube: DOM/other welded/seamless mechanical. All Other Long: carbon structurals, carbon pipe and tube: pressure/standard/structural. 33

34 Non-GAAP Reconciliation EBITDA represents net income before interest and other expense on debt, provision for income taxes, depreciation and amortization. Adjusted EBITDA gives further effect to, among other things, impairment charges on assets, reorganization expenses and foreign currency transaction gains and losses. We believe that the presentation of EBITDA, Adjusted EBITDA and Adjusted EBITDA, excluding LIFO expense (income), net, provides useful information to investors regarding our operational performance because they enhance an investor s overall understanding of our core financial performance and provide a basis of comparison of results between current, past and future periods. We also disclose the metric Adjusted EBITDA, excluding LIFO expense (income), net, to provide a means of comparison amongst our competitors who may not use the same basis of accounting for inventories. EBITDA, Adjusted EBITDA and Adjusted EBITDA, excluding LIFO expense (income), net, are three of the primary metrics management uses for planning and forecasting in future periods, including trending and analyzing the core operating performance of our business without the effect of U.S. generally accepted accounting principles, or GAAP, expenses, revenues and gains (losses) that are unrelated to the day to day performance of our business. We also establish compensation programs for our executive management and regional employees that are based upon the achievement of pre-established EBITDA, Adjusted EBITDA and Adjusted EBITDA, excluding LIFO expense (income), net, targets. We also use EBITDA, Adjusted EBITDA and Adjusted EBITDA, excluding LIFO expense (income), net, to benchmark our operating performance to that of our competitors. EBITDA, Adjusted EBITDA and Adjusted EBITDA, excluding LIFO expense (income), net do not represent, and should not be used as a substitute for, net income or cash flows from operations as determined in accordance with generally accepted accounting principles, and neither EBITDA, Adjusted EBITDA and Adjusted EBITDA, excluding LIFO expense (income), net, is necessarily an indication of whether cash flow will be sufficient to fund our cash requirements. This release also presents gross margin, excluding LIFO expense (income), net, which is calculated as gross profit plus LIFO expense (or minus LIFO income), net, divided by net sales. We have excluded LIFO expense (income), net from the gross margin and Adjusted EBITDA as a percentage of net sales metrics in order to provide a means of comparison amongst our competitors who may not use the same basis of accounting for inventories as we do. Our definitions of EBITDA, Adjusted EBITDA, Adjusted EBITDA, excluding LIFO expense (income), net, gross margin, excluding LIFO expense (income), net, and Adjusted EBITDA, excluding LIFO expense (income), net, as a percentage of sales may differ from that of other companies. 34

35 Non-GAAP Reconciliation: Quarterly ($M) Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Net Sales Gross Profit Gross Margin 17.3% 19.7% 19.0% 15.2% 21.0% 22.0% 19.8% 16.8% LIFO Expense (Income) (12.0) (37.0) (21.3) 10.8 (14.8) (7.0) Gross Profit, excluding LIFO Gross Margin, excluding LIFO 15.9% 15.3% 16.3% 16.8% 18.9% 21.1% 20.0% 18.8% Warehousing, delivery, selling, general and administrative expenses Depreciation and amortization expense Warehousing, delivery, selling, general and administrative expenses excluding Depreciation and Amortization Expense excluding Depreciation and Amortization, impairment, and restructuring % of Net Sales 12.1% 12.3% 12.8% 14.6% 14.0% 13.8% 13.5% 13.8% Net Income (loss) attributable to Ryerson Holding (2.5) (20.5) (8.6) Interest and other expense on debt Provision (benefit) for income taxes (0.2) (12.4) (6.8) Depreciation and amortization expense EBITDA (1.3) Reorganization Gain on sale of assets (1.9) Gain on settlements (4.4) (Gain) loss on retirement of debt (1.0) - (8.2) Foreign currency transaction (gains) losses (1.6) 0.5 (0.1) (0.3) Impairment charges on assets Purchase consideration and other transaction costs (0.5) Other adjustments - (0.1) (0.1) (0.1) Adjusted EBITDA LIFO Expense (Income) (12.0) (37.0) (21.3) 10.8 (14.8) (7.0) Adjusted EBITDA, excluding LIFO Adjusted EBITDA Margin, excluding LIFO 4.1% 3.5% 3.8% 2.1% 5.3% 7.6% 6.6% 5.3% 35

36 Non-GAAP Reconciliation: Reconciliation of Net Income (Loss) and Earnings (Loss) per Share Excluding Impairment and (Gain) Loss on Retirement of Debt Year Ended Fourth Quarter December 31, Dollars and Shares in Millions, Except per Share Data Net Income (loss) attributable to Ryerson Holding Corporation $ (8.6) $ (20.5) $ 18.7 $ (0.5) Restructuring and other charges (1.5) Impairment charges on assets (Gain) loss on retirement of debt (0.3) Benefit for income taxes (0.9) (0.7) (5.6) (5.6) Net income (loss) attributable to Ryerson Holding Corporation, excluding restructuring and other charges, impairment charges on assets and gain (loss) on retirement of debt $ (7.1) $ (12.9) $ 28.0 $ 16.1 Earnings (loss) per share, excluding restructuring and other charges, impairment charges on assets and (gain) loss on retirement of debt Basic $ (0.19) $ (0.40) $ 0.82 $ 0.50 Diluted $ (0.19) $ (0.40) $ 0.81 $ 0.50 Shares outstanding - basic Shares outstanding - diluted Net income (loss) and Earnings (loss) per share excluding restructuring and other charges, impairment charges on assets and (gain) loss on retirement of debt are presented to provide a means of comparison with periods that do not include restructuring and other charges, impairment charges on assets and gains or losses on retirement of debt. 36

37 37 Non-GAAP Reconciliation: Annual ($M) Net Sales 3, , , ,859.7 Gross Profit Gross Margin 17.8% 16.4% 17.9% 20.0% LIFO Expense (Income), net (33.0) 42.3 (59.5) (6.6) Gross Profit, excluding LIFO Gross Margin, excluding LIFO 16.9% 17.6% 16.0% 19.7% Warehousing, delivery, selling, general and administrative expenses IPO-related expenses Depreciation and amortization expense Warehousing, delivery, selling, general and administrative expenses excluding Depreciation and Amortization and IPO-related expenses Expense excluding Depreciation and Amortization, impairment, restructuring, and IPO-related expenses % of Net Sales 12.5% 11.9% 12.9% 13.8% Net Income (loss) attributable to Ryerson Holding (25.7) (0.5) 18.7 Interest and other expense on debt Provision (benefit) for income taxes (112.3) (0.7) Depreciation and amortization expense EBITDA Reorganization Gain on sale of assets - (1.8) (1.9) - Gain on settlements - (0.4) (4.4) - Advisory service fee (Gain) loss on retirement of debt (0.3) 8.7 Foreign currency transaction (gains) losses (3.7) (5.3) (1.5) 3.9 Impairment charges on assets Purchase consideration and other transaction costs Other adjustments Adjusted EBITDA LIFO Expense (Income) (33.0) 42.3 (59.5) (6.6) Adjusted EBITDA, excluding LIFO Adjusted EBITDA Margin, excluding LIFO 4.9% 6.0% 3.4% 6.2%

38 38