Jefferies Steel & Metals Summit. June 2018

Transcription

1 Jefferies Steel & Metals Summit June

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 or the Company ) 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, 2017, 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 3 Business Overview

4 4 Iconic Industrial Metals Company Founded in 1842 Processes and distributes carbon, aluminum, and stainless products Distributes 65,000+ products to 40,000 manufacturing customers 100 interconnected facilities located in North America and China Sales of $3.4 billion and shipments of 2 million tons in 2017 Processes over 75% of the metal we sell, emphasizing value-added fabrication services

5 Local Presence, National Scale Leading North American metals processor and distributor optimizing customer supply chains with tailored solutions, services, and products 24/7 customer access through local sales, customer development centers, and e-commerce Intelligently networked locations sharing knowledge, assets, and inventory at scale Differentiated model creates continuing great customer experiences 5

6 The DNA of Our Success ANALYTICS SPEED CULTURE VALUE-ADD SCALE 6

7 Ryerson s Commitment to Safety Ryerson is committed to providing a safe work environment. Ryerson s safety record is consistently better than the industry, and we continue to strive towards zero work place incidents. *Injury rate calculated as OSHA incidents per 100 full-time employees Source: Metals Service Center Institute 7

8 Ryerson s Strategic Drivers Optimizing the Customer Experience Through Intelligently Networked Service Centers Coil & Sheet Franchise Renewal Stainless Products Leadership Develop & Diversify Vertical Markets Portfolio Scale Prospecting & Call Centers Ryerson E-Commerce Built-Out & Scaling Long Products Depots Centers of Excellence Ryerson Virtual Warehouse Mapped Supply Chains Ryerson Advanced Processing Value-Add Amplifier & Accelerator 8

9 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 to our customers success 9

10 Delivering Value to Customers: Understanding the Elements Is Vital to Profitable Growth Metal Shape Processing As Is Burn/Cut Fabrication Carbon 50% Stainless 26% Aluminum 22% Percent of 2017 Sales Flat Long Plate 10

11 Macro Outlook Prices Indexed to Dec. 31, Improved but Volatile Commodity Prices Since Dec. 31, 2015 CRU HRC LME Nickel LME Aluminum + Midwest Premium 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 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Dec. 15 May 18 performance +149% +65% +64% Inflection in U.S. Industrial Production 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 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Sources: Bloomberg; prices through March 31, 2018; Federal Reserve; industrial production index monthly year-over-year change. 11

12 MSCI Demand Gap Persisting U.S. Carbon and Stainless Average Monthly Shipments Tons Per Month Jan. '93 - Oct. '08 = 4.2M/mo. Nov. '08 - Present = 3.2M/mo. Average Monthly Tons in Millions Source: Average annual shipments calculated using monthly Metals Service Center Institute data.

13 Diverse End-Markets Food Processing & Ag., 10% Oil & Gas, 5% All Other, 4% Commercial Ground Transportation, 16% Construction Equipment, 9% Metal Fabrication & Machine Shops, 20% HVAC, 7% Consumer Durable, 11% Industrial Machinery & Equipment, 18% Percentages are based on 2017 sales as disclosed in Ryerson s Annual Report on Form 10-K for the year ended December 31,

14 Driving Market Share Growth 4.21% 3.78% 16.4% 17.3% RYI U.S. MSCI Market Share Gross Margin Highly fragmented U.S. industry with: 7,000 service centers 1 million customers 30 million transactions per year Sources: Metals Service Center Institute and IBISWorld Estimated market data based on Ryerson s analysis of Metals Service Center Institute data. 14

15 Bending Beveling Blanchard Grinding Blasting Burning Centerless Grinding Cutting-to-Length Drilling Embossing Flattening Forming Grinding Laser Cutting Machining Notching Painting 15 Ryerson s Processing Capabilities = Value Add Image: Converter system for packaging equipment customer Machining and Forming Plate Beveling Welding Painting Perforating Precision Blanking Polishing Profile Cutting Punching Rolling Sawing Scribing Shearing Slitting Stamping Tapping Threading Toll Processing Turning Water Jet Cutting Welding Fully integrated into our customer s supply chain delivering value-add products that exceed our customer s expectations

16 Optimizing Mix to Drive Margin Expansion Gross Profit per Ton Fabrication % of Sales 17.9% 15.2% $240 $263 $291 $ Gross Profit Per Ton ($M) Gross Profit Per Ton, excl. LIFO ($M) Gross Margin, excl. LIFO $M, Tons 000's % Change Tons Sold 2,252 2,000-11% Gross Profit % Gross Margin 13.9% 17.3% 340 bps LIFO Expense % Gross Profit, excl. LIFO % Gross Margin, excl. LIFO 15.2% 17.9% 270 bps 6.7% 9.8% Ryerson processes over 75% of the metal we sell, with a greater emphasis on value-added fabrication services 16

17 Shifting Enterprise Value to Equity Holders Net Debt to Adj. EBITDA, excl. LIFO 5.3X 5.0X 2017 TTM Q1 '18 $M 2017 TTM Q1 '18 Adj. EBITDA, excl. LIFO Ending Net Debt Net Debt to Adj. EBITDA, excl. LIFO 5.3X 5.0X TTM - Trailing 12 month number Ryerson has improved our Net Debt to EBITDA ratio, working toward our goal of 3X 17

18 18 Financial Overview

19 Ryerson Financial Priorities Days of Supply 20% Gross Margins, excl. LIFO 3x Debt / EBITDA Gaining Financial Strength Through Continuously Improving Operating and Financial Performance 19

20 Annual Financial Highlights $178.0 $184.1 $18.7 $ Adj. EBITDA, excl. LIFO ($M) Net Income Attributable to Ryerson Holding Corporation ($M) Adj. EBITDA, excluding LIFO increased 3.4% to $184M in 2017 Average selling prices per ton increased 11.9%, tons sold increased 5.1%, and revenues grew by 17.7% vs Operating expenses as a percentage of sales declined to 14.0% compared to 15.3% in 2016 Lowered days of supply to 71 days in 2017 compared to 76 days in 2016 A reconciliation of non-gaap financial measures to the comparable GAAP measure is included in the Appendix. 20

21 Proven Inventory & Operational Efficiency Industry Leadership Days of Supply Expense Percentage of Sales Excluding D&A and One-Time Items Ryerson Competitor Averages Competitor averages are based on Ryerson s analysis of financial information disclosed in peer groups annual reports. Ryerson s peer group includes 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. 21

22 First Quarter 2018 Financial Highlights $62.2 $54.3 $51.5 $37.7 $40.6 $14.8 $10.4 $0.6 $1.7 $0.0 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Adj. EBITDA, excl. LIFO ($M) Net Income Attributable to Ryerson Holding Corporation ($M) Achieved Adjusted EBITDA, excluding LIFO of $62M, compared to $54M in Q1 17 Average selling prices per ton increased 9.2%, tons sold increased 5.8%, and revenues grew by 15.6% compared to Q1 17 Ryerson North American volume growth of 5.6% outpaced MSCI growth of 2.6% Achieved gross margin of 17.5%, increasing gross margin, excl. LIFO by 110 bps to 18.9% compared to Q4 17 A reconciliation of non-gaap financial measures to the comparable GAAP measure is included in the Appendix. 22

23 Gross Profit per Ton Expansion with Improving Industry Conditions $323 $322 $271 $298 $282 $278 $290 $308 $313 $338 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Gross Profit Per Ton ($M) Gross Profit Per Ton excl. LIFO ($M) Ryerson s strategic plan execution to optimize our margins coupled with improved industrial demand and pricing conditions experienced in the past 2 quarters increased our gross profit per ton sold in Q1 18. A reconciliation of non-gaap financial measures to the comparable GAAP measure is included in the Appendix. 23

24 24 Ryerson Enters Into Agreement to Acquire Central Steel & Wire Company Central Steel & Wire has a rich 109 year history with a loyal customer base and a strong brand name Complimentary product offerings, 60% of which are long, tube, and plate products Synergy opportunities from Ryerson s industry leading working capital and expense metrics, leveraged across a larger procurement base

25 Deleveraging Increases Value for All Investors $1,242 Total Debt ($M) Reduced total debt ~$200M since IPO $1,046 Annual Fixed Cash Commitments ($M) Cash Interest Pension and OPEB Maintenance Capital Expenditures Taxes and Other Annual Fixed Cash Commitments $ 87M 35M 15M 8M $ 145M Dec. 31, 2014 Dec. 31,

26 Deferred Retiree Benefit Liability Declines Since 2015 Pension and OPEB liability has declined 27% over the past 2 years driven by stronger pension asset returns and strategic participant reductions Sources: Federal Reserve treasury rates; Yahoo Finance daily adjusted stock price 26

27 Investing Drives Increased Free Cash Flow $50 million in capital investment since 2016 to expand value-added capabilities Enhanced intelligent systems to connect people, supply chains, inventory, fixed assets, and logistics Nine bolt-on acquisitions since

28 Liquidity to Fund Operations and Investments Liquidity ($M) $ $ $162.9 Ryerson s ability to maintain ample liquidity allows us to invest in working capital to maintain high service levels for our customers. Dec. 31, 2017 Mar. 31, 2018 North American Availability Foreign Availability Cash & Equivalents 28

29 29 Conclusion

30 Industry Paradigm Shift to a Singularity Networked and Intelligent Great Customer Experiences Attributes Speed Feedback/ Analytics Digitalization Human Relationship Systems Culture Knowledge Capabilities 30

31 Our Commitment, Our Culture Say Yes, Figure It Out 31

32 32 Appendix

33 Metal Service Center Supply Chain SUPPLIERS Manufacture metals Produce & ship large volumes Have long lead times with high variance delivery times RYERSON 65,000+ aluminum, carbon, and stainless products Processes 75% of products sold Delivers same/next day Provides product and end-market expertise Purchases in scale; ship smaller quantities CUSTOMERS Purchase smaller quantities Require a variety of products and services Can leverage Ryerson to reduce processing and inventory investment needs 33

34 Executive Experienced Management Team Title Years in 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 - Global 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. 34

35 1,903 Annual Financial Highlights Tons Sold (000 s) Average Selling Price Per Ton 2,000 $1,682 $1, Gross Margin & Gross Margin, excl. LIFO Gross Margin % Gross Margin, excl. LIFO % Expense Percentage of Sales excl. D&A 20.0% 19.7% 17.3% 17.9% 13.8% 12.6% A reconciliation of non-gaap financial measures to the comparable GAAP measure is included in this Appendix

36 Quarterly Financial Highlights Tons Sold (000 s) Average Selling Price Per Ton $1,725 $1,690 $1,678 $1,639 $1,790 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Gross Margin & Gross Margin, excl. LIFO Gross Margin % Gross Margin, excl. LIFO % Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Expense Percentage of Sales excl. D&A 19.7% 19.6% 16.0% 17.7% 16.8% 16.6% 16.8% 17.8% 17.5% 18.9% 13.3% 12.0% 12.4% 13.4% 12.6% 36 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 A reconciliation of non-gaap financial measures to the comparable GAAP measure is included in this Appendix.

37 Industry Math: 2017 MSCI Shipped Tonnage Mix 2017 Industry Tons Mix Total Shapes 100% Flat 68% Carbon Flat Rolled 63% Stainless Sheet & Coil 3% Aluminum Sheet & Coil 2% Long 20% Plate 12% Carbon Plate 10% Stainless Plate 1% Aluminum Plate 1% 37

38 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. 38

39 39 Non-GAAP Reconciliation: Annual ($M) Net Sales 3, , , , ,364.7 Gross Profit Gross Profit per Ton Gross Margin 17.8% 16.4% 17.9% 20.0% 17.3% LIFO Expense (Income) (33.0) 42.3 (59.5) (6.6) 19.9 Gross Profit, excluding LIFO Gross Profit, excluding LIFO per Ton Gross Margin, excluding LIFO 16.9% 17.6% 16.0% 19.7% 17.9% 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% 12.6% Net Income (loss) attributable to Ryerson Holding Corporation (25.7) (0.5) Interest and other expense on debt Provision (benefit) for income taxes (112.3) (0.7) (1.3) 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) Foreign currency transaction (gains) losses (3.7) (5.3) (1.5) 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) 19.9 Adjusted EBITDA, excluding LIFO Adjusted EBITDA Margin, excluding LIFO 4.9% 6.0% 3.4% 6.2% 5.5%

40 40 Non-GAAP Reconciliation: Quarterly ($M) Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Tons Sold (000's) Net Sales Gross Profit Gross Profit per Ton Gross Margin 19.7% 16.0% 16.8% 16.8% 17.5% LIFO Expense (Income) (0.7) 14.2 (1.7) Gross Profit, excluding LIFO Gross Profit, excluding LIFO per Ton Gross Margin, excluding LIFO 19.6% 17.7% 16.6% 17.8% 18.9% 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 13.3% 12.0% 12.4% 13.4% 12.6% Net Income attributable to Ryerson Holding Corporation Interest and other expense on debt Provision (benefit) for income taxes 6.8 (0.8) (0.7) (6.6) 4.1 Depreciation and amortization expense EBITDA Reorganization Foreign currency transaction (gains) losses (0.3) (2.0) Impairment charges on assets Purchase consideration and other transaction costs Other adjustments (0.6) Adjusted EBITDA LIFO Expense (Income) (0.7) 14.2 (1.7) Adjusted EBITDA, excluding LIFO Adjusted EBITDA Margin, excluding LIFO 6.7% 5.9% 4.4% 5.0% 6.6%

41 Metal Commodity Price Movements Impact LIFO Expense 22% $9 $14 $19 $0 $7 $25 $2 $23 $14 $8 9% 2% 2% 1% ($12) ($37) ($30) ($18) ($27) -6% -8% -1% 7% -3% 11% ($2) -2% 4% Ryerson LIFO Detail ($M) 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 LIFO Expense (Income) $9 $14 $19 $0 ($12) ($37) ($30) ($18) ($27) $7 $25 $2 $23 $14 ($2) $8 Lower of Cost or Market Adjustment (14) (24) 11 (24) LIFO, Net (12) (37) (21) 11 (15) (7) 1 14 (1) 14 (2) 8 Commodity Price Movements Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 CRU HRC ($/ton) $655 $671 $668 $634 $536 $454 $459 $387 $398 $562 $592 $521 $623 $618 $620 $609 LME Nickel ($/lb.) Midwest Aluminum ($/lb.) Weighted Avg. Commodity Pricing Change* 2% 9% 2% -6% -12% -13% -8% -12% -1% 22% 7% -3% 11% -2% 4% 3% Weighted Avg. Commodity Pricing Change Shifted 1 Qtr. Forward (i.e. Q4 '17 is Q3 '17 data) 1% 2% 9% 2% -6% -12% -13% -8% -12% -1% 22% 7% -3% 11% -2% 4% *Weighted using 50% CRU HRC, 25% LME Nickel, & 25% Midwest Aluminum to reflect Ryerson's approximate product mix Sources: Bloomberg; CRU 41-12% -13% -12% Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 LIFO Expense (Income) ($M) Weighted Avg. Commodity Pricing Change* Weighted Avg. Commodity Pricing Change Shifted 1 Qtr. Forward (i.e. Q4 '17 is Q3 '17 data)

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