Vulcan Steel : acquisition of Ullrich Aluminium presentation

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U L L R I C H A L U M I N I U M A C Q U I S I T I O N

22 July 2022

U L L R I C H A L U M I N I U M A C Q U I S I T I O N

Disclaimer

only	The material contained in this document is	They may also be based on factors which are subject
a presentation of information about Vulcan Steel	to significant uncertainties and contingencies which
Limited's ("Vulcan") and Ullrich Aluminium Limited's	may be outside the control of Vulcan and are provided
use	("Ullrich") activities current as of 22 July 2022.	only as a general guide or statement and should
It is provided in summary form and does not purport	not be relied upon as an indication or guarantee
(expressed or implied) of future performance. Except
to be complete. It should be read in conjunction with
as required by applicable law or the ASX and NZX
Vulcan's periodic reporting and other announcements
Listing Rules, Vulcan disclaims any obligation or
lodged with the Australian Securities Exchange (ASX)
undertaking to publicly update such forward-looking
and New Zealand Stock Exchange (NZX).
statements.
This document contains projections and other
This document is not intended to be relied upon as
forward-looking statements, current intention, opinion
personalr	and predictions regarding the Company's present	advice to investors or potential investors and does not
take into account the investment objectives, financial
and future operations, possible future events and
situation or needs of any particular investor.
future financial prospects. These represent Vulcan's
	assumptions and views, including expectations and	Unless otherwise stated, financials (including
	projections about Vulcan's business, the industry in	comparatives) reflect the adoption of IFRS 16 Leases.
	which it operates and management's own beliefs	This presentation contains non-IFRS financial
	and assumptions. While these statements reflect	measures to assist readers of this document to assess
	expectations at the date of this document, they are,	the underlying financial performance of Vulcan.
	by their nature, not certain and are susceptible to	The non-IFRS financial measures in this presentation
	change. Such matters require subjective judgement	were not subject to a review or an audit by Deloitte.
	and analysis and may be based on assumptions
	which are incorrect.
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Agenda

Transaction Summary

Rationale

Industry and Ullrich Business Overview

Integration, Synergies and Financial Impact

Funding and Dividend Payout Policy

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Transaction Summary

The acquisition of Ullrich significantly adds to the network reach and scale of Vulcan in its goal to become the leading steel and metal products distributor and value added processor in Australasia.

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Transaction

• Vulcan has signed a conditional sale and purchase agreement with Gilbert Ullrich, the owner founder of Ullrich Aluminium Company Limited ("Ullrich") to acquire 100% of Ullrich at a projected book equity value
  (net tangible assets, NTA) of NZ$131m1 (A$118m). This is subject to finalisation of accounts for the period 1 April to 31 July 2022 and precedent conditions by 16 September
  2022.
• The equivalent enterprise value is NZ $165m (A$149m) based on NZ$34m (A$31m) net debt assumed by
  Vulcan as part of the acquisition, excluding NZ$79m capitalised lease obligations. On Ullrich's March year- ended 2021 and 2022 earnings, this represents 7.2x and 4.3x pre-IFRS 16 EBITDA1,2 multiple, respectively.
• Adjusting for the working capital to be reduced which will be funded by a deferred settlement of NZ$20m for the transaction in 1H 2023, the effective adjusted enterprise value is NZ $145m (A$131m). On Ullrich's March year-ended 2021 and 2022 earnings, this represents 6.3x and 3.8x pre-IFRS 16 EBITDA multiple, respectively.

Rationale

• Ullrich is an aluminium distribution focused business.
  With 60 years' operating history, the company is regarded as one of the leading downstream participants in Australasia. In the financial years ended
  31 March 2021 and 2022, the company recorded
  NZ$215m and NZ$270m in revenue, respectively, and
  NZ$32m (NZ$23m pre-IFRS 16) and NZ$49m in EBITDA (NZ$39m pre-IFRS 16), respectively.
• The aluminium distribution market is an opportunity which Vulcan has been considering for many years. Ullrich's platform and network combined with Vulcan offer significant potential synergies.

Funding

• The acquisition of Ullrich will be fully debt funded.
• On completion of the settlement (excluding the
  NZ$20m working capital deferred payments in 2023) on 16 September 2022, Vulcan's post transaction financial position remains strong, with a proforma Net Debt/EBITDA of 1.44x in FY22.

Impact on Earnings & Payout

• Eleven months of consolidated earnings and accretive to Vulcan's NPAT and earnings per share in FY23
• To provide more details at FY22 result on earnings and synergies
• 60%-80%dividend payout policy retained.

Remaining Conditions

The acquisition is subject to various conditions including no material adverse change prior to completion of the transaction, finalisation of lease terms, stock take and fixed asset review, and accounts for the period 1 April to 31 July 2022.

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1. EBITDA Earnings Before Interest Tax and Depreciation and Amortisation. 2. IFRS16 International Financial Reporting Standards 16 accounting for leases.

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A compelling investment opportunity

Ullrich is an integrated distribution-centric operator with a large sales network, together with extrusion facilities and fabrication operations.

• A well-established and a strong industrial brand in aluminium with scale across Australia and New Zealand

23,000t1

Tonnes of aluminium products sold in FY22

(+7.6% cagr FY18-22)

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• Complementary to Vulcan's stainless product offering
• Alignment between Vulcan and Ullrich company culture
• A customer-centric service model which includes ownership of truck fleet operated by employee drivers
• Site optimisation and productivity gain opportunity
• Further enhances the potential for additional hybrid sites and cross selling collaboration, especially in stainless and aluminium products
• Margin enhancement opportunity
• Optimisation of aluminium stock range to improve working capital efficiency
• The introduction of value added processing opportunity for aluminium
• Earnings and shareholder value accretive

10-12%

Pre-COVID-19 ROCE2 FY18-20

(Return on Capital Employed)

1.0x

Acquisition Price/ NTA

(subject to account finalisation

and acquisition accounting

standards)

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1. Only includes products that are sold by weight or where sales weight are measured. 2. ROCE is based on pre-IFRS 16 EBIT divided by shareholders funds and net debt excluding capitalised lease obligations.