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Diversified Industrials - Metals & Materials I Q3 2017
Investment Banking I Industry Spotlight
2
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017
Key Industrial Sector Contacts
Investment Banking
Debt Capital Markets Equity Capital Markets
Mike Brothers Managing Director
michael.brothers@53.com
Mike Ryan Managing Director
michael.ryan@53.com
Corporate Banking
Diversified Industrials Investment Banking
Industry Expertise Capital Markets Capabilities
Full-service Capital Markets platform staffed with over 200 professionals, offering the following capabilities:
Investment Banking
M&A Advisory
Capital Raising
Strategic Alternatives
Debt Capital Markets (DCM)
Loan Capital Markets:
– Pro Rata
– Institutional
Bond Capital Markets:
– Investment Grade
– High Yield
– Acquisition & Bridge Finance
Securitization & Private Placements
Equity Capital Markets (ECM)
Initial Public Offerings (IPO’s)
Follow-On Offerings
Convertible Debt
Sponsor Coverage
Bill Tyson Co-Head Capital Markets, EVP
william.tyson@53.com
Jeff Thieman Managing Director
jeff.thieman@53.com
Diversified Industrials Group Overview
Jeremy Eberlein Managing Director
jeremy.eberlein@53.com
Zac Kennedy Senior Associate
zac.kennedy@53.com
Senior Diversified Industrials Investment Banking Team
Chemicals, Plastics & Packaging
Coatings Diversified Chemicals
Packaging Plastics Manufacturing
Industrial Technology
Flow Control Process/Motion Control
Test & Measurement
Metals & Materials
Metal Forming & Machining
Mills & Specialty Metal
Natural Resources & Mining
Processors/ Distributors Scrap/Recycling
Specialty Distribution
Automotive Aftermarket Building & Construction
Products
Electrical & Communication
Industrial, MRO & Safety
Transportation & Logistics
Automotive & Heavy Duty Vehicles
Marine
Rail & Rail Services Third Party Logistics
Over 20 years of investment banking experience, inclusive of: merger & acquisition advisory, restructuring advisory, equity offerings, debt placements, and principal investing
Career primarily focused on middle market industrial oriented companies
Previously a Director in Harris Williams & Co’s Industrials Group and led the Metals Industry Practice
BSBA – Ohio University
Over 11 years of investment banking and private equity experience with Corporate Fuel Partners and Fifth Third Securities
Experienced with a variety of middle market industrial manufacturing, distribution and services companies
BS – University of Florida
MBA – New York University’s Stern School of Business
Jeremy Eberlein Managing Director
Marc Hirschfield Vice President
Christopher Mosley Metals West
christopher.mosley@53.com
Rachel Hermanson Metals East
rachel.hermanson@53.com
C.J. Andriole Senior Associate
cj.andriole@53.com
Joe Carson Managing Director
joeseph.carson@53.com Marc Hirschfield
Principal marc.hirschfield@53.com
Joe Carson Managing Director
Over 24 years of experience in financial advisory services, investment banking, and strategic planning coupled with direct operational and managerial responsibilities
Prior to FTS, served as a Senior Vice President at Caldwell Tanks; oversaw business development and strategy
Prior to Caldwell Tanks, served as a Managing Director and Co-Head of Industrials at Western Reserve Partners
BSBA – Miami University MBA – Case Western Reserve University’s Weatherhead
School of Management
Melina Audinelle Director
melina.audinelle@53.com
Gregory Eck Asset Based Lending
gregory.eck@53.com
Chemicals, Plastics & Packaging
Coatings Diversified Chemicals
Packaging Plastics Manufacturing
Specialty Distribution
Automotive Aftermarket Building & Construction
Products
Electrical & Communication
Industrial, MRO & Safety
Industrial Technology
Flow Control Process/Motion Control
Test & Measurement
Metals & Materials
Metal Forming & Machining
Mills & Specialty Metal
Natural Resources & Mining
Processors/ Distributors Scrap/Recycling
Transportation & Logistics
Automotive & Heavy Duty Vehicles
Marine
Rail & Rail Services Third Party Logistics
3
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017
July 2017
has been acquired by
The undersigned served as Exclusive Financial Advisor to Schafer in connection with this transaction
About Schafer
Founded in 1934, Schafer Industries is a leading producer of high-precision, custom-engineered gears and machined parts as well as assembled axles, transaxles, transmissions, brake assemblies and other components for a wide variety of industries. An ISO 9001:2015 company, Schafer is headquartered together with an operations facility in South Bend, Ind., and has manufacturing facilities in Illinois and Ohio.
About HBM Holdings
HBM Holdings is an investment and management company that acquires, supports, and operates middle-market businesses in industrial products and services. The firm’s strategy is to grow a diversified portfolio using a long-term buy and build approach. HBM provides our portfolio companies with professional management expertise, financial resources, and high potential human capital to accelerate their growth. HBM invests in high-performing companies in the specialty-manufacturing sector, specifically in industrial equipment and components, energy equipment, transportation equipment (excluding light automotive) and chemical and minerals. HBM’s portfolio of companies includes Mississippi Lime Company, Delavau LLC, Schafer Industries, Tru-Flex LLC, and Breen Energy Solutions LLC.
Highlighted FTS Advisory Transaction
July 2017: Fifth Third Securities, Inc. Advises Schafer Industries, Inc. on its Sale to HBM Holdings Company Fifth Third Securities, Inc. acted as the exclusive financial advisor to Schafer Industries Inc. (“Schafer”) on its recent sale to HBM Holdings Company (“HBM”). The acquisition of Schafer is a continuation of HBM’s long-term strategy to acquire and build market leading manufacturers of industrial products. Advising Schafer on the transaction from Fifth Third were Mike Burr, Managing Director and Head of FTS’ M&A practice; Jeremy Eberlein, Managing Director and Head of FTS’ Diversified Industrials Group; Rob Bohn, Director; C.J. Andriole, Senior Associate; and Max Matthews, Analyst.
Key Transaction Commentary
“The Fifth Third Securities team not only was wonderful to work with, but it also delivered results,” said Bipin Doshi, CEO of Schafer. “The team worked efficiently and effectively with our legal, financial and operational teams and successfully closed the deal in a 45-day window.”
“Our investment banking team is proud to have represented Schafer and its shareholders in their transition to new ownership under HBM Holdings and we look forward to following the company’s continued growth and success,” said Jeremy Eberlein. “Schafer’s impressive capabilities and dedicated employees will be an excellent fit with HBM’s dedication to long-term value creation and provide HBM with a strong platform for future industry leadership.”
4
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017
July 2017
Advanced Energy Technologies LLC
a subsidiary of
has been acquired by
The undersigned served as Exclusive
Financial Advisor to GrafTech in connection with this transaction
About AET
Founded in 1886 in Cleveland, Ohio, by its predecessor firm, the National Carbon Company, Advanced Energy Technologies LLC (renamed following the closing to Neograf Solutions, LLC) is a leading technology developer and manufacturer of high quality flexible natural and synthetic graphite solutions for thermal management, fluid sealing, and industrial additive and powder applications in the consumer electronics, automotive, and other industries.
About GrafTech
GrafTech International Ltd. is a global company, established more than 130 years ago. It offers innovative graphite and petroleum needle coke material solutions to its customers in a wide range of industries and end markets, including steel and other metals manufacturing, graphite electrode, and specialties manufacturing. GrafTech operates 12 principal manufacturing facilities on four continents and sells products in over 70 countries. Headquartered in Brooklyn Heights, Ohio, GrafTech employs approximately 1,500 people.
Highlighted FTS Advisory Transaction
July 2017: Fifth Third Securities, Inc. Advises GrafTech International Ltd. on the Sale of Advanced Energy Technologies LLC to Aterian Investment Partners
Fifth Third Securities, Inc. (“FTS”) acted as exclusive financial advisor to GrafTech International Ltd. (“GrafTech”) on the sale of Advanced Energy Technologies LLC (“AET”) to Aterian Investment Partners (“Aterian”). The sale was completed as part of the on-going divestiture of GrafTech’s Engineered Solutions segment, enabling GrafTech to focus on its core graphite electrode and related businesses. Advising GrafTech on the transaction from Fifth Third were Jeremy Eberlein, Managing Director and Head of FTS’ Diversified Industrials Group; Marc Hirschfield, Principal; and Colin Schulz, Analyst.
Key Transaction Commentary
“This transaction infuses new energy and business development experience into the Company and is a critical step in NeoGraf’s continued development. Aterian has demonstrated a track record of investing in operations and growing businesses alongside management. Aterian’s support will allow NeoGraf to continue providing technology-leading, high quality products to our existing customers, as well as pursue additional business initiatives and service offerings.” – Andy Reynolds, CEO of NeoGraf
5
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017
+47%
(25%)
0%
25%
50%
75%
Sep-16 Dec-16 Mar-17 Jun-17 Sep-17
Metal Forming & Machining Mills & Specialty MetalNatural Resources & Mining Processors/DistributorsScrap/Recycling S&P 500
+6%
+33%
+37%
(20%)
(10%)
0%
10%
20%
Sep
-16
Oct
-16
No
v-1
6
Dec
-16
Jan
-17
Feb
-17
Mar
-17
Ap
r-17
May
-17
Jun
-17
Jul-
17
Au
g-1
7
Sep
-17
Hot-Rolled Steel Coil ($/ton) Cold-Rolled Steel Coil ($/ton)
Copper ($/lbs.) Zinc ($/ton)
5
10
15
20
20
40
60
80
Au
g-1
0
Dec
-10
Ap
r-11
Au
g-1
1
Dec
-11
Ap
r-12
Au
g-1
2
Dec
-12
Ap
r-13
Au
g-1
3
Dec
-13
Ap
r-14
Au
g-1
4
Dec
-14
Ap
r-15
Au
g-1
5
Dec
-15
Ap
r-16
Au
g-1
6
Dec
-16
Ap
r-17
Au
g-1
7
ROW China North America
[1] Washington Post [2] Ducker Worldwide [3] World Steel Association [4] American Iron and Steel Institute
Selected Price Performance Benchmarks (% monthly change) [6]
+34%
Latest Twelve Months (“LTM”) Share Price Performance [7,8]
Market Insights Metals & Materials
RECENT HEADLINES Tuesday, August 8, 2017: U.S. Commerce Department issued an import tax on
shipments of aluminum foil from various Chinese providers [1]
− Specifically levied “countervailing duties” on four Chinese companies ranging from 17% on one firm to 81% for two others
Ruling still awaits final decision from the Commerce Department on October 23rd, in addition to a decision from the International Trade Commission
Automotive industry aluminum consumption is expected to rise by 42% over the next decade, lower than previous forecasts [2]
− Analysts do not expect another scaled aluminum model like the Ford F-150 to enter the market, as designers turn to new lightweight, high-strength steels and materials, including magnesium and carbon fiber to achieve weight savings
MARKET UPDATES AND TRENDS YTD Aug-2017 global crude steel production increased 5.0% vs. YTD Aug-2016 [3]
− Chinese steel production outpaced North American production in the first eight months of the year, growing at 5.6% Y-o-Y versus 3.2% Y-o-Y, respectively [3]
− North American M-o-M growth in steel production from July to August outpaced Chinese production, growing at 2.9% vs. Chinese growth of 1.1% [3]
Capacity utilization for raw steel and iron produced through August 2017 was 74.6%, an increase from the 72.2% utilization rate seen over the same period in 2016 [4]
The gap between U.S. and Chinese hot-rolled steel pricing narrowed by approximately 50% from January to August 2017 [4]
As a result of the increased steel demand, the pricing of electrodes, used by mini-mills to melt scrap in electric arc furnaces, have soared from about $1.0/lb. to $5.0/lb., raising the cost from as low as $10 per net ton of steel to as high as $80 per net ton of steel produced
For the first eight months of 2017, U.S. total and finished steel imports were 26.7 million net tons and 20.6 million net tons, up 21.4% and 16.5%, respectively, from the same period in 2016 [4]
Current agricultural steel demand is relatively frothy, as export pricing and the demand outlook for tractors, combines, and implements both continue to experience volatility and uncertain growth
− Machinery and equipment accounts for ~ 9.0% of U.S. steel demand, with agricultural equipment representing a portion of that percentage, mostly in tractors and combines [4]
− For the first half of 2017:
Shipments of 2WD tractors classified as <40 horsepower (HP) were up 12.1%, consistent with FY 2016 growth [5]
Growth in shipments of larger, 2WD >100 HP tractors remains negative, although less so than FY 2016 (-14.0% vs. -22.4%, respectively) [5]
Global Crude Steel Production (million tons) [3]
+17%
Source Websites: [1] https://www.washingtonpost.com/news/wonk/wp/2017/08/09/trump-edges-closer-to-a-trade-war-with-china-thanks-to-aluminum-foil/?utm_term=.74261d9f4418 [2] Potential: http://www.reuters.com/article/us-usa-trump-steel-idUSKBN17M237
Ch
ina
an
d R
est
of
Wo
rld
No
rth A
merica
[5] Association of Equipment Manufacturers [6] Steelbenchmarker, S&P Capital IQ as of September 29, 2017 [7] S&P Capital IQ as of September 29, 2017 [8] Detail related to indices can be found on pgs. 6 – 9
RECENT INFRASTRUCTURE AND TRADE HEADLINES
The Trump Administration’s $1 trillion infrastructure plan is gaining visibility, after more than 500 infrastructure projects were recently submitted for proposal from every U.S. state and several U.S. territories, totaling over $500 billion [1]
− President Trump granted permit for construction of the Keystone XL pipeline March 24, 2017
− Notables currently in plan: $45 billion Alaska Pipeline and LNG Project; $25 billion Gateway Rail Tunnel Project connecting New York and New Jersey; $15 billion California WaterFix (Bay Delta Tunnels) Project [1]
Current prioritization and future result of the U.S. Section 232 case, which allows the President to adjust imports if excessive foreign imports are found to be a threat to national security, serves as a potential catalyst to the broader Metals & Materials industry
− Potential macroeconomic result: less foreign steel imports in the U.S., leading to an increase in domestic metals production
MARKET UPDATES AND REVIEWS
Although China still disproportionately utilizes blast furnaces to produce the majority of its steel, the U.S. continues to transition to more energy and operationally efficient arc furnaces for raw steel production [2]
− U.S. electric arc furnace output increased 6.6% while U.S. blast furnace output was down 3.0% in 1Q 2017 when compared to 1Q 2016 [2]
Adjusted YTD Jun-2017 U.S. steel production was 41.6 million net tons, up 2.5% from the same period last year [2]
− YTD Jun-2017 U.S. steel production capability utilization rate of 74.4%, increasing 1.8% from the same period last year [2]
GLOBAL CRUDE STEEL PRODUCTION TRENDS
YTD May-2017 global crude steel production increased 4.9% when compared to the same period last year [3]
− Chinese steel production out-paced North American production in the first five months of the year, growing at 4.3% Y-o-Y versus 3.6% Y-o-Y [3]
However, North America recently experienced a favorable steel production uptick, growing 4.2% in May 2017 M-o-M from April 2017, while Chinese steel production declined 0.7% over the same period [3]
MAJOR INDUSTRY PLAYERS: LAST TWELVE MONTHS STOCK PERFORMANCE
Since June 2016, all public market Metals & Materials indices have outperformed the S&P 500, excluding the Processors/Distributors index
− Metal Forming & Machining index trending upwards YTD 2017
− Scrap/Recycling public companies marginally performed most favorably over the last twelve months from a pricing perspective, gaining 31% since June 2016
6
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017
3.0x
5.0x
7.0x
9.0x
11.0x
13.0x
Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17
Metal Forming & Machining Mills & Specialty Metal
Natural Resources & Mining Processors/Distributors
Scrap/Recycling S&P 500
+75% +64% +62%
Sub Sector Indices’ Stock Price Performance and Valuation Summary
Metals & Materials 5-Year Share Price Performance Metals & Materials 5-Yr. Median EV/1-Yr. Forward EBITDA Valuation
Public Market Valuation Trends Metals & Materials
Source: S&P Capital IQ as of September 29, 2017
+13%
+36%
(36%)
(100%)
(75%)
(50%)
(25%)
0%
25%
50%
75%
100%
Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17
Metal Forming & Machining Mills & Specialty MetalNatural Resources & Mining Processors/DistributorsScrap/Recycling S&P 500
Sub SectorNumber of
Companies
Median
Enterprise Value
Median
% Change in Stock Price
Median TEV /
LTM Multiples
Median TEV /
Forward Multiples
$ in millions 12 Months YTD Revenue EBITDA Revenue EBITDA
Metal Forming & Machining 18 $1,922 34% 24% 1.4x 11.4x 1.4x 9.6x
Mills & Specialty Metal 19 $4,392 33% 16% 0.9x 7.5x 0.9x 7.4x
Natural Resources & Mining 6 $40,843 47% 11% 1.6x 6.3x 1.4x 5.2x
Processors/Distributors 6 $1,762 6% (4%) 0.6x 10.1x 0.6x 8.7x
Scrap/Recycling 4 $2,659 37% 3% 0.6x 9.9x 0.6x 7.9x
S&P 500 500 17% 12% 2.4x 12.3x 2.3x 10.6x
7
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017 Comparable Public Companies Metals & Materials – Metal Forming & Machining
Operating & Trading Statistics ($ in millions, except per-share data)
NA – Not available NM – Not meaningful E – Estimate Enterprise value equals market capitalization plus minority equity plus debt minus cash Source: S&P Capital IQ as of September 29, 2017
Stock % of 52- Enterprise Value /
Price at Week Market Enterprise Revenue Growth LTM Margins Debt / Price / Revenue EBITDA
9/29/17 High Cap Value '15A - '16A '16A - '17E Gross EBITDA EBITDA Earnings LTM 2017E LTM 2017E
Metal Forming
Arconic Inc. $24.88 81% $11,476 $16,606 (0%) (2%) 21.0% 10.7% 5.1x NM 1.3x 1.4x 12.3x 9.2x
Voestalpine AG 50.99 96% 8,991 13,020 (4%) 4% 22.3% 14.0% 2.5x 16.8x 1.0x 1.0x 6.9x 7.4x
Kaiser Aluminum Corporation 103.14 100% 1,741 1,877 (4%) 2% 22.9% 14.9% 1.8x 18.2x 1.4x 1.4x 9.2x 10.0x
Shiloh Industries Inc. 10.40 62% 238 405 (1%) NA 10.6% 6.8% 2.5x 27.4x 0.4x NA 5.6x NA
SIFCO Industries Inc. 5.70 49% 32 66 9% NA 11.6% 3.9% 7.0x NM 0.5x NA 13.4x NA
Median: Metal Forming (1%) 2% 21.0% 10.7% 2.5x 18.2x 1.0x 1.4x 9.2x 9.2x
Industrial Machining
Regal Beloit Corporation $79.00 90% $3,559 $4,659 (8%) 1% 27.0% 14.4% 2.8x 17.1x 1.4x 1.4x 9.9x 9.5x
The Timken Company 48.55 94% 3,795 4,384 (7%) (0%) 26.2% 13.9% 2.6x 30.9x 1.6x 1.7x 11.4x 11.3x
Rexnord Corporation 25.41 99% 2,642 3,754 (0%) 1% 35.3% 17.0% 5.0x 39.7x 1.9x 1.9x 11.4x 9.8x
RBC Bearings Inc. 125.15 99% 2,941 3,133 3% 4% 37.9% 24.2% 1.6x 42.1x 5.0x 4.9x 20.7x 20.3x
Actuant Corporation 25.60 86% 1,531 1,864 (5%) 1% 34.6% 11.4% 4.5x 30.5x 1.7x 1.7x 14.9x 12.3x
Altra Industrial Motion Corp. 48.10 99% 1,424 1,690 (5%) 19% 31.7% 14.1% 2.9x 47.9x 2.2x 2.0x 15.2x 13.7x
CIRCOR International, Inc. 54.43 75% 905 1,080 (10%) 12% 31.9% 9.6% 4.5x NM 1.8x 1.6x 19.1x 13.2x
Median: Industrial Machining (5%) 1% 31.9% 14.1% 2.9x 35.3x 1.8x 1.7x 14.9x 12.3x
Aerospace Machining
Spirit AeroSystems Holdings, Inc. $77.72 98% $9,182 $9,573 2% 1% 14.2% 10.9% 1.5x 21.9x 1.4x 1.4x 12.9x 8.8x
Triumph Group, Inc. 29.75 85% 1,499 2,743 (9%) (2%) 23.9% 11.7% 3.2x NM 0.8x 0.8x 6.8x 5.9x
Kaman Corporation 55.78 102% 1,526 1,932 2% 3% 29.9% 9.1% 2.7x 28.4x 1.1x 1.0x 12.0x 11.4x
Magellan Aerospace Corp. 14.32 84% 845 941 9% 3% 17.6% 15.5% 0.9x 10.6x 1.2x 1.2x 8.0x 6.9x
Ducommun Inc. 32.05 90% 366 528 (17%) 2% 19.1% 9.4% 3.3x 26.4x 1.0x 0.9x 10.2x 9.3x
Heroux-Devtek Inc. 10.38 81% 366 436 (3%) (2%) 16.7% 13.8% 2.4x 15.7x 1.4x 1.5x 10.3x 9.3x
Median: Aerospace Machining (0%) 1% 18.4% 11.3% 2.5x 21.9x 1.2x 1.1x 10.3x 9.1x
All Indices Median (3%) 2% 23.4% 12.7% 2.7x 26.9x 1.4x 1.4x 11.4x 9.6x
8
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017 Comparable Public Companies Metals & Materials – Mills & Specialty Metal
Operating & Trading Statistics ($ in millions, except per-share data)
NA – Not available NM – Not meaningful E – Estimate Enterprise value equals market capitalization plus minority equity plus debt minus cash Source: S&P Capital IQ as of September 29, 2017
Stock % of 52- Enterprise Value /
Price at Week Market Enterprise Revenue Growth LTM Margins Debt / Price / Revenue EBITDA
9/29/17 High Cap Value '15A - '16A '16A - '17E Gross EBITDA EBITDA Earnings LTM 2017E LTM 2017E
Mills & Specialty Metal
NIPPON STEEL & SUMITOMO METAL CORPORATION $22.94 89% $20,242 $41,550 (5%) 11% 12.2% 10.0% 4.4x 17.3x 0.9x 0.9x 9.4x 8.5x
ArcelorMittal 25.79 82% 26,311 40,644 (11%) 13% 11.8% 12.0% 1.9x 8.6x 0.7x 0.6x 5.4x 5.2x
POSCO 277.17 91% 22,173 38,410 (11%) 17% 13.3% 12.1% 3.2x 13.6x 0.8x 0.7x 6.3x 6.1x
Nucor Corporation 56.04 82% 17,901 21,054 (1%) 18% 14.3% 14.6% 1.6x 16.9x 1.2x 1.1x 7.9x 7.2x
Voestalpine AG 50.99 96% 8,991 13,020 (4%) 4% 22.3% 14.0% 2.5x 16.8x 1.0x 1.0x 6.9x 7.4x
Steel Dynamics Inc. 34.47 86% 8,268 9,692 2% 15% 18.7% 15.6% 1.7x 16.3x 1.1x 1.1x 7.1x 6.6x
Alcoa Inc. 46.62 97% 8,594 11,322 (17%) 24% 18.0% 15.5% 0.9x NM 1.1x 1.0x 7.1x 5.6x
United States Steel Corp. 25.66 61% 4,488 5,894 (11%) 18% 8.4% 7.5% 3.5x NM 0.5x 0.5x 7.0x 4.5x
Outokumpu Oyj 10.39 84% 4,282 5,613 (13%) 17% 10.5% 11.1% 2.2x 11.1x 0.8x 0.8x 7.0x 6.6x
Acerinox, S.A. 14.42 86% 3,981 4,823 (9%) 21% 35.4% 11.6% 2.4x 20.0x 0.9x 1.0x 8.1x 8.9x
AK Steel Holding Corporation 5.59 49% 1,760 3,666 (12%) 3% 15.0% 12.0% 2.4x 21.7x 0.6x 0.6x 5.1x 6.2x
Allegheny Technologies Inc. 23.90 100% 2,602 4,493 (16%) 10% 9.9% 8.9% 6.6x NM 1.4x 1.3x 15.2x 11.0x
Commercial Metals Company 19.03 77% 2,203 2,992 (23%) 11% 13.1% 6.4% 3.5x 28.8x 0.6x 0.6x 9.8x 8.0x
Ferroglobe PLC 13.16 91% 2,263 2,694 21% 6% 34.4% 3.8% 10.5x NM 1.7x 1.6x 45.7x 19.3x
Carpenter Technology Corp. 48.03 101% 2,246 2,784 (1%) 7% 15.2% 11.9% 2.8x NM 1.5x 1.4x 13.0x 10.4x
Schmolz + Bickenbach AG 0.92 90% 868 1,415 (16%) 10% 37.3% 7.8% 2.6x NM 0.5x 0.5x 6.4x 6.7x
Global Brass and Copper Holdings, Inc. 33.80 85% 740 975 (11%) 6% 12.8% 7.8% 2.8x 19.9x 0.7x 0.7x 8.6x 7.8x
TimkenSteel Corporation 16.50 72% 733 865 (21%) 41% NM NM NM NM 0.8x 0.7x NM 9.7x
Universal Stainless & Alloy Products Inc. 20.85 100% 151 228 (15%) 11% 10.0% 10.2% 4.3x NM 1.3x 1.3x 12.8x 9.2x
Median: Mills & Specialty Metal (11%) 11% 13.8% 11.3% 2.7x 16.9x 0.9x 0.9x 7.5x 7.4x
9
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017 Comparable Public Companies Metals & Materials – Natural Resources & Mining, Processors/Distributors, and Scrap/Recycling
Natural Resources & Mining Operating & Trading Statistics ($ in millions, except per-share data)
Processors/Distributors Operating & Trading Statistics ($ in millions, except per-share data)
Scrap/Recycling Operating & Trading Statistics ($ in millions, except per-share data)
NA – Not available NM – Not meaningful E – Estimate Enterprise value equals market capitalization plus minority equity plus debt minus cash Source: S&P Capital IQ as of September 29, 2017
Stock % of 52- Enterprise Value /
Price at Week Market Enterprise Revenue Growth LTM Margins Debt / Price / Revenue EBITDA
9/29/17 High Cap Value '15A - '16A '16A - '17E Gross EBITDA EBITDA Earnings LTM 2017E LTM 2017E
Natural Resources & Mining
BHP Billiton plc $17.62 87% $93,823 $116,926 23% 12% 85.6% 50.6% 1.6x 37.8x 3.1x 2.7x 6.0x 4.8x
Rio Tinto plc 46.56 92% 82,943 96,733 (3%) 17% 20.7% 40.5% 1.0x 18.2x 2.6x 2.4x 6.4x 5.4x
Glencore Plc 4.59 91% 65,390 92,089 4% 19% 2.1% 5.7% 2.9x NM 0.5x 0.5x 8.8x 6.5x
Vedanta Resources plc 11.69 78% 3,342 19,860 7% 17% 23.7% 27.5% 6.3x NM 1.7x 1.5x 6.3x 5.4x
Cliffs Natural Resources Inc. 7.15 58% 2,120 3,583 5% 19% 20.0% 20.5% 3.5x 26.6x 1.5x 1.4x 7.5x 5.1x
ERAMET S.A. 67.94 86% 1,795 2,668 (7%) 14% 19.5% 17.0% 3.4x NM 0.7x 0.8x 4.1x 3.8x
Median: Natural Resources & Mining 4% 17% 20.4% 24.0% 3.1x 26.6x 1.6x 1.4x 6.3x 5.2x
Stock % of 52- Enterprise Value /
Price at Week Market Enterprise Revenue Growth LTM Margins Debt / Price / Revenue EBITDA
9/29/17 High Cap Value '15A - '16A '16A - '17E Gross EBITDA EBITDA Earnings LTM 2017E LTM 2017E
Processors/Distributors
Reliance Steel & Aluminum Co. $76.17 86% $5,560 $7,513 (8%) 10% 29.6% 9.3% 2.4x 17.2x 0.8x 0.8x 8.8x 8.4x
Worthington Industries, Inc. 46.00 74% 2,829 3,539 7% 1% 16.7% 9.2% 2.7x 16.2x 1.1x 1.2x 12.3x 11.8x
Klöckner & Co SE 12.82 83% 1,279 1,834 (14%) 8% 21.5% 3.5% 2.9x 14.8x 0.3x 0.3x 7.5x 8.0x
Russel Metals Inc. 22.07 93% 1,369 1,568 (14%) 19% 19.4% 6.1% 2.4x 17.7x 0.7x 0.7x 11.4x 11.5x
Ryerson Holding Corporation 10.85 64% 353 1,314 (10%) 12% 18.1% 5.0% 6.6x 26.9x 0.4x 0.4x 8.4x 5.9x
Olympic Steel, Inc. 22.00 77% 239 446 (10%) 15% 21.3% 3.0% 5.9x 28.9x 0.4x 0.4x 12.4x 9.0x
Median: Processors/Distributors (10%) 11% 20.3% 5.6% 2.8x 17.5x 0.6x 0.6x 10.1x 8.7x
Stock % of 52- Enterprise Value /
Price at Week Market Enterprise Revenue Growth LTM Margins Debt / Price / Revenue EBITDA
9/29/17 High Cap Value '15A - '16A '16A - '17E Gross EBITDA EBITDA Earnings LTM 2017E LTM 2017E
Scrap/Recycling
Steel Dynamics, Inc. $34.47 86% $8,268 $9,692 2% 15% 18.7% 15.6% 1.7x 16.3x 1.1x 1.1x 7.1x 6.6x
Commercial Metals Company 19.03 77% 2,203 2,992 (23%) 11% 13.1% 6.4% 3.5x 28.8x 0.6x 0.6x 9.8x 8.0x
Sims Metal Management Limited 10.58 82% 2,125 1,831 12% 3% 14.2% 4.6% 0.0x 25.7x 0.5x 0.5x 10.3x 7.7x
Schnitzer Steel Industries, Inc. 28.15 92% 741 915 (29%) 13% 13.3% 5.7% 2.0x 18.1x 0.6x 0.6x 10.1x 9.0x
Median: Scrap/Recycling (10%) 12% 13.8% 6.0% 1.9x 21.9x 0.6x 0.6x 9.9x 7.9x
10
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017
8.0x
9.3x
8.7x
7.2x
8.1x8.4x 8.3x 8.4x
9.3x
9.9x 9.7x10.0x 10.2x
8.8x 8.7x9.0x
8.3x8.8x 9.0x
8.7x 8.7x 8.9x
9.6x9.3x
10.2x
8.5x
6.0x
8.0x
10.0x
12.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD8/2016
YTD8/2017
Financial Buyers Strategic Buyers
0
4,000
8,000
12,000
16,000
20,000
24,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 3Q 2016 3Q 2017
Under $25mm $25 to $500mm Above $500mm Undisclosed
U.S. M&A Volume and Valuation Trends
Median Transaction Multiples (Enterprise Value / LTM EBITDA)
Transaction Volume
Note: This data represents the entire U.S. market (all industries) Source: PitchBook, S&P Capital IQ, and S&P Capital IQ LCD
Recession Recession
’16 vs. ’17
▼ 15%
‘07 to ‘11 Median Financial = 8.4x Strategic = 8.8x
‘12 to ‘16 Median Financial = 9.3x Strategic = 8.9x
11
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017
U.S. Metals & Materials M&A Announced Deal Volume Recent activity in U.S. Metals & Materials M&A has been driven by middle market transactions
− Highlighted middle market transactions include:
Gamut Capital’s acquisition of JPW Industries, announced July 19, 2017
White Wolf Capital’s acquisition of Astro-Tek Industries, announced June 30, 2017
− U.S. deal volume increased in 3Q 2017 from the prior quarter, but was lower on a Q-o-Q basis when compared to 3Q 2016
U.S. middle market deal multiples have strengthened YTD 9/2017 from 2016 and remain in line with the seven-year average
− The average YTD 9/2017 enterprise value to LTM EBITDA multiple for U.S. middle market transactions was 7.1x (vs. 6.0x for 2016)
U.S. M&A outlook for Metals & Materials remains strong
− Current low interest rate environment in the U.S. is a positive tailwind and attractive for valuation
− Domestic steel pricing trending favorably, potentially strengthening U.S. metals companies’ operating performance and pushing valuations to more attractive levels
U.S. Hot-Rolled Coil (FOB Midwest Mill) pricing has increased by 7.0% YTD 9/2017
U.S. Metals & Materials M&A Disclosed Deal Value ($ in billions)
U.S. Metals & Materials M&A Closed Deal Average EV / EBITDA Multiple
Note: Middle Market defined as transactions with disclosed deal values less than $1 billion EV – Enterprise Value ND – No Transaction Values Disclosed NM – Not Meaningful Source: Fifth Third Securities, Bloomberg, PitchBook and S&P Capital IQ
M&A Trends Metals & Materials Specific Activity
0
50
100
150
1Q
201
0
2Q
201
0
3Q
201
0
4Q
201
0
1Q
201
1
2Q
201
1
3Q
201
1
4Q
201
1
1Q
201
2
2Q
201
2
3Q
201
2
4Q
201
2
1Q20
13
2Q
201
3
3Q
201
3
4Q
201
3
1Q
201
4
2Q
201
4
3Q
201
4
4Q
201
4
1Q
201
5
2Q
201
5
3Q
201
5
4Q
201
5
1Q
201
6
2Q
201
6
3Q
201
6
4Q
201
6
1Q
201
7
2Q
201
7
3Q
201
7
Total U.S. Metals & Materials Deal Volume
9.8x
5.8x 6.1x
9.8x7.5x
11.5x
6.0x7.1x
ND ND
14.0x11.8x
16.2x
10.5x
14.1x
ND0.0x
5.0x
10.0x
15.0x
20.0x
2010 2011 2012 2013 2014 2015 2016 YTD 9/2017
Middle Market >$1 Billion
$0
$2
$4
$6
$8
$10
1Q
201
0
2Q
201
0
3Q
201
0
4Q
201
0
1Q
201
1
2Q20
11
3Q
201
1
4Q
201
1
1Q
201
2
2Q
201
2
3Q
201
2
4Q
201
2
1Q
201
3
2Q
201
3
3Q
201
3
4Q
201
3
1Q
201
4
2Q
201
4
3Q
201
4
4Q
201
4
1Q
201
5
2Q
201
5
3Q
201
5
4Q
201
5
1Q
201
6
2Q
201
6
3Q
201
6
4Q
201
6
1Q20
17
2Q
201
7
3Q
201
7
Middle Market >$1 Billion
12
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017
Metals & Materials ($ in millions)
M&A Trends Metals & Materials – Select Global Transaction Detail
Source: Company Filings, S&P Capital IQ, PitchBook
Transaction's Implied Target's
Date Enterprise Enterprise Value / LTM Last Twelve Months ("LTM")
Announced Acquirer Target Value Revenue EBITDA
Sep-17 Quadrant Management General Flange & Forge $3 - -
Sep-17 Santa Fe Gold Corporation (OTCPK:SFEG) Bullard's Peak Corporation and Black Hawk Consolidated Mines Company, Inc. $3 - -
Sep-17 Kencoa Aerospace LLC Heart of Georgia Metal Crafters, LLC NA - -
Sep-17 Wolfden Resources Corporation (TSXV:WLF) Base-Metal Project In Penobscot County, Maine, USA $9 - -
Sep-17 Auxo Investment Partners Atlas Die LLC NA - -
Aug-17 PHI Group Inc. (OTCPK:PHIL) Twenty-One Mining Claims in Granite Mining District, Grant County, Oregon $49 - -
Aug-17 Kadant Inc. (NYSE:KAI) UNAFLEX, LLC $31 1.7x -
Aug-17 TCTM Financial FS LLC Wellman Dynamics Corporation $21 - -
Aug-17 New Hampshire Ball Bearings, Inc.; Development Bank of Japan Inc., Investment Arm C&A Tool Engineering, Inc. NA - -
Aug-17 Nucor Corporation (NYSE:NUE) St. Louis Cold Drawn, Inc. NA - -
Aug-17 Lippo China Resources Limited (SEHK:156); CCI U.S. Asset Holdings LLC CS Mining, LLC $35 - -
Aug-17 ConforMIS, Inc. (NasdaqGS:CFMS) Broad Peak Manufacturing LLC, Machining and Polishing Assets $7 - -
Aug-17 GenNx360 Capital Partners; Yukon Partners Management, LLC Tooling Technology Group, LLC NA - -
Aug-17 Speyside Equity LLC Craftsman Custom Metals, LLC NA - -
Aug-17 Ta Chen International, Inc. Outokumpu Oyj, Pipe Plant in Wildwood, Florida $30 - -
Jul-17 HBM Holdings Company Schafer Industries, Inc.
Jul-17 Aterian Investment Partners Advanced Energy Technologies LLC (business unit of GrafTech International Ltd.)
Jul-17 Trex Company, Inc. (NYSE:TREX) Staging Concepts Acquisition, LLC $72 - -
Jul-17 MCM Capital Partners First Impression Security Doors NA - -
Jul-17 H.I.G. Capital Diamond Gypsum Company NA - -
Jul-17 Arlington Capital Partners Thortex NA - -
Jul-17 RoadSafe Traffic Systems, Inc. IJN Inc. NA - -
Jul-17 The CapStreet Group, LLC Marco Group International, Inc. NA - -
Jul-17 PPG Industries, Inc. (NYSE:PPG) The Crown Group, Inc. NA - -
Jul-17 Gamut Capital Management, L.P. JPW Industries, Inc. $340 2.3x -
Jul-17 Amerinac Holding Corp. Prime Metals & Alloys Inc. $10 - -
Jul-17 Wingate Partners Precision Mine Repair NA - -
Jul-17 Genstar Capital Tri-Star Industries (United States) NA - -
Jul-17 American Alloy Acquisition LLC CC Metals and Alloys, LLC NA - -
Jun-17 AZZ Inc. (NYSE:AZZ) Enhanced Powder Coating, Inc. NA - -
Jun-17 White Wolf Capital Astro-Tek Industries NA - -
Jun-17 Synalloy Corporation (NasdaqGM:SYNL) (3% minority position) Universal Stainless & Alloy Products, Inc. (NasdaqGS:USAP) NA - -
Jun-17 Kyocera Corporation (TSE:6971) Kyocera Senco Industrial Tools, Inc. NA - -
Jun-17 Spell Capital Partners LLC Jet Edge, Inc. NA - -
Jun-17 Compco Industries, Incorporated Compco Quaker Manufacturing Inc. NA - -
Jun-17 Prospect Partners, LLC Qualitas Manufacturing Inc. NA - -
Jun-17 QVT Financial; JHL Capital Group; Shenghe Resources International Trading Co. Molycorp Minerals, LLC, Mountain Pass Mine $21 - -
Jun-17 Audax Group United Welding Services NA - -
Jun-17 Gulfco Forge Company, LLC (Ellwood Group Subsidiary) Gulf Coast Machine & Supply Company NA - -
Jun-17 Atkore International Group Inc. (NYSE:ATKR) Cobra Systems Inc. NA - -
May-17 Highland Capital Management, L.P. Structural & Steel Products, Inc. NA - -
May-17 TianJin Motor Dies Co., Ltd. (SZSE:002510) DieTech North America, LLC $33 - -
May-17 Boyd Corporation Aavid Thermalloy NA - -
May-17 Speyside Equity LLC Avon Machining Company NA - -
May-17 Reliance Worldwide Corporation Limited (ASX:RWC) Securus, Inc. $93 - -
May-17 Triton Investment Management Werner Holding Co. NA - -
May-17 Speyside Equity LLC Ashland Foundry & Machine Works LLC NA - -
Confidential
Confidential
13
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017
U.S. Private Equity deal flow was down during the third quarter of 2017 on a volume basis and up on a deal value basis
Private equity activity started off slow in 2017, yet market fundamentals point to strong deal flow in the year ahead as fundraising has continued at a rampant pace
As of June 30th, 2017, there were 5,758 private equity sponsored middle market companies in the U.S., representing a 40% increase in inventory since 2010
− 39.7% of U.S. private equity sponsored middle market companies were acquired over five years ago
Metals & Materials private equity disclosed capital invested and number of deals closed increased slightly YTD 9/2017 when compared to the same period last year
− 53 deals closed for a total disclosed value of $1.3 billion during the first three quarters of 2017
The number of private equity exits within Metals & Materials decreased slightly YTD 9/2017 when compared to the same period last year, exhibiting a disclosed median deal size of $358 million
Overall U.S. Private Equity Deal Flow ($ in billions)
U.S. Metals & Materials Private Equity Deal Flow ($ in billions)
U.S. Metals & Materials Private Equity Exits ($ in millions)
*3Q17 preliminary PitchBook data ND – No Transaction Values Disclosed Source: Fifth Third Securities, PitchBook
Private Equity Activity Metals & Materials
67 64
8072
87 8569
52 53
$3.7 $4.1
$2.0 $1.0
$4.5
$3.2 $1.1
$1.1 $1.3
2010 2011 2012 2013 2014 2015 2016 YTD9/2016
YTD9/2017
# of Deals Closed Disclosed Capital Invested ($)
912
19
1116
13
22
1714
$142
$980
$78 $18
$800
$291 $54 $54 $358
2010 2011 2012 2013 2014 2015 2016 YTD9/2016
YTD9/2017
# of Exits Disclosed Median Deal Size ($)
0
500
1,000
1,500
$0
$50
$100
$150
$200
$250
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q14
3Q
14
4Q
14
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17*
Deal Value ($) # of Deals Closed
14
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
MM B-rated MM NR
6.12%
6.29%
Note: This data represents the entire U.S. middle market (all industries) Note: The middle market is defined as deal size < $100 million and borrower sales < $500 million [1] Includes both non-sponsored and sponsored transactions; sufficient data not available for MM NR loans in 1Q15 and 1Q17 Source: Bloomberg, S&P Capital IQ LCD, and Thomson Reuters LPC
U.S. Middle Market Loan Market Trends
Loan Volume: Low Level of Supply Continues ($ in billions) Non-Rated Term Loan Yields Tighten Further [1]
Covenant-Lite Volume Surges in 2Q17 ($ in billions) Leverage Multiples Remain Aggressive on Middle Market LBOs
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
Non-Sponsored Sponsored
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x1st Lien Debt to EBITDA Junior Debt to EBITDA
15
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017
112
159 197 181
241 241 273
313
361 347 366
L+0
L+50
L+100
L+150
L+200
L+250
L+300
L+350
L+400
L+450
Observation: Closing leverage determines ~97% (R2) of the variations in pricing; every 0.5x turn of leverage costs ~25bps (slope)
Pro Rata Market Update: 2Q 2017 Banks Ease Terms for Larger Credits; Downward Pricing Pressure Remains
Structure
Banks largely left C&I lending standards for firms of all sizes unchanged,
with a modest easing of most terms, including pricing and covenants, for
large and middle-market firms per the 2Q17 Federal Reserve Senior Loan
Officer Survey results. Per results of the 2Q17 Federal Reserve’s Senior Loan
Officer Survey. A moderate net percentage of banks increased the maximum
size of credit lines, reduced the cost of such credit lines, narrowed the spread
of loan rates over their cost of funds, and eased loan covenants
Observations from Fifth Third’s loan database:
Financial Covenants – single covenant deals became slightly more
prevalent through LTM Q2 2017, with two covenant deals remaining
most common, typically consisting of a leverage and coverage ratio
Tenors – static at 5 years, co-terminus revolver and term loans
Amortization – no discernable market-driven movement, with a
standard 5yr tenor term loan amortizing anywhere between 25-75%,
with ~30-35% amortization being most common
Excess Cash Flow Recapture – fewer deals continue to have no sweep,
with roughly half of all pro rata issuance executing without a sweep, up
from ~1/3 of deals in 2016
Pricing
While pricing in the pro rata market is highly subjective depending upon
banking relationships and ancillary business, respondents to the Fed Survey
have now reported net pricing reductions for 29 consecutive quarters
In-line with Fed survey muted responses with respect to pricing, Fifth
Third’s pro rata database showed a modest 4 bps of YoY spread contraction,
bringing the average drawn spread at close to L+200 for the 2Q17 vs. 2Q16
With many grids reaching levels below L+200, approaching pricing on
investment grade and asset based loans, there appears to be little runway for
further pricing concessions in the pro rata market
Source: Fifth Third Securities, Federal Reserve Board
Average Pro Rata Pricing at Close by Market Segment (as of 2Q17)
LTM 2Q17 Synthetic Leverage Grid for Pro Rata Executions
417 445
414 431
270 272 267 298
218 207 197 210
L + 0
L + 50
L + 100
L + 150
L + 200
L + 250
L + 300
L + 350
L + 400
L + 450
L + 500
Current Prior Yr Current Prior Yr
Trailing 3M Trailing 12M
Middle Market Sponsored Middle Market Non-Sponsored Pro Rata / Bank-Only
417445
414 431
270 272 267298
218 207 197 210
L +0
L +50
L +100
L +150
L +200
L +250
L +300
L +350
L +400
L +450
L +500
Current Prior Yr. Current Prior Yr.
Trailing 3M Trailing 12M
Middle Market Sponsored Middle Market Non-Sponsored Pro Rata / Bank-Only
16
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017 Asset Based Lending Market Update
ABL Deal Purpose Dispersion ABL Average Pro Rata Pricing
ABL Volume and Deal Count ($ billions) 2Q 2017: ABL Market Commentary
ABL issuance volumes totaled $25.3 billion in 2Q17, an increase of 13% and 29% from 2Q16 and prior quarter volumes, respectively. 1H17 volumes totaled nearly $45.0 billion
1H17 new money deal flow totaled $9.8 billion, or 22% of volume
Volume continued to consist primarily of refinancing activity with general corporate purposes being the primary use of proceeds. M&A lending was limited to 4% of total 1H17 volume
Deal size continued to skew towards the smaller end of the market (sub $250.0 million) as refinancings and add-ons dominated. Larger sized credits north of $500.0 million were heavily weighted towards repricings and opportunistic refinancings
Clubby deals under $150.0 million made up 52% of total 1H17 volumes. Deals ≥ $500.0 million represented 13% of 1H17 deal flow
Quarter over quarter ABL drawn spreads continue to tighten. Average drawn pricing decreased to 167 bps from 200bps. Average undrawn pricing decreased to 29 bps from 35 bps
In 1H17, 89% of deals ≥ $75 million in size were priced (drawn pricing) below 250 bps, of which 48% were priced between 150-199 bps
Source: Thomson Reuters LPC
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Gen. Corp. Purp. Amend & Extends DIP/Exit Fin. M&A Other
L+0
L+100
L+200
L+300
Drawn Undrawn
0
20
40
60
80
100
120
$0
$5
$10
$15
$20
$25
$30
$35
Volume Deal Count
17
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017 Economic Dashboard
Industrial Production Index Capital Goods Orders Housing Starts
Source: Board of Governors of the Federal Reserve System
($ in billions)
Source: United States Census Bureau
National Unemployment Rate Real GDP Growth Additions to Non-Farm Payrolls
Housing Starts
Source: Bureau of Economic Analysis Source: Bureau of Labor Statistics Source: Bureau of Labor Statistics
Source: United States Census Bureau
(in thousands of employees)
(in thousands of units)
$200
$225
$250
$275
96
102
108
114
5.0%
2.3%2.0%
2.6%2.0%
0.9% 0.8%1.4%
3.5%
2.1%1.4%
2.6%
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
'14 '15 '16 '17
4.0%
5.0%
6.0%
7.0%
0
100
200
300
400
750
850
950
1,050
1,150
1,250
1,350
18
Diversified Industrials - Metals & Materials I Industry Spotlight
Q3 2017 Notes & Definitions
S&P 500 Index- A broad index that includes American Companies. EBITDA- A company's earnings before interest, taxes, depreciation, and amortization, is an accounting measure calculated using a company's net earnings, before interest expenses, taxes, depreciation and amortization are subtracted, as a proxy for a company's current operating profitability. Dry Powder- Refers to cash reserves kept on hand to cover future obligations or to purchase assets. GDP- Gross domestic product is the market value of the goods and services produced by labor and property located in the United States Consumer Sentiment Index- The University of Michigan Consumer Sentiment Index is a consumer confidence index published monthly by the University of Michigan. The index is normalized to have a value of 100 in December 1964 National Unemployment Rate- the percentage of the total labor force that is unemployed but actively seeking employment and willing to work. Non-Farm Payroll- Nonfarm payroll employment is a compiled name for goods, construction and manufacturing companies in the US. It does not include farm workers, private household employees, non-profit organization employees, or government employees . It is an economic indicator released monthly by the United States Department of Labor as part of a comprehensive report on the state of the labor market. Housing Starts- are the number of new residential construction projects that have begun during any particular month. The Economist- offers authoritative insight and opinion on international news, politics, business, finance, science, technology and the connections between them LBO -- leveraged buyout (LBO) is the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company. Industrial Production Index (IPI)- is an economic indicator published by the Federal Reserve Board of the United States that measures the real production output of manufacturing, mining, and utilities Capital Goods Orders. Covenant-lite loans- means that debt is being issued, both personally and commercially, to borrowers with less restrictions on collateral, payment terms, and level of income. IRR-Internal Rate of Return.
About Fifth Third Capital Markets
Fifth Third Capital Markets is the marketing name under which Fifth Third Bank and its subsidiary, Fifth Third Securities, Inc., provide certain securities and investment banking products and services. Banking products and services are offered by Fifth Third Bank. Securities products and services are offered by licensed securities representatives of Fifth Third Securities, Inc., who may be employees of Fifth Third Bank. Important notice This document has been prepared by Fifth Third Bank (“Fifth Third”) or one of its subsidiaries for the sole purpose of providing a proposal to the parties to whom it is addressed in order that they may evaluate the capabilities of Fifth Third to supply the proposed services. It is not intended to provide specific investment advice or investment recommendations and does not constitute either a commitment to enter into a specific transaction or an offer or solicitation, with respect to the purchase or sale of any security. The information contained in this document has been compiled by Fifth Third and includes material which may have been obtained from information provided by various sources and discussions with management but has not been verified or audited. This document also contains confidential material proprietary to Fifth Third. Except in the general context of evaluating our capabilities, no reliance may be placed for any purposes whatsoever on the contents of this document or on its completeness. No representation or warranty, express or implied, is given and no responsibility or liability is or will be accepted by or on behalf of Fifth Third or by any of its subsidiaries, members, employees, agents or any other person as to the accuracy, completeness or correctness of the information contained in this document or any other oral information made available and any such liability is expressly disclaimed. This document and its contents are confidential and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person in whole or in part without our prior written consent. Past performance is No Guarantee of Future Results. Fifth Third Capital Markets is a wholly owned subsidiary of Fifth Third Bank offering investment banking++, debt capital markets+, bond capital markets++, equity capital markets++, financial risk management+, and fixed income sales and trading++. Fifth Third Bank provides access to investments and investment services through various subsidiaries, including Fifth Third Securities. Fifth Third Securities is the trade name used by Fifth Third Securities, Inc., member FINRA/SIPC, a registered broker-dealer and registered investment advisor registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Securities and investments offered through Fifth Third Securities, Inc. and insurance products: + Services and activities offered through Fifth Third Bank ++ Services and activities offered through Fifth Third Securities, Inc © Fifth Third Bank 2017
19
Are Not FDIC Insured Offer No Bank Guarantee May Lose Value
Are Not Insured By Any Federal Government Agency Are Not A Deposit
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