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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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V U L C A N . C O
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Agenda
Transaction Summary
Rationale
Industry and Ullrich Business Overview
Integration, Synergies and Financial Impact
Funding and Dividend Payout Policy
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 | V U L C A N . C O |
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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
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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.
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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.
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Vulcan Steel Ltd. published this content on 21 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 July 2022 22:43:00 UTC.