John Reid – President and Chief Operating Officer Marion Britton – Executive Vice President and Chief Financial Officer

Michael Tupholme – TD Sara O’Brien – RBC Capital Markets Anthony Zicha – Scotia Capital Frederic Bastien – Raymond James Anoop Prihar – GMP Securities

Good morning, ladies and gentlemen, and welcome to the Russel Metals 2016 Year-End Fourth Quarter Results Conference Call. Today’s call will be hosted by Mr. Brian Hedges, Chief Executive Officer; Mr. John Reid, President and Chief Operating Officer; and Ms. Marion Britton, Executive Vice President and Chief Financial Officer of Russel Metals Inc. Today’s presentation will be followed by a question-and-answer period. [Operator Instructions]. I will now turn the meeting over to Ms. Marion Britton. Please go ahead.

Good morning, everyone. I’ll start with the page three, the normal reading of the cautionary statements. Certain statements made on this conference call constitute forward-looking statements or information within the meaning of applicable securities laws, including statements as to our future capital expenditures, our outlook, the availability of our future financing and our ability to pay dividends. Forward-looking statements relate to future events or our future performance. All statements, other than statements of historical fact, are forward-looking statements. Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by us, inherently involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Our actual results could differ materially from those anticipated in our forward-looking statements including as a result of the risk factors described below in this document and also in our MD&A and in our Annual Information Form. While we believe that the expectations reflected in our forward-looking statements are reasonable, no assurance can be given that these expectations will prove to be correct, and our forward-looking statements included in this call should not be unduly relied upon. These statements speak only as of the date of this call and, except as required by law, we do not assume any obligation to update our forward-looking statements. So I’d ask you to in the slide deck go to page five, speak to the fourth quarter and year-end highlights. Q4, we had earnings of $23 million which represented EPS of $0.37 that does include sale of certain properties which I’ll speak to with a little more detail later. For the year, we had earnings of $63 million and an EPS of $1.02. Free cash flow of $77 million or $1.25 per share based on our calculation which is cash from operations before working capital and less capital expenditures. Return on equity was 8%, cash and cash equivalents was $147 million as of December 31, which is up significantly from September due to the sale of the properties mentioned above and low AR in inventory at year-end. In addition, we declared our dividend of $0.38 for the quarter. Turning to page six, outlook has turned more favorable as we enter into 2017, specifically steel prices at the end of the quarter in ‘16 and have continued to increase throughout to this point in ‘17. Rig count is up in both Canada and U.S. year-over-year in the first quarter. Metal service centers accounts tons for Q4 2016 were consistent with Q4 2015 and for the year, they were down 2%. In relation to average selling price, we were up 1% in the quarter, however, the year was down 4% and it had to do with how the ‘15 started out stronger at the beginning and dropped off versus this year kind of didn’t rise as much. Energy Products segment revenue decline 12% from Q4 2015, obviously an improvement over the year-to-date decline of 28% which for the year 2015. Just of note, if you go back to ‘14, our year is 50% what our revenue was for 2014. So, hopefully with some more positive results, we’ll move back up some of that 50% decline. Moving to the next page, page seven, want to point out a couple of things on this slide a summary, looking at our balance sheet information, you’ll note our accounts receivables is quite low. It is slightly up from 2015 due to stronger revenue in the fourth quarter. Our inventories are at the lowest point they have been in the last five years at December. They are down significantly from the high point of 930 at the end of ‘14. And you will also note that our net working capital is the lowest it has been in any of those five year period. Dropping down to the net interest bearing debt, so that’s debt outstanding of the $300 million left – cash, you all know that our net borrowing has declined to $149 million from the $431 million that we had at the end of ‘14. So we have taken out a significant amount of working capital and thrown off a significant amount of cash during this period. Also, I just wanted to mention that our whole set of statements were filed on SEDAR last night, so anybody that’s interested in getting the notes, they are there. Turning to page 10, which is the cash flow. Earlier I had mentioned that our free cash flow was --cash from operating activities less are CapEx of $16.7 million, so that was $77 million. If you were to adjust for the proceeds from the sale of the properties, you would have a free cash flow of $123 million which is obviously higher than the $94 million of dividends that we paid in the year. Moving forward to page 13, wanted to point out that we do give a breakdown of some of the adjustments, obviously we’ve had a number of adjustments in ‘15 but we have two adjustments in this year that we’ve noted on this year to being the gain on sale of properties which is represents EPS of $0.27 and withholding tax representing $0.03. During the last quarter, we decided to repatriate some excess funds to Canada from the U.S. and pay the 5% withholding tax that was required with $2 million. Turning to page 14, we have broken out here our inventory write-downs for the year. You’ll note that we had $11 million which is net of some write-ups or reversal of write-down, I think is the proper terminology, related that were in the Steel Distributor segment. The $11 million in this year is not driven by pricing issues, it’s driven by obsolescence concerns on product we had that may not have a customer that’s active enough up in the current year to use it at the levels that we would like to move it out. So this $11 million represents $0.13 in our EPS, net debt after-tax. Turning to page 16 just highlights the gross margins on that page for the year, metal service center had 21.6% obviously driven by increased pricing that compares to 19.1% of last year that did have a small an inventory write-down which we’ve noted on the line above, although the gross margins that have calculated are after the write-downs -- or the write-downs have not been excluded. The other one that moved more than normal is the distributors - first of all the 5.1% includes the write-down of $22 million from last year but the 18.5% does include the reversal of the 2.1% so they’re not quite representative so go-forward we’ll look at those when we get to the quarterly numbers again. Turning to page 18, metal service centers, just to comment on the changes in the tons. We did experience volume increases in British Columbia and Quebec regions. However, they weren’t able to offset that have been happening in Alberta related to customers that are servicing the energy industry. Dropping down to the third paragraph in this section, you’ll note the average price of our -- average invoice revenue and the number of transactions per day that we did in 2016 versus 2015. And we had an increase of 6% in a number of transactions and then when if you go to the next paragraph, you’ll note that we were able to reduce our expenses $2 million. So our operators did a very good job in maintaining their level of activity and keeping their expenses down in the current year. Energy, page 19, so year-over-year, we give the 28% which previously mentioned but also the fact that our oil gas drilling customer activity was down 37%. So the difference which was lower is our oilfield services operations. Operating expenses in this segment was down 27% driven by employee reduction 12% this year and we’ve had 17% in the prior year and other right-sizing of small branches that may have been closed in the period. Turning to page 20, just make a comment on the corporate expenses. Corporate expenses are up $6 million. Within that number is the mark-to-market on the DSU and RSUs[ph] that the company has and this year we had an expense of $4 million related to that as our share price moved from 16.07 last year-end to 25.58 at close of this year and the prior year because of the drop in the share price, we had income of $3 million. So we actually had a $7 million win in that number related to the mark-to-market on the DSUs and RSUs. Turning forward to page 21, just highlight the income tax rates that we have. I would recommend that you do look at the note on this, you want to understand a little bit better that 35.5% it is driven by higher taxes on the property sales that was in the U.S. and the non-recoverable withholding tax money that was repatriated to Canada. Going to the next page, make some comment on capital expenditures, we had $17 million in the year which is lower than the prior year and lower than our norm. Our depreciation was $29 million and that’s more close to what we would anticipate in this coming year. Look down on that same page, you’ll see our inventory numbers by segment and you’ll also see the turns. The turns were reasonably good at the end of the quarter and energy could improve a little bit better, but it is an improvement over the prior periods that we have noted on here in prior years. Turning forward to page 28, I’ll make a couple comments on the quarter. So in the quarter, we did take an inventory write-down which is as I mentioned before of the less obsolescence related nor pricing related, $5.6 million which is effective tax rate is $0.06 of EPS that is in those numbers. Also I’d like to speak just to the margins, so 20.6% for the quarter is lower than our year-to-date and this was anticipated on our call last time because pricing had come off in October-November. We did get a little bit of uptick in the end of the year but not a lot was in December due to the fact that it’s a short month and that compares to 18.8% last year. The Energy Products number does include the reserve write-down that is above, steel distributors is probably somewhat of a more normal margins for them as they do not have any significant write-up or write-down in that period. Those are my comments. I’ll turn it over for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. Your first question comes from Michael Tupholme, TD. Michael, please go ahead.

Thanks. Good morning. Within metal service centers released your prices have risen significantly since late last year and in your outlook you talk about service centers benefitting from rising steel prices. I’m just wondering if you could be any more specific about the level of year-over-year pricing gains, you’d expect to be able to achieve in Q1 and beyond if possible to comment on that as well?

Michael, we’ve definitely seen an improvement, I mean it was late Q4 if you come into it. Obviously shipments in that last week were challenging with the customers being closed, but we’ve seen an increase on the margins coming back from that area. I think it will be fairly significant, a couple points or two will come above last year.

That quarter last year, I think we’ll be closer to the year-to-date number probably it will be a little bit better.

Sorry, this is on the gross margins?

On the gross margins, yeah.

Right. What I’m wondering actually, in addition to that, in terms of the actual pricing gains on a year-over-year basis, you’d expect to be able to realize within service centers on the revenue line in terms of what that you should be able to contribute to revenue, if you can speak to that at all?

Looking at Q1, we’ve definitely seen an increase compared to the MSDI numbers as we go forward. So we think we’ll up above those, that’s the trend right now. Again, we think it will be same for everywhere, we’ll continue to watch it. Looks like it’s taking a little bit of – right now where the pricing is, we think we’ll be above the MSDI numbers.

For ton ship and then pricing will definitely be up but we don’t know based on mix what – to give you a specific revenue number.

Okay, and then I guess just sticking with metal service centers, in the fourth quarter, I was a little bit surprised to see operating expenses in service centers was, they were actually up a little bit sequentially in spite of the fact that revenue in the service centers were down a bit sequentially. I guess I’m just wondering how we think about that and how we think of the operating expenses in service centers going forward, I’m not sure the best way to answer whether it’s an actual dollar amount, or how to think about it as a percentage of revenue?

I think that you should just really look at the annual numbers and kind of divide them by the quarters times two. So a little bit of troughing[ph] up in the last quarter whether it’d be for bonuses or other things, nothing specifically jumps out.

Okay. And then just, to the Energy segment, obviously we’ve seen big increases in the rig count. Can you speak a little bit to what you’re hearing from your energy customers? And whether or not you’ve seen any sort of a notable pick up to this point?

Both in Canada and the U.S. we’ve seen those pick-ups. There’s an optimism that’s out there, psychologically we just go - these things that are going on that are really exciting in Alberta coming off of last year, obviously the same thing. As you look at west Texas, pushing five plants now back in Pennsylvania so obviously the announcement to the Keystone, so there’s a lot of positive sentiment around that as well as the rig count pick up, all prices are sustaining in that mid-50 to low-50 range. So that’s given some compensation to investors as well to continue to go out there. So we’re pretty optimistic on the first quarter.

Yeah, we really don’t know where it’s going to go once we get into breakups and when they’ll come back and I think that will be driven by pricing as we go through the year.

Okay, fair enough. And then just lastly from me, Marion, obviously over the course of ‘16, we saw changes in non-cash, working capital was a big source of cash for Russel. With things looking like they’ve bottomed and hopefully you’re seeing a pick up here in ‘17, how should we think about changes in non-cash working capital in 2017?

Well, definitely we’ll use cash. The question is how fast we do get higher revenues. We basically have always estimated that $0.30 of working capital is needed for every dollar revenue increase we obtain. So I believe that will stick throughout the year, sometimes a bit less than that as you start off the year because you do have your AP as you add for your inventory, but typically that’s what we would anticipate throughout this year.

Okay. Thanks very much.

Thank you. Your next question comes from Sara O’Brien, RBC. Sara, please go ahead. Sara O’Brien: Hi. It’s actually Sara, but good morning. Just wanted to get back to the service centers and pricing pass through on the recent escalation in steel pricing. May be Marion if you could comment a little bit on how fast do you see kind of a one for one impact on the top-line? So I noticed the mix impact, but how much does the recent inflation translate into your types of products, in Q1 and Q2 and how long does it take to turn and see that given the competitive environment?

So if we just sort of compare to last year, so last year the prices started to go up in January and we really didn’t get a strong impact until March, where we started to see a move up in November, and we’re just starting to see a strong impact in January. So assuming we don’t see a dip in before the end of this quarter, we’re going to have strong impact on it for the whole quarter. Sara O’Brien: Okay. And I just wondered, why do you need to repatriate cash? I was just wondering why you’d pay an interest rate in 5% to do that instead of some kind of a borrowing against it or something?

Well the sale of the property and we had put out the fact that we sold the number, it resulted in excess cash in the U.S. that we didn’t believe we would need for working capital purposes and we could [indiscernible] if we do an acquisition need it in the U.S. but we thought over long-term, couple of years the difference we end up incurring in interest cost by borrowing in Canada and felt it was appropriate to do it. Sara O’Brien: Okay. And then just on the back of that, acquisition wise, what’s the outlook right now in terms of opportunities and would you look at anything in energy now given the pick up or is it really service center related that should be interested in or other?

Service centers are definitely in the U.S., it’s something that we’re interested in. We’re starting to see some activity there. Also we would look at energy, it would be more along the Apex lines I think for growth. Although if there’s something in the end, that was out there that was opportunistic that would let us grow in our existing energy business, predominantly we’re looking probably in Canada. Sara O’Brien: Okay. And then maybe just on the Apex, could you comment on what’s the environment’s been like? I know you’ve already seen a pick up, but given increased activity in the price of crudes, at least north of 50 now, what’s -- has there been any impact or any kind of better outlook for the Apex business?

They’ve taken up quickly again, as they maintain the rigs, you’ve seen the rig count increase, drilling activity comes back there effective quickly. And so, again, they will be a leading indicator on that and we’re seeing pickups on both sides of the border there.

Yeah, I expect their percent up in the first quarter is going to be more significant than any of the other energy operations. Sara O’Brien: Okay. Thank you.

Thank you. Your next question comes from Anthony Zicha, Scotia Bank. Anthony, please go ahead.

Yes, good morning. John, could you give us a bit of more color on the OCTG pricing trends, if we look at the competitive landscape, some of your competitors have been stating publicly that size increased. And are you looking at disposing of some assets or are you a buyer? And lastly, was there weather impact in Q4 in this business?

On the OCTG side, again, the pricing is improving. We’re seeing lead times push out of the mills, and so, we’re going to continue to see that as the mills try to ramp back up. They’re not running at full capacity, there may be running more into two shifts, but as they’ve had ramp back up, I think we’ll see those at into the June-July timeframe and so that’s been positive and they’ve been able to achieve some price increases there. So, --

So, you had a question about would we see as a seller or buyer, well, at the right price, we would consider decreasing our energy but we’re not actively looking at that. And I think we already kind of addressed it, we might consider something in Canada in energy and John spoke on this service center U.S. for sure.

We would look at both but again, it’s not something where I could – on it.

And was there any weather impact in Q4?

Really, I don’t think we had anything, may be a day or two shipments but it was here and there for operation but it was nothing material.

From this month.

Yeah, we’re seeing it now.

John, bit of a big picture item, there’s been a lot of talk obviously on the NASDAQ. Could there be any potential impact on your business?

From what we know now and again with the new administration in the U.S., we feel like we’re really well positioned, we’re on both sides of the border, we do very few cross-border transactions, although we do have customers that do some, so they may be impacted. But based on what we know today, we think we’re well positioned to start from either Canadian side or the U.S. side for energy and service centers. So we’re looking at it as a positive, I mean there’s obviously energy in issue, it will be pushed infrastructure, if any of those things go out there, we think will lift steel and steel usage. So we view it as a positive right now

And then a big wild card here is the border tax, what would it mean to Russel and other if the U.S. government were to implement a border’s tax and what about – there’s been also a talk by the Feds about buying American steel like this also push prices higher and cut back on volume?

You definitely can push prices higher, again, we’re positioned on both sides, so we can ship from Canada to Canada or we can ship U.S. in U.S. I think there will be some impact to especially the Apex type businesses, a lot of that is not made in the United States. I think there’ll have to be some alleviation and they just won’t get often, get those products domestically. But again, the way it’s written it’s in the best interest of and there’s some baked internalities there - so we don’t see it today on the line pipe as a negative impact, we figure something that could be positive, let the pricing limit of the imports that are coming in.

And last question, in Canada, on the infrastructure side, are you seeing increased demand or are we still some of the positive trends that we saw in 2016?

Yes, we’re continuing some of those projects, there are some new things starting there, so we’re starting to see some lift in those areas. Again, like we’re up in Canada in both energy and service centers early on into the year.

Okay. Thank you very much.

Thank you. [Operator Instructions]. Your next question comes from Frederic Bastien, Raymond James. Frederic, please go ahead.

Hi, good morning guys. Over the last few years, you’ve made progress bringing your service center discipline to the energy product side, just understand that you’re now employing a RONA based approach with respect to just operating the business in general. And I appreciate that when the energy downturn happened, that kind of was stepped in some way. So was wondering where you’re at right now with respect to that development and you’re comfortable with the level of inventory that you have right now on the energy side?

Frederic, I’ll just address that. We always – for long-term, we’ve had a RONA based approach. The one thing that we have been little more on to is capital commitment which looks that a little bit our forward on-order position within our inventory to sort of help manage the inventory and expectations of our operating units versus expectations of senior management. We just continue to talk with them and understand their customer needs, because obviously, they are the ones in the field and dealing with the customers. So we all know it, it’s in the best interest to have our inventories lower because that produces a larger RONA and we are a pay for performance company. So they work with us on that area and understand that it’s a bit of a balancing, trying to anticipate your customers’ needs in ordering versus what makes sense to get inventory down. We’ve had shorter lead times last year so that has helped in the case where they’ve needed products. So capital allocation hasn’t really been a problem, will it be in the future as lead time leads out or I mean not a problem meaning further discussion I believe there will be further discussions as to how much we believe energy is picking up and how fast.

Great. Part of your comment again was to the inventory discipline, we’ve discussed in previous calls and so, as we’ve gone to that again, we think we will turn the inventory faster, comparing to some of our other public competitors in energy, we were profitable last year. And so, as we look at those in that discipline to inventory now, we brought over from the service center side, that’s something we’re seeing a great positive impact and I think we’ll turn much faster than we have in the past which will result in less volatility.

Okay, thanks for that clarification and sorry if I misinterpreted the RONA thing there.

That’s fine.

Appreciate you have - I guess your outlook really focus on Q1, but just trying to get you to maybe, I don’t want you to commit to the next several quarters. But - and I appreciate the amount of visibility on that in the second half, but is it reasonable to think that you can earn any dividend this year?

We have our fingers crossed. How’s that?

We obviously, you waited every quarter, you don’t know what breakups are going to bring to the energy and that’s a real wild card that’s out there now and so as we work through breakup there’ll be more clarity. On the service center side, if things maintain and if we continue demand, then we feel very positive about the opportunity to do so.

The flat line pricing will sure help as opposed to the dip.

Indeed. Okay. Thank you.

Thank you. Your next question comes from Anoop Prihar, GMP Securities. Anoop, please go ahead.

Good morning. John, just a question for you, I think it’s fair to say the market isn’t spinning some sort of infrastructure program being implemented by the new administration. I’m just curious as to first of all, what you’re hearing and second of all, do you have any expectations surrounding that?

Well, we are hearing things to change pretty regular but there definitely seems to be an emphasis on infrastructure spending and pushing forward also limiting the regulation. So I don’t have a current expectation, things are a little bit vague at this point, well it seems to be moving very quickly and again there is a lot of optimism in the U.S. around that.

Are you - it’s reasonable his first 100 days will emerge on this route?

Well I think so, maybe his first 45.

Thank you.

Thank you. Your next question comes from Michael Tupholme, TD. Michael, please go ahead.

Thanks. On steel distributors Marion, you did mention that in the quarter itself you saw that as a fairly sort of normal type of margin that you delivered I think on the gross margin you were referring. If we look at the EBIT margin 9.6% in the quarter, is that a sustainable level going forward or would you expect to moderate at all because it just seems a little bit high when I look back historically?

I think it will come down a bit, they shortly have been a little bit better than some of our other operations, but yes, that is high. I was commenting on the gross margin level that they had.

Right, okay. And then, John, can you give us a bit of an update on where things sit right now within the overall North American industry as far as the inventory situation for OCTG and line pipe?

They’re coming back in balance quickly, again, I think the industry was very focused on OCTG when we seemed to get stuck at nine months last year for several months, that’s come back down. And so, with the extended lead times from the mills, increased usage, so that’s coming back in balance. So we’re getting supply and demand in balance and then with limited opportunities for imports into the U.S. market, that’s also helped. So I think we’re in a fairly balanced position right now, we would be at the appropriate number of months on hand based on mill lead times. Line pipe, again, really dependent on how fast the projects take off. Right now may be we’re a little heavy on inventory industry-wide, but is the Keystone going to use new line pipe? Is it going to be able to use the new line pipe? There are several other projects that look to be approved both in U.S. and Canada. Those are going to take line pipes [indiscernible] very quickly. So it’s not, may be a little bit of bulge inventory right now, but it’s nothing that I would be too alarmed about.

And then lastly, John I think you did speak to this earlier, but just want to clarify, within metal service centers, the gross margins in Q1 given the strength of pricing, you suggested they would be up a couple points year-over-year sort of the guidance, is that correct?

I think so, 1% to 2% year-over-year.

Okay, perfect. Thank you.

Thank you. There are no further questions at this time. Please proceed.

Yes, thanks everyone for joining the call. We’ll talk to you next quarter.

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.