Harbor Aluminum Conference Chicago, IL June 9, 2016 Cautions about - - PowerPoint PPT Presentation

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Harbor Aluminum Conference Chicago, IL June 9, 2016 Cautions about - - PowerPoint PPT Presentation

Harbor Aluminum Conference Chicago, IL June 9, 2016 Cautions about forward-looking statements and other notices Cautionary Statement Regarding Forward-Looking Statements. This presentation contains forward-looking statements, which are based on


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Harbor Aluminum Conference Chicago, IL June 9, 2016

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Cautions about forward-looking statements and other notices

Cautionary Statement Regarding Forward-Looking Statements. This presentation contains forward-looking statements, which are based on our current expectations, estimates and projections about Real Industry, Inc. and its subsidiaries' (the “Company”) businesses and prospects, as well as management’s beliefs and certain assumptions made by management. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “should,” “will” and variations of these words are intended to identify forward-looking statements. Such statements speak only as of the date hereof and are subject to change. The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason. These statements include, but are not limited to, statements regarding estimated secondary aluminum demand in future periods; secondary aluminum outlook; scrap market outlook; automotive end use outlook as well as future performance, growth, operating results, financial condition and prospects of the Company. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Accordingly, actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Important factors that may cause such a difference include, but are not limited to the Company’s ability to successfully identify, consummate and integrate acquisitions and/or other businesses; changes in business or other market conditions; the difficulty of keeping expense growth at modest levels while increasing revenues; the difficulty of making operating and cost improvements; the Company and its subsidiaries' ability to successfully defend against current and new litigation and indemnification matters, as well as demands by investment banks for defense, indemnity, and contribution claims; the Company’s ability to access and realize value from its federal net operating loss tax carryforwards; the Company’s ability to identify and recruit management; the Company’s ability to maintain the listing requirements of the NASDAQ; and other risks detailed from time to time in the Company’s SEC filings, including but not limited to the most recently filed Annual Report on Form 10-K and subsequent reports filed on Forms 10-Q and 8-K.

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Real Alloy at a Glance

 Global leader in third-party aluminum recycling  Headquarters in Beachwood, OH  30+ year operating history  Convert aluminum scrap and by-products into recycled metal and specification alloys  24 facilities in North America and Europe  300+ customers worldwide  1,700+ employees globally  Summary financials as of or LTM 3/31/16: — Volume invoiced over 2.6B pounds — Revenues of $1.3B — Leverage ratio of approximately 4.1 — Liquidity over $78M Our mission is to responsibly capture the inherent economic value of aluminum recycling solutions

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Value Proposition

 Cost advantages over primary aluminum  Closed-loop (maximizes consumption of

  • wned metal units and cheapest source of

metal)

 Molten delivery reduces cost and can

expand capacity

 Scale and expertise boost efficiency and

quality

 Production and delivery flexibility  Scrap procurement capabilities

Scrap Suppliers Customers

SECONDARY Aluminum recycling − wrought, cast and specification alloys

Wrought alloy processors (e.g., rolling mills, extruders) Automotive OEMs, foundries and casters Industrial (new) Post-consumer (old) Aluminum by-products (e.g. dross)

Secondary Aluminum Industry

Key Bridge in the Supply Chain

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5 26.0 36.9 43.5 54.9 67.3 9.8 13.8 19.7 27.7 37.7 35.7 50.7 63.2 82.5 104.9

2002 2007 2012 2017E 2022E

Primary Secondary 5.2% CAGR % '12 - '22E

Secondary Aluminum Demand

Global aluminum production % Share of aluminum production – NA and Europe Secondary aluminum production is expected to grow faster than primary production and should account for half of all production in North America and Europe by 2022

(Tonnes in millions)

6.7% 4.5% 69.4% 63.1% 57.4% 52.9% 50.4% 30.6% 36.9% 42.6% 47.1% 49.6%

2002 2007 2012 2017E 2022E

Primary Secondary

Source: Freedonia Group, October 2013.

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Aluminum Pricing

Source: Metalprices.com

Price Movements Tied to Inventory???

$1,400 $1,600 $1,800 $2,000 $2,200 $2,400 $2,600 $2,800 $3,000

1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000

3-May-11 3-Nov-11 3-May-12 3-Nov-12 3-May-13 3-Nov-13 3-May-14 3-Nov-14 3-May-15 3-Nov-15 3-May-16

$/T Metric Tonnes

P1020 Price vs. LME Primary Inventory

Aluminum stock P1020 price

$1,400 $1,600 $1,800 $2,000 $2,200 $2,400 $2,600 $2,800

20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000

3-May-11 3-Nov-11 3-May-12 3-Nov-12 3-May-13 3-Nov-13 3-May-14 3-Nov-14 3-May-15 3-Nov-15 3-May-16

$/T Metric Tonnes

NASAAC/380 Price vs. NASAAC LME Inventory

NASAAC stock NASAAC price MW380

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Automotive End Use Outlook

 Auto builds forecasted to rise in all regions — North American increases largely in Mexico — European producers expanding to Eastern Europe  Huge growth projected in body, bumper and closure  Castings pounds per vehicle to increase — Powertrain to increase from 196 lbs to 209 lbs — Chassis, Suspension and Steering to increase from 21 lbs to 38 lbs  Capacity exists to process the expanded alloy mix from new products and applications

Source: Ducker Worldwide, October 2012.

Auto Builds Aluminum Content per Vehicle

343 Pounds/Vehicle

57% 17% 6% 5% 15% Current Component Mix

Powertrain Wheels Chassis, Suspension & Steering Body, Bumper and Closure All Other

550 Pounds/Vehicle

38% 11% 7% 32% 12% Future Component Mix

Powertrain Wheels Chassis, Suspension & Steering Body, Bumper and Closure All Other

Ramp Up is Underway – Impact to be Determined

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Scrap Market and Outlook

 Industrial Scrap − Flow remains fairly strong − Auto body scrap supply chain being defined  Post-Consumer Scrap − Low prices driving down flow − Steel industry slowdown has negative impact − China remains less active  Aluminum by-products (dross) − Driven by rolling mill / extrusion / casting volumes − Expected to increase with auto body trends  Impact of currency fluctuations − Leads to changes in flow of scrap, ingot and products

Source: USGS

$0.70 $0.80 $0.90 $1.00 $1.10 $1.20 $1.30 $1.40 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May MTD $/Lb

Platts MW A-380 vs. MB226 (USD)

MB226 (USD) MW380

Bumpy Ride to Continue

90 114 112 85 102 99 99 102 120 120 116 100 85 81 82 80 88 85 98 101 96 102 83 83 60 57 66 74 74 80 81 81 72 74 71 54 54 56 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16

US Exports of Aluminum Scrap to China

(Metric Tonnes 000's)

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Financial Strength of Supply Chain

Scrap Suppliers Customers

SECONDARY Aluminum recycling − wrought, cast and specification alloys Wrought alloy processors (e.g., rolling mills, extruders) Automotive OEMs, foundries and casters Industrial (new) Post-consumer (old) Aluminum by-products (e.g. dross)

Aluminum Supply Chain Remains Strong

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Secondary Aluminum Outlook

 Increasing use of aluminum  Global expansion of the industry  Technology  Demand for eco-friendly products  Legislation

Opportunities Risks

 Currency  Relocation of production  Financial health of industry  Impact of low prices  Global balance of prime and scrap

Positive Outlook Despite Risks