INVESTOR PRESENTATION. November 2018

Similar documents
STELLA-JONES REPORTS STRONG 2016 THIRD QUARTER RESULTS

Three-month period ended June 30, 2013 compared with the three-month period ended June 30, 2012

Three-month period ended March 31, 2014 compared with the three-month period ended March 31, 2013

STELLA-JONES REPORTS 2017 FOURTH QUARTER AND ANNUAL RESULTS Seventeenth consecutive year of sales and net income growth

STELLA-JONES REPORTS 2018 SECOND QUARTER RESULTS

STELLA-JONES REPORTS SECOND QUARTER RESULTS

STELLA-JONES REPORTS SOLID THIRD QUARTER RESULTS

Raymond James Institutional Investor Conference. Refine. Investor Presentation

consolidated FINaNcIal StatEMENtS

Third Quarter Ended September 30, 2016

Q Interim Report

We create communities. We are Stantec.

EARNINGS PRESENTATION FEBRUARY 2019

Interfor Corporation Vancouver, B.C. August 2, 2018

Financial Industry Solutions. Second Quarter Financial Results AUGUST 9, 2018

First Quarter Strategic Update & Financial Results MAY 10, 2018

Quarterly Report Ending June 30, 2016 TAIGA BUILDING PRODUCTS LTD. Q1 Financial Highlights. Sales $325.5 million. Earnings Per Share (loss) $0.

Quarterly Report Ending December 31, 2016 TAIGA BUILDING PRODUCTS LTD. Q3 Financial Highlights. Sales $277.4 million. Earnings Per Share $0.

4Q17 EARNINGS PRESENTATION NYSE: DOOR

Superior Plus Corp. Announces 2018 Second Quarter Results and Increases 2018 Adjusted EBITDA Guidance

Parkland Fuel Corporation to Acquire 75% of SOL, the Largest Independent Fuel Marketer in the Caribbean

Gildan Investor Presentation

Q Earnings Presentation May 1, 2018

Company Report Materials

4Q16 Earnings Presentation

Second Quarter Fiscal 2017 Financial Results

First Quarter 2018 Earnings Call. May 10, 2018

CONIFEX TIMBER INC. Conifex Announces First Quarter 2018 Results

Investor Presentation April 2015

Quarterly Report Ending June 30, Sales $335.8 million. Earnings Per Share $0.05 Net Income $1.5 million. EBITDA $9.6 million

High Liner Foods. Q Investor Presentation. February 2019

Desjardins Industrials, Telcom & Consumer Conference Montréal, QC Tuesday March 28, 2017

Interfor Corporation Third Quarter Report For the three and nine months ended September 30, 2016

Q4 & Full Year 2017 Earnings. Webcast Presentation February 1, 2018

BADGER DAYLIGHTING LTD. ANNOUNCES RECORD SECOND QUARTER FINANCIAL RESULTS

Raymond James 39 th Annual Institutional Investor Conference. John Sznewajs, Chief Financial Officer March 2018

Robert Pace CHAIRMAN OF THE BOARD

2018 FOURTH QUARTER EARNINGS CALL

Interfor Corporation Vancouver, B.C. February 7, 2019

Interfor Corporation Vancouver, B.C. November 2, 2017

FORWARD LOOKING STATEMENTS

DH CORPORATION Management s Discussion and Analysis For the quarter ended March 31, 2016

CIBC Investor Presentation Q1 F18

Sales $379.8 million Earnings Per Share $0.16. Net Income $5.0 million EBITDA $14.3 million

Second Quarter 2017 Earnings Call

Conifex Announces Strong Fourth Quarter and Annual Results. Reports Two Consecutive Years of Record Adjusted EBITDA and Operating Income

Q2 Financial Highlights

Achieving our goals and. Annual Meeting of Shareholders. poised for growth

Superior Plus Corp. TSX: SPB. Investor Update. November 2018

Fourth Quarter & Full Year 2016 Earnings Call

Agrium s Q Earnings Conference Call

2018 Outlook. Webcast Presentation December 13, 2017

1Q18 EARNINGS PRESENTATION NYSE: DOOR

2016 Financial Update and 2017 Outlook. Webcast Presentation December 13, 2016

Acquisition of Jack Wolfskin. November 2018

CANADIAN PACIFIC ANNOUNCES 2008 RESULTS

First Quarter Fiscal 2017 Financial Results

CIBC Investor Presentation. First Quarter, 2012

Second Quarter 2018 Earnings Presentation May 8, 2018

CP reports record fourth-quarter and record full-year results on the strength of its operating model and disciplined approach in the marketplace

QUARTERLY REVIEW FIRST QUARTER ENDED APRIL 30, 2018

Cautionary Statement Regarding Forward-Looking Information

Management's Discussion and Analysis

Q Investors Presentation

High Liner Foods RBC Capital Markets Consumer & Retail Conference. May 30, 2018

Accelerating Profitable Growth. Uni-Select TSX: UNS Q Conference Call February 9, 2017

CanWel Building Materials Group Ltd.

Interfor Corporation Second Quarter Report For the three and six months ended June 30, 2018

Third Quarter 2015 Earnings Call October 29, 2015

Q Earnings Presentation. November 1, 2018

First Quarter 2018 Earnings Call

MSCI THIRD QUARTER 2016

CIBC Annual Whistler Institutional Investor Conference January 25-28, 2017 Whistler, BC. parkland.ca

WSP AT A GLANCE. April 2016

Conifex Announces 2016 Fourth Quarter and Annual Results. Reports Record Adjusted EBITDA and Net Income

Forward-looking Statements

Q Earnings Presentation

MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE 13 AND 26 WEEKS ENDED NOVEMBER 4, 2017

2018 First Quarter Earnings Call. February 8, 2018

THE POWER OF FIRST QUARTER REPOR T S ENDED AUGU

FINANCIAL OVERVIEW AL M I S T Y S Y N

Click to edit Master title style. Growth through sustainable cash flow

First Quarter Fiscal 2017 Financial Report

RESOLUTE FOREST PRODUCTS Q RESULTS RICHARD GARNEAU, PRESIDENT & CEO JO-ANN LONGWORTH, SVP & CFO

Altus Group Reports First Quarter 2018 Financial Results

Investor Presentation. April 2019

Crius Energy Trust Reports Fourth Quarter and Year End 2017 Results

Second Quarter 2017 Financial Results. July 25, 2017

RESOLUTE FOREST PRODUCTS Q RESULTS RICHARD GARNEAU, PRESIDENT & CEO JO-ANN LONGWORTH, SVP & CFO

TABLE OF CONTENTS ON COURSE, POSITIONED FOR GROWTH. 1 Five-Year Review. 2 Core Strengths of Stella-Jones Highlights. 4 Chairman s Report

Fourth Quarter & Full Year 2017 Earnings Call

INVESTOR PRESENTATION Henry Demone, CEO; Paul Jewer, CFO Heather Keeler-Hurshman, Investor Relations. November 2014

First Quarter Fiscal 2016 Earnings Conference Call

FINANCIAL OVERVIEW AL MISTYSYN SENIOR VICE PRESIDENT, FINANCE & CHIEF FINANCIAL OFFICER FINANCIAL COMMUNITY PRESENTATION OCTOBER 3, 2017

TSX: RME. Investor Presentation January 8, 2018

Management s Discussion and Analysis

BMO Auto Forum February 16, 2017 Element Fleet Management

Click to edit Master title style. Growth through sustainable cash flow

Q EARNINGS CALL May 1, :00 am ET

First Quarter Fiscal 2019 Financial Results

Transcription:

INVESTOR PRESENTATION November 2018 1

Forward-looking statements This presentation contains certain statements that are forward-looking, including comments with respect to the Company's objectives, strategies, targets and expectations. We caution you not to place undue reliance on these statements since a number of known and unknown risks and uncertainties may cause actual results to be materially different from those expressed or implied by such forward-looking statements. Such risks include: economic conditions; dependence on major customers; availability and cost of raw materials; environmental risk; risks related to acquisitions; litigation risk; insurance coverage; currency risk; interest rate fluctuations; customers credit risk; cyber risk; corporate tax risk and other factors referred to herein and in the Company's annual information form, and other public documents filed with the Canadian Securities Regulatory Authorities (available on SEDAR at www.sedar.com). 2

Non-IFRS Measures Operating income before depreciation of property, plant and equipment and amortization of intangible assets (herein referred to as earnings before interest, taxes, depreciation and amortization [ EBITDA ]), and cash flow from operating activities before changes in non-cash working capital components and interest and income taxes paid are financial measures not prescribed by IFRS and are not likely to be comparable to similar measures presented by other issuers. Management considers these non-ifrs measures to be useful information to assist knowledgeable investors regarding the Company s financial condition and operating results as they provide additional measures of its performance. Please refer to the Company s MD&A for a reconciliation of EBITDA to net income. 3

Agenda Investment Thesis Overview of Stella-Jones Strategy and Future Growth Overview by Business Unit Financial Trends Q3-2018 Results Appendix 4

Investment Thesis 5

Investment Thesis Balanced portfolio of businesses Track record of performance Leadership positions in markets served Scope of network in North America Solid balance sheet Proven consolidator with disciplined acquisition strategy Experienced and proven management team 6

Overview of Stella-Jones 7

Stella-Jones at a Glance A Leading North American Supplier of Pressure Treated Wood Products 5.0% Industrial Products 19.4% Residential Lumber 6.4% Logs & Lumber 2017 Revenues $1.9 B 34.7% Utility Poles 2,000 Employees 12 Pole Peeling Facilities 39 Wood Treating Facilities 70% Revenues from U.S. 34.5% Railway Ties $2.8B Market Cap SJ TSX Note: Based on fiscal 2017 data, except market cap 8

Important Milestones in 25-Year History Foundation Public Company Over $1 Billion in sales 4 for 1 stock split 1993 1994 2010 2012 2013 2015 Acquired Tangent Rail Corporation: Game-changing for Railway Ties Acquired McFarland Cascade: Game-changing for Utility Poles Acquired RAM Forest Group & Ramfor Lumber: Game-changing for Residential Lumber 9

Growing by Acquisitions July 2003 August 2005 July 2006 February 2007 April 2008 April 2010 December 2011 November 2012 November 2013 May 2014 September 2015 October 2015 December 2015 June 2016 December 2016 December 2017 February 2018 April 2018 Cambium Group Inc. (Canada) Webster Wood Preserving (U.S.) Bell Pole Company (Canada) Wood utility pole business of J.H. Baxter (U.S.) The Burke-Parsons-Bowlby Corporation (U.S.) Tangent Rail Corporation (U.S.) Thompson Industries (U.S.) McFarland Cascade Holdings (U.S.) The Pacific Wood Preserving Companies (U.S.) Wood treating facilities of Boatright Railroad Products (U.S.) Treated Materials Co., Inc. (U.S.) Ram Forest Group Inc. and Ramfor Lumber Inc. (Canada) United Wood Treating Company, Inc. (U.S.) Lufkin Creosoting Co., Inc. and 440 Investments, LLC [ Kisatchie ] (U.S.) Bois KMS Ltée and Northern Pressure Treated Wood Ltd (Canada) Wood Products Industries Inc. (Canada) Prairie Forest Products (Canada) Wood Preservers Incorporated (U.S.) Acquisition Contribution Stronger industry player Extended North American network & broadened product line Greater customer service flexibility & ability to bid on larger projects Synergies 10

North American Network Note: highlighted plants were recently acquired 11

Track Record of Performance Revenues $1,886M EBITDA (1) $241M 19.3% CAGR 17.2% CAGR $385M $58M 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Net income $168M Cash Flow (2) $246M 21.6% CAGR 22.0% CAGR $29M $41M 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (1) This is a non-ifrs financial measure. Please refer to the Company s MD&A. (2) Before changes in non-cash working capital components and interest and income tax paid. 12

Stock Price Appreciation $60.00 Shares outstanding 69.4M Float 61.7M Average daily volume 181,231 $40.00 52 week (high-low) $51.79-$40.66 Market Capitalization $2.8 B Nov. 13: $40.66 $20.00 $0.00 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 13

Strategy and Future Growth 14

Strategy and Future Growth by Business Unit Market Growth Drivers Trends Growth Strategy Railway Ties 34.5% of sales Stable market Market is fairly consolidated Maintenance requirements Market share gains GDP growth Oversupply of railway ties driving prices down Customers transitioning to Black Tie program Tuck-in acquisitions Market share gains Utility Poles 34.7% of sales Potential for further consolidation in the North American market Replacement programs Weather related events Mid-single digit growth Increase in replacement demand as average age of poles is very high Acquisitions Leveraging the upcoming increase in replacement demand Residential Lumber 19.4% of sales Partially consolidated Home renovation Dealer network Limited supply of wood driving prices of lumber up Expanding the dealer network Select acquisitions Industrial Products 5.0% of sales Niche business driven primarily by bridge timbers, road crossings, pilings and special projects Recent acquisition in Warsaw, VA will further contribute to sales in this category Logs and Lumber 6.4% of sales Business used to optimize our costs 15

Overview by Business Units 16

Railway Ties - Overview % 2017 Sales 5-Year Revenue $652M $652 M 34.5% $394M Pricing pressures 90% of ties sold in North America are for maintenance and over 90% are wood 2013 2014 2015 2016 2017 Producer of pressure-treated railway ties 17

Railway Ties Business Model Revenue Mix 65% Class 1 railroads Selected Metrics Business Model Game-changing Acquisition Tangent Rail (2010) Value Proposition Availability of inventory, scope of network & flexible service Selected Metrics Business Model Customers ~65% Class 1 railroads (Union Pacific, CN, CP, CSX, BNSF, NS) ~35% short and regional rail lines and contractors Contracts for Class 1 Long-term contracts up to 10 years (base contract) Variable pricing periodically Contracts for short and regional rail lines & contractors Bidding process spot business Facilities 2 in Canada 10 in U.S. Services Black Tie Treatment Only Inventory turnover ~2-2.5x 18

Railway Ties - Market Conditions & Drivers Players Consolidation among railway operators favors large scale tie providers Trends Oversupply of railway ties driving prices down & customers transitioning to Black Tie program Growth Tuck-in acquisitions and market gains as the market is fairly stable Selected Metric Market Conditions and Drivers Market size ~24 million railway tie purchases on an annualized basis in North America (source: Railway Tie Association) Market share One of the leading players in the industry Competition/ Comparables Koppers Holdings Inc. (NYSE: KOP) Amerities Holdings, LLC Kansas City Southern Marketplace Stable market Market is fairly consolidated Growth drivers Maintenance requirements Market share gains GDP growth 19

Utility Poles - Overview % 2017 Sales $654 M 34.7% 5-Year Revenues $654M Wood offers the best value over alternative materials, such as steel, composites and concrete $406M Growth in SE U.S. 2013 2014 2015 2016 2017 Producer of pressure-treated utility poles 20

Utility Poles Business Model Revenue Mix ~80% of business under multi-year agreements Game-changing Acquisition McFarland (2012) Value Proposition Availability of inventory, scope of network & flexible service Selected Metrics Business Model Customers Electrical utility companies Telecommunication companies Contracts Competitive bidding process Price increases are indexed Varying 3 to 7 years (evergreen features) Facilities 7 in Canada 13 in U.S. Inventory turnover 2-2.5x 21

Utility Poles - Market Conditions & Drivers Market South East U.S. market is fragmented Trends Increase in replacement demand as average age of poles is very high Growth Acquisitions and leveraging the upcoming increase in replacement demand Selected Metric Market Conditions and Drivers Market size There are about 150MM poles in North America, of which 105MM are wood Market share One of the leading players in the industry Competition/ Comparables Koppers Holdings Inc. (NYSE: KOP) Bell Lumber & Pole Co. Cahaba Pressure Treated Forest Products Inc. Marketplace Potential for further consolidation in the North American market Growth drivers Replacement programs (life span of poles is typically 65 years) Weather related events Mid-single digit growth 22

Residential Lumber - Overview 5-Year Revenue % 2017 Sales $366M RAM acquisition $366 M 19.4% Sales are tied to the price of lumber as well as market share growth $112M 2013 2014 2015 2016 2017 Producer of treated wood sold through wholesalers and big-box retailers to consumers 23

Residential Lumber Business Model Revenue Mix 80% Big Box Retailers Game-changing Acquisition RAM Forest Group (2015) Value Proposition Availability of inventory, scope of network & flexible service Selected Metrics Business Model Customers Big box retailers Dealer network Contracts 1 year - renewed annually Facilities 5 in Canada 2 in U.S. Services in Canada Lumber Distribution of complementary accessories Services in U.S. Lumber Inventory turnover 4-5x 24

Residential Lumber - Market Conditions & Drivers Players Limited pure plays Trends Limited supply of wood driving prices of lumber up Growth Expanding the dealer network, implementing the direct-to-home model in the U.S. and select acquisitions Selected Metric Market Conditions and Drivers Market size N/A Market share N/A Competition/ Comparables Canwell Building Materials Group Ltd Universal Forest Products, Inc. Great Southern Wood Preserving, Incorporated Marketplace Partially consolidated Growth drivers Home renovation Dealer network 25

Industrial Products - Overview % 2017 Sales 5-Year Revenues $95M $95 M 5.0% $58M 2013 2014 2015 2016 Niche business driven primarily by bridge timbers, road crossings, pilings and special projects 2017 Producer of treated piles and timbers, mainly used for a variety of land-based and marine applications 26

Logs and Lumber - Overview % 2017 Sales $120 M 6.4% 5-Year Revenues Growth in residential $120M 2013 2014 2015 2016 2017 Business used to optimize our costs by selling non-pole quality logs as well as selling excess untreated dimensional lumber to the market Sell untreated lumber and logs unsuitable for use as poles 27

Financial Trends 28

Diversifying Product Mix Based on core competence 31% of sales Logs & Lumber Industrial Products Residential Lumber Utility Poles 17% of sales Railway Ties 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 29

Growing Proportion of U.S. Sales 70.2% 53.2% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Canada US 30

Growing EBITDA (1) in Absolute Dollars 300 250 200 150 100 50-16.8% 15.2% 14.4% 12.7% 15.1% 15.3% 14.1% 15.6% 14.4% $58M $241M 12.8% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 EBITDA EBITDA % (1) This is a non-ifrs financial measure. Please refer to the Company s MD&A. 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 31

Generating Strong Free Cash Flow (1) Free cash flow (1) profile improving $249M 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (1) This is a non-ifrs financial measure. Please refer to the Company s MD&A. 32

Deploying Capital Prudently $192M $198M $95M $97M $105M $122M $88M $53M $45M $9M 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Acquisitions Capex Dividends 33

Increasing Dividends Consistently 2018 will mark the 14 th consecutive year of dividend increase $0.48 $0.40 $0.44 $0.28 $0.32 $0.09 $0.10 $0.13 $0.16 $0.20 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 E 34

Maintaining a Solid Financial Position 800 $354.5 million available on the Company s syndicated credit facilities as at December 31, 2017 4.00 700 600 500 400 3.21 2.43 2.22 3.02 2.41 2.52 2.75 2.62 $456M 3.50 3.00 2.50 2.00 300 1.87 1.89 1.50 200 1.00 100 0.50-2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 LTD Total Debt / EBITDA - 35

Q3 2018 Results 36

Q3-18 Sales Increased in All Product Categories $630.0M Logs & Lumber Industrial Products Residential Lumber Utility Poles $517.6M +21.7% SALES VARIANCE Q3-17 Sales (M) $517.6 Acquisitions 19.9 Currency variations 12.9 Organic growth 79.6 Q3-18 Sales (M) $630.0 Railway Ties Q3-17 Q3-18 37

Q3-18 Sales Variance Organic growth of 15.4% on a consolidated basis (in millions of dollars) Railway Ties Utility Poles Residential Lumber Industrial Products Logs & Lumber Consolidated Sales 2017 Sales 160.8 172.5 125.8 25.6 32.9 517.6 Acquisitions - 0.1 15.2 4.3 0.3 19.9 FX impact 5.1 5.1 1.5 0.7 0.5 12.9 Organic growth 21.8 22.9 18.0 1.8 15.1 79.6 2018 Sales 187.7 200.6 160.5 32.4 48.8 630.0 Organic growth % 13.5% 13.3% 14.3% 7.0% 45.9% 15.4% *Numbers may not add exactly due to rounding 38

Q3-18 Gross Profit Remains Under Pressure $94.0M 16.1% 14.9% $83.6M 1 Increase in untreated railway tie costs and certain untreated species of poles 2 Higher lumber costs, which are a pass through to customers, have contributed to increased cost of sales and have put downward pressure on margins as a percentage of sales 3 Foreign currency translation Q3-17 Q3-18 39

Q3-18 Increased Net Income & EPS Net income EPS $42.0M $45.8M $0.61 $0.66 9.2% Driven by higher operating income Q3-17 Q3-18 Q3-17 Q3-18 40

Managing Cash Flow for Seasonality Cash Flow before certain items (1) Cash Flow from Operating Activities $72.6M $79.5M $175.5M Higher working capital requirements $91.3M Q3-17 Q3-18 Q3-17 Q3-18 (1) Before changes in non-cash working capital components and interest and income tax paid. 41

Maintaining a Solid Financial Position 800 $266.1 million available on the Company s syndicated credit facilities 4.00 700 600 500 400 300 2.43 2.22 3.02 2.41 2.52 2.75 2.62 1.89 $499M 2.11 3.50 3.00 2.50 2.00 1.50 200 1.00 100 0.50-2009 2010 2011 2012 2013 2014 2015 2016 2017 Q3-18 LTD Total Debt / EBITDA - 42

Outlook Based on current market conditions and stable currencies 2018 vs 2017 2019 vs 2018 Consolidated Higher sales The progression of operating margins in Q4-18 will continue to be impacted by higher untreated railway tie costs until sales prices can be adjusted Railway Ties In Q4-18, pricing will continue to improve but related margin gains will be partially offset by rapidly increasing costs of untreated railway ties due to the tightening of supply Utility Poles In Q4-18, sales will benefit from pricing adjustments and strong demand Residential Lumber Higher sales Operating margins expected to improve Pricing adjustments will have a positive effect on sales and margins Strong demand for replacement programs Increased project-based sales Sales and margins expected to improve Increased sales Continued strong demand Logs & Lumber Increased sales Since this business does not generate any margin, sales growth will further reduce overall margins 43

Appendix 44

Income Statement - 5-Year Financial Summary 2017 2016 2015 2014 2013 Sales 1,886.1 1838.4 1559.3 1,249.5 1,011.3 EBITDA (1) 240.6 264.8 243.4 176.3 155.0 EBITDA % (1) 12.8% 14.4% 15.6% 14.1% 15.3% Operating income 207.4 233.2 220.1 155.7 138.7 Operating % 11.0% 12.7% 14.1% 12.5% 13.7% Net income 167.9 153.9 141.4 103.8 92.5 EPS - diluted 2.42 2.22 2.04 1.50 1.34 45

Financial Position - 5-Year Financial Summary 2017 2016 2015 2014 2013 Working capital 779.4 928.0 854.4 615.1 517.0 Total assets 1,786.0 1960.9 1,778.9 1,289.0 1,071.9 Total debt 455.6 694.0 669.9 444.6 372.9 Shareholders equity 1,115.5 1,026.4 913.5 692.3 572.2 Total debt to capitalization Total debt to trailing 12- month EBITDA 0.29:1 0.40:1 0.42:1 0.39:1 0.39:1 1.89 2.62 2.75 2.52 2.41 46

THANK YOU 47