Stella-jones Inc. · TSX:SJ
Stella-jones — Shareholder Meeting (May 2017)
40 slides from Stella-jones's shareholder meeting presentation, May 4, 2017
Slide 1: A Consistent Force
A CONSISTENT FORCE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS MAY 4, 2017
Slide 2: Forward-Looking Statements
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 ris
Slide 3: Tom A. Bruce Jones, CBE, Chairman of the Board
Tom A. Bruce Jones, CBE Chairman of the Board 3
Slide 4: Stella-Jones in 1994
Stella-Jones in 1994 4
Slide 5: Stella-Jones in 2017
Stella-Jones in 2017 Original sites Treating facilities 5
Slide 6: Stella-Jones in 2017
Stella-Jones in 2017 6
Slide 7: ie col
ie col neS 7 go a Stélla-J
Slide 8: 8
8
Slide 9: 9
9
Slide 10: 10
10
Slide 11: ,* siellaJjoneS » «4
EY = ,* siellaJjoneS 1 3 » «4
Slide 12: 12
12
Slide 13: 13
13
Slide 14: neS
neS 14 O a— Stélla-]
Slide 15: 15
15
Slide 16: TTT
TTT PAPAYA ELVACHANAN TITALULVELVIN\\4 \\ NY
Slide 17: Treating 700,000 m3 of domestic lumber
: 7 ™ = Not to mention treating 700,000 m? of domestic lumber — more than enough to fill the Bell Centre! x <2. .. ~ ; i \ w _ Stella-JoneS 7 = a
Slide 18: Agenda
AGENDA 1. Opening of the Meeting 2. Chairman and Secretary 3. Notice of Meeting 4. Report of Scrutineers 5. Minutes of the Annual Meeting of Shareholders Held on April 28, 2016 6. Receipt of the Consolidated Financial Statements and of the Independent Auditor’s Report for the Year Ended December 31,
Slide 19: Proposed Directors
PROPOSED DIRECTORS • Tom A. Bruce Jones Chairman, James Jones & Sons Limited • George J. Bunze Vice-Chairman and Director, Kruger Inc. • Gianni Chiarva Chairman, Stella Jones International S.A. • Katherine A. Lehman Managing Partner, Hilltop Private Capital LLC • James A. Manzi, Jr. Corporate Direct
Slide 20: Agenda
AGENDA 1. Opening of the Meeting 2. Chairman and Secretary 3. Notice of Meeting 4. Report of Scrutineers 5. Minutes of the Annual Meeting of Shareholders Held on April 28, 2016 6. Receipt of the Consolidated Financial Statements and of the Independent Auditor’s Report for the Year Ended December 31,
Slide 21: Brian McManus, President and Chief Executive Officer
Brian McManus President and Chief Executive Officer 21
Slide 22: A Consistent Force
A CONSISTENT FORCE In 2016, Stella-Jones maintained its prominent role in the treated wood industry Over the years, Stella-Jones has been consistently: • Exemplary in the quality of our products • Reliable in our proficiency to deliver • Disciplined in our pursuit of growth This consistency ex
Slide 23: Sixteenth Consecutive Year of Growth
SIXTEENTH CONSECUTIVE YEAR OF GROWTH Record sales and record net income Sales rose 17.9% to $1.84 billion • 4.4% increase excluding acquisitions and currency variations Net income increased 8.9% to $153.9 million 23
Slide 24: The Stella-Jones Business Model
THE STELLA-JONES BUSINESS MODEL Strict discipline in: 1- Never straying from our core competence • Pressure treatment of wood 2- Main product categories • Railway ties and utility poles constitute fundamental infrastructure components 3- Methodical network expansion • Logical next step in a geograph
Slide 25: Network Expansion
NETWORK EXPANSION Acquisitions in the United States: • Lufkin Creosoting (Texas); Kisatchie (Louisiana) Three facilities that primarily produce utility poles Expanded our presence in the U.S. Southeast Acquisitions in Canada: • Bois KMS (Québec); Northern Pressure Treated Wood (Ontario) En
Slide 26: Railway Ties – Sustained Demand
RAILWAY TIES – SUSTAINED DEMAND Sales of $716.2 million Strong performance in the first half of 2016 Softer demand in the second half 26
Slide 27: Utility Poles - Stable Demand
UTILITY POLES - STABLE DEMAND Sales of $579.2 million • 9.8% year-over-year increase • Excluding acquisitions and the currency conversion effect, sales decreased approximately 4.7% Lower sales of distribution poles due to reduced maintenance demand in certain regions Transmission pole demand h
Slide 28: Residential Lumber - Substantial Growth
RESIDENTIAL LUMBER - SUBSTANTIAL GROWTH Sales of $345.7 million • 89.4% year-over-year increase Full-year contribution from the 2015 Ram acquisition Providing residential lumber retailers with a value-added, full service offering • As opposed to previous approach of providing treating services
Slide 29: Industrial Products - Logs & Lumber
INDUSTRIAL PRODUCTS - LOGS & LUMBER Industrial product sales of $96.3 million • Relatively stable from the previous year Logs & lumber sales of $100.8 million • $58.4 million increase over the previous year • Mainly reflects the addition of activities focussed on re-selling excess purchased lumb
Slide 30: Éric Vachon, Senior Vice-President and Chief Financial Officer
Éric Vachon Senior Vice-President and Chief Financial Officer 30
Slide 31: A Consistent Force
A CONSISTENT FORCE Sales EBITDA (in millions of $) (in millions of $) $2,000 $300 $1,500 $225 $1,000 $150 $500 $75 $0 $0 2006 2008 2010 2012 2014 2016 2006 2008 2010 2012 2014 2016 10-year CAGR of 22.7% 10-year CAGR of 21.4% 31
Slide 32: Operating Results
OPERATING RESULTS (in millions, except per share data) Fiscal years ended December 31, 2016 2015 Sales $1,838.4 $1,559.3 Acquisitions $ 156.8 Y/Y sales variation from: Currency variations $ 53.1 Organic growth $ 69.1 +4.4% Gross profit $ 333.7 $ 307.3 Gross profit margin 18.2% 19.7% Net income $ 153
Slide 33: Twelfth Consecutive Year of Dividend Increase
TWELFTH CONSECUTIVE YEAR OF DIVIDEND INCREASE $0.40 $0.30 $0.20 $0.10 $0.00 2004* 2006* 2008* 2010* 2012* 2014 2016 * Incorporates 4 for 1 stock split by way of dividend on October 1, 2013 33
Slide 34: Financial Position
FINANCIAL POSITION (in millions) Dec. 31, 2016 Dec. 31, 2015 Current assets $1,050.5 $ 1,013.8 Property, plant & equipment $ 467.0 $ 375.5 Capital investments of $63.2 million, including the new facility in Cameron, Wisconsin Intangible assets & goodwill $ 431.9 $ 386.6 Total assets $ 1,962.0 $ 1,77
Slide 35: Financial Position
FINANCIAL POSITION (in millions, except ratio) Dec. 31, 2016 Dec. 31, 2015 Long-term debt* $ 694.4 $ 669.9 January 2017: US$150.0 million private placement • US$75.0 million payable in January 2024 • US$75.0 million payable in January 2027 • Proceeds used to reimburse a portion of the committed revo
Slide 36: 2017 First Quarter Results
2017 FIRST QUARTER RESULTS (in millions, except per share data) Quarters ended March 31, 2017 2016 Sales $ 396.9 $ 421.0 Acquisitions $ 22.8 Y/Y sales variation from: Currency variations $ (11.3) Organic variation $ (35.5) -8.4% Gross profit $ 63.8 $ 78.8 Gross profit margin 16.1% 18.7% Net income $
Slide 37: Outlook
OUTLOOK Year-over-year decrease in railway tie sales • Most operators have slightly reduced their maintenance programs • We expect normal buying patterns to resume beyond 2017 Gradual return to regular business flow in the utility pole category • Expansion in the southeastern U.S. to have a slig
Slide 38: Outlook
OUTLOOK Weaker year-over-year performance in the first half of 2017 • Margins impacted by product mix and softer pricing Expect a year-over-year increase in the second half We study every expansion opportunity that offers strategic value • Remain a consistent force in our industry, while consi
Slide 39: PERIOD
Stella-Jo ones Ss
Slide 40: FORCE
Stella-Jo ones Ss Ss aa