Stella-jones Inc. · TSX:SJ
Stella-jones — Investor Presentation (November 2022)
42 slides from Stella-jones's investor presentation, November 2022
Slide 1: Investor Presentation
November 2022 INVESTOR PRESENTATION
Slide 2: Caution Regarding Forward-Looking Information & Non-GAAP and Other Financial Measures
C A U T I O N R E G A R D I N G F O R WA R D - L O O K I N G I N F O R M AT I O N & NON-GAAP AND OTHER FINANCIAL MEASURES This presentation contains certain statements that are forward-looking, including comments with respect to the Company's objectives, strategies, targets and expectations. The rea
Slide 3: Building on Our Strong Fundamentals
B U I L D I N G O N O U R S T R O N G F U N D A M E N TA L S UTILITY R A I L W AY RESIDENTIAL POLES TIES LUMBER Supplies the continent’s major Supplies North America’s Class 1, Manufactures and distributes electrical utilities and short line and commercial premium residential lumber and telecommunic
Slide 4: Stella-Jones at a Glance
S T E L L A - J O N E S AT A G L A N C E The Leading North American Supplier Of Pressure-Treated Wood Products 6.6% (1) 4.6% Industrial Logs & Lumber 2,530 (1) 42 Products Wood Treating Facilities Employees 25.0% 27 U.S. and 15 Canada Railway Ties 25.5% $2.945B 13 (1) 68% (2) Residential Sales Pole
Slide 5: Historical Milestones
HISTORICAL MILESTONES Completed more than 20 acquisitions in the past 20 years Initial Public Over $1 Billion in sales Over $2 Billion Foundation Offering 4 for 1 stock split in sales ACQUISITION CONTRIBUTIONS • Stronger industry player 1993 1994 2010 2012 2013 2015 2018 • Expand North American netw
Slide 6: Infrastructure-Related Businesses
I N F R A S T R U C T U R E - R E L AT E D B U S I N E S S E S Sales Infrastructure-related businesses represent approximately 68% of total sales $2,945M Sales $1,559M 2015 2016 2017 2018 2019 2020 2021 12 m. ended Sept. 30, 2022 Infrastructure-related products: utility poles, railway ties and indus
Slide 7: Stella-Jones' Continental Network
S T E L L A - J O N E S ’ C O N T I N E N TA L N E T W O R K 7
Slide 8: Competitive Strengths
COMPETITIVE STRENGTHS Resilient Business Model • Businesses with steady demand • Leadership position in product categories • Decentralized structure with the ability to rapidly adjust to changing environments and customer requirements • Extensive network to service customers • Solid and sustained cu
Slide 9: Strategy and Future Growth by Business Unit
S T R AT E G Y A N D F U T U R E G R O W T H B Y B U S I N E S S U N I T % of Sales* Market Growth Drivers Trends Growth Strategy • Potential for further consolidation in • Replacement programs (life span of • Increasing average age of poles • Acquisitions 38.3% the North American market poles is ty
Slide 10: Overview by Business Unit
OVERVIEW BY B U SIN ESS U N IT 10
Slide 11: Utility Poles – Overview
UTILITY POLES – OVERVIEW Leading North American supplier of wood utility poles, providing over one million pressure-treated wood poles per year to replace, upgrade and develop new electrical utility and telecommunications lines across Canada and the United States Sales $1,128M $674M Volume $1,128M G
Slide 12: Utility Poles – Offering
UTILITY POLES – OFFERING Competitive Advantages An extensive distribution network, continuous supply, emergency response and fire- resistant wrap Customers Product Category Size • Electrical utility companies • Telecommunication companies • There are about 150MM poles in North America, of which 105M
Slide 13: Railway Ties – Overview
R A I LWAY T I E S – O V E R V I E W Industry leader in the development, upgrade and maintenance of North America’s railroad infrastructure, with the capacity to supply the continent’s demand for railway ties and timbers with over 10 million pressure-treated wooden crossties per year Sales $736M $65
Slide 14: Railway Ties – Offering
R A I LWAY T I E S – O F F E R I N G Competitive Advantages An extensive distribution network, steady supply and short delivery times Customers Product Category Size • ~65% Class 1 railroads • ~35% short and regional rail lines & contractors • ~18 million railway tie purchases on an annualized basis
Slide 15: Residential Lumber - Overview
RESIDENTIAL LUMBER - OVERVIEW Provides seamless, end-to-end service to key North American retailers, supplying hundreds of millions of board feet of treated residential lumber across Canada and the United States Sales $751M Sales $751M $366M variations largely reflect 25.5% the normalization of lumb
Slide 16: Residential Lumber - Offering
RESIDENTIAL LUMBER - OFFERING Competitive Advantages Solid supply, dedicated distribution centres, quick delivery times and low transportation costs Customers Product Category Size • ~70% Big box retailers • Dealer network • Difficult to access • Limited pure plays Contracts • Renewed annually Servi
Slide 17: Industrial Products – Overview
INDUSTRIAL PRODUCTS – OVERVIEW A leading supplier of pressure-treated wood products to the industrial, marine and civic sectors for outdoor applications, including wood for railway bridges and crossings, marine and foundation pilings and construction timbers, offered in a variety of select wood spec
Slide 18: Logs and Lumber – Overview
LOGS AND LUMBER – OVERVIEW Business used to optimize procurement and does not generate a margin Sales $194M $194M $120M Sales are 6.6% tied to the price of lumber 2017 2018 2019 2020 2021 12 m. ended 12-month period ended Sept. 30, 2022 Sept. 30, 2022 18
Slide 19: Environmental, Social and Governance
EN VIR ON MEN TA L, SOCIAL AND GOVER N A N C E 19
Slide 20: Pursuing Our Business Activities Responsibly
P U R S U I N G O U R B U S I N E S S A C T I V I T I E S R E S P O N S I B LY We are committed to integrating ESG into our daily business decisions and strategies, which will make us a more resilient and agile business in the long-term. Keeping with our vision to consistently improve our sustainabi
Slide 21: 2021 ESG Highlights
2021 ESG HIGHLIGHTS PEOPLE Safety, well being, and a collaborative and inclusive workforce Women on the Board of SHIELD rollout extends into Community engagement Streamlined HR processes 40% Directors, exceeding 30% gender diversity target Canada, our environment, health and safety management progra
Slide 22: Financial Overview
FINANCIAL OVERVIEW 22
Slide 23: Track Record of Performance
TRACK RECORD OF PERFORMANCE Sales(1) $2,750M $2,945M EBITDA(2)(3) $400M $413M $1,559M $243M 2015-21 CAGR 10% 2015-21 CAGR 9% 2015 2016 2017 2018 2019 2020 2021 12 m. ended 2015 2016 2017 2018 2019 2020 2021 12 m. ended Sept. 30, Sept. 30, 2022 2022 Net Income Cash Flow From Operating Activities(4) $
Slide 24: Maintaining a Solid Financial Position
M A I N TA I N I N G A S O L I D F I N A N C I A L P O S I T I O N $1,000 2.3x $800 2.2x 2.3x 1.9x $600 2.8x 2.6x 2.1x $400 1.9x $200 $0 2015 2016 2017 2018 2019 2020 2021 12 m. ended September 30, Net debt (1) Net Debt-to-EBITDA (1) 2022 (1) These are non-GAAP and other financial measures which do
Slide 25: Annual Inventory Turnover
A N N U A L I N V E N T O RY T U R N O V E R Because of the long periods required to air-season wood, inventory turnover is relatively low. 2.2x 2.1x 2.1x 1.9x 1.8x 1.9x 2.0x 1.9x 1.7x 1.6x avg. 1.4x 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 25
Slide 26: Capital Allocation Priorities
C A P I TA L A L L O C AT I O N P R I O R I T I E S 1 2 3 Capital Expenditures Dividend Acquisitions Share Repurchase Expand capex to reflect Durable dividend Organic growth, growing demand of the Pursue accretive Return excess free cash payout innovation, productivity infrastructure-related transac
Slide 27: Allocating Capital for Growth & Returns
A L L O C AT I N G C A P I TA L F O R G R O W T H & R E T U R N S Stella-Jones has invested $821M in growth investments and returned $661M in cash to shareholders since 2015 $348M $252M $198M $177M $143M $155M $122M $87M 2015 2016 2017 2018 2019 2020 2021 Nine-month period ended September Acquisitio
Slide 28: Increasing Dividends Consistently
I N C R E A S I N G D I V I D E N D S C O N S I S T E N T LY 2022 marks the 18th consecutive year of dividend increase $0.80* 14% CAGR $0.72 $0.60 $0.56 $0.32 $0.48 $0.44 $0.40 2015 2016 2017 2018 2019 2020 2021 2022E * Projected based on the latest declared quarterly dividend 28
Slide 29: Q3-2022 & Year-to-Date 2022 Financial Results
Q3 -2022 & YEA R -TO DATE 2022 FIN A N C IA L R ESU LTS 29
Slide 30: Q3 & YTD-22 – Sales
Q3 & YTD-22 – SALES $2,400M $2,205M SALES VARIANCE Q3 YTD 19% 5% Organic Organic 2021 Sales ($M) 679 2,205 Growth Growth Acquisitions 17 47 $842M $679M Currency variations 18 40 Organic growth 128 108 Pressure treated wood 125 146 Logs and lumber 3 (38) Q3-21 Q3-21 Q3-22 Q2-22 YTD-21 YTD-21 YTD-22 Y
Slide 31: YTD-22 – Sales Variance
Y T D - 2 2 – S A L E S VA R I A N C E Infrastructure-Related Businesses Organic Growth of 13% (in millions of Residential Industrial TOTAL PRESSURE Logs & Utility Poles Railway Ties CONSOLIDATED SALES dollars) Lumber Products TREATED WOOD Lumber YTD 2021 698 553 666 96 2,013 192 2,205 Acquisitions
Slide 32: Q3 & YTD-22 – Profitability
Q 3 & Y T D - 2 2 – P R O F I TA B I L I T Y EBITDA(1) & Operating Income Net Income & Earnings Per Share (in millions of $) (in millions of $, except per share data) $348 $361 $205 $205 $294 $298 $3.30 14.1% $1.07 $3.14 15.8% 10.2% $119 15.0% $0.52 $98 $65 $69 $51 $34 Q3-21 Q3-22 YTD-21 YTD-22 Q3-2
Slide 33: Q3-22 – Cash Flow and Capital Allocation
Q 3 - 2 2 – C A S H F L O W A N D C A P I TA L A L L O C AT I O N CFO before certain items(1) Capital Allocation Dividends (in millions of $) (in millions of $) $252 (in $ per share) $363 $341 $0.80(2) $157 $0.72 $102 $121 $52 $70 Q3-21 Q3-22 YTD-21 YTD-22 2021 2022 Q3-21 Q3-22 YTD-21 YTD-22 Acquisi
Slide 34: 2022-2024 Financial Objectives
2022-2024 FIN A N C IA L OB JEC TIVES 34
Slide 35: 2022-2024 Objectives by Product Categories
2 0 2 2 - 2 0 2 4 O B J E C T I V E S B Y P R O D U C T C AT E G O R I E S UTILITY RAILWAY RESIDENTIAL POLES TIES LUMBER • Support customers with ample and timely • Strong procurement network provided a • Navigated through the market price supply of key infrastructure requirements steady raw materia
Slide 36: 2022-2024 Outlook – Evolving Product Sales
2 0 2 2 - 2 0 2 4 O U T L O O K – E V O LV I N G P R O D U C T S A L E S ~2%-5% 8% 6% ~20%-25% 5% 26% 28% 22% • Compound annual sales growth rate in ~75%-80% 68% 64% the mid-single digit range from 2019 73% pre-pandemic levels to 2024. • Infrastructure-related sales are expected to represent 75-80%
Slide 37: Investing and Innovating in Our Network
I N V E S T I N G A N D I N N O VAT I N G I N O U R N E T W O R K IMPROVEMENTS INCLUDE: • Capex Program Expanded - Incremental $90M to $100M over 3 years to support the growing demand of its infrastructure-related customer base, in addition to the $50 to $60 million of annual capital expenditures •
Slide 38: Returning Capital to Shareholders
R E T U R N I N G C A P I TA L TO S H A R E H O L D E R S +50% 2019- 2022-2024 • The Company expects to return 2021 Projected approximately $500 to $600 million to shareholders in the 2022-2024 period. • $180M returned in first nine months of 2022 $365M $500M-$600M cumulative cumulative Please refer
Slide 39: Appendix
APPENDIX 39
Slide 40: Income Statement - Financial Summary
I N C O M E S TAT E M E N T - F I N A N C I A L S U M M A RY 12 m. ended 2021 2020 2019 2018(1) 2017(1) Sept. 30, 2022 Sales(2) 2,945 2,750 2,551 2,189 2,144 1,908 Gross Profit(3) 477 456 446 358 328 315 Gross Profit margin(3) 16.2% 16.6% 17.5% 16.4% 15.3% 16.5% EBITDA(3) 413 400 385 313 244 243 EBI
Slide 41: Financial Position - Financial Summary
F I N A N C I A L P O S I T I O N - F I N A N C I A L S U M M A RY YTD 2022 2021 2020 2019 2018(1) 2017(1) Working capital(2)(3) 1,231 1,146 1,101 1,010 909 779 Total assets 2,936 2,665 2,426 2,281 2,062 1,786 Long-term debt(4) 774 734 606 605 514 456 Lease liabilities(4) 161 144 139 118 - - Shareho
Slide 42: Stella-Jones
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