Stella-jones Inc. · TSX:SJ
Stella-jones — Investor Presentation (March 2024)
37 slides from Stella-jones's investor presentation, March 2024
Slide 1: Plan in Action: Investor Presentation March 2024
PLAN IN ACTION Investor Presentation March 2024 (Financial Outlook Updated November 2024) Stella-JoneS 5
Slide 2: Caution Regarding Forward-Looking Information
Caution Regarding Forward-Looking Information This presentation contains certain statements that are forward-looking, including comments with respect to the Company's objectives, strategies, targets and expectations. The reader is cautioned not to place undue reliance on these statements since a num
Slide 3: Stella-Jones At-A-Glance
Stella-Jones At-A-Glance oh) $4398" “SJ RSZ Market Cap WS! Tsx & * xf ~70% Wood Treating iil Facilities 29 U.S. Sales and 16 Canada in the U.S. 0 EB >2,900 Employees “AIS Stella-JoneS a—. are Canadian dollars, CAD “Allan }ecember 31, 2023 ee 0 e Ce @ @e e eo e?e
Slide 4: Product Category Overview
Product Category Overview RAILWAY- PRESIDENTIAL SF TIES PROBUCTS = LUMBER «= “9 & LUMBER 47% of Sales 25% of Sales 5% of Sales 19% of Sales 4% of Sales Stella-JoneS a
Slide 5: Historical Milestones
Historical Milestones Completed more than 20 acquisitions in the past 20 years Foundati IPO Over $1 billion in sales Over $2 billion oundation 4 for 1 stock split in sales 2010 2015 2021 Tangent Rail McFarland Cascade: RAM Forest Group & Cahaba: Corporation: Acquisition for Ramfor Lumber: Acquisitio
Slide 6: Our Mission
Our Mission To be the performance leader in the industries in which we operate, and. a model corporate citizen, exercising environmental responsibility and integrity.
Slide 7: Investment Highlights
Investment Highlights ° ° Leader in Gy Qj) Infrastructure- Driven Markets Prudent Capital S Allocation and <7 Balance Sheet Management “ry Favorable Tailwinds Track Record of a A Shareholder Value Creation Leading North American manufacturer of treated wood infrastructure products: utility poles and
Slide 8: Growth Catalysts
Growth Catalysts = Significant investments by utility companies to ensure infrastructure will support North America’s future needs = Well positioned to support North American rail infrastructure = Acquisition opportunities to better serve customers in areas of procurement and logistics Increasing Ut
Slide 9: Acquisition Criteria
Acquisition Criteria Acquisition opportunities to better serve railroad and utility customers * Continued focus on wood treating " Consideration given to complementary products or services * Subject to strict evaluation criteria = Accretive to margins and returns = Steady revenues and free cash flow
Slide 10: Utility Poles
PLAN IN ACTION Utility Poles Stella-JoneS a—.
Slide 11: Utility Poles: Overview
Utility Poles: Overview = Stella-Jones supplies major electrical utilities and telecommunication companies with wood utility poles across North America = Extensive network of distribution facilities to quickly respond to un-forecasted demand = Treated wood poles preferred because of their durability
Slide 12: Large & Diversified North American Presence
Large & Diversified North American Presence 1 New Westminster, BC 15. Silver Springs, NV 2 Prince George, BC 16 Lufkin, TX 3. Galloway, BC 17 Rison, AR 4 Carseland, AB 18 Converse, LA 5 Neepawa, MB 19 Pineville, LA 6 Kirkland Lake, ON 20 Cameron, WI 7 Guelph, ON 21 Scooba, MS 8 Gatineau, QC 22 Wiggi
Slide 13: Robust Procurement Network
Stella-Jone 0" Robust Procurement Network & Consistent Access to Wood Fibre Competitive Strengths —_— ™&» Expansive Inventory Manufacturing Network Extensive Transportation Network 000 amy Rey, Broad and Diversified Customer Base = Production facilities strategically located close to various wood sp
Slide 14: Growth Drivers
Growth Drivers & yp Utility Pole Maintenance Fire-Resistant Wrap Utility Poles > Broadband Expansion & Renewable Generation/ Transmission Wheeling E> Electric Vehicle Expansion = Most significant growth driver = Utilities have not undergone significant capital investments for pole maintenance for ap
Slide 15: Railway Ties
PLAN IN ACTION Railway Ties Stella-JoneS a
Slide 16: Railway Ties: Overview
Railway Ties: Overview Industry leader in the manufacture and distribution of wood railway crossties, switch ties, bridge timbers, prefabricated bridges, crossing panels, and pre-plated products Treating capacity, sources of supply and purchasing power to meet the needs of Class 1, Short Line railro
Slide 17: Competitive Strengths
Competitive Strengths ES Established Customer Relationships Extensive Manufacturing, Distribution & Procurement Networks Differentiated Offering ma oo Robust Inventory Levels = Long-term contracts with Class | carriers in North America = Established strong relationships with Class | customers due to
Slide 18: Large & Diversified North American Presence
Large & Diversified North | . , American Presence * 1. Prince George, BC . wee - 7 12 Treating Facilities ~ o 2. Delson, QC " Re 3. Russellville, AR 2 in Canada LQ } 4. Alexandria, LA 10 in U.S. } 5. Bangor, WI ; —— = eo 6. Fulton, KY > e 7. Winslow, IN 8. Montevallo, AL { ¢ 9. Clanton, AL } oe : (1
Slide 19: Growth Drivers
Growth Drivers {e) DA Increased Volumes & Favourable Pricing Dynamics Relationships with Class 1 Railroads Procurement Network Capacity Availability Positioned to benefit from U.S. Infrastructure Bill = Building on strong relationships with Class | railways " Opportunity to expand business with comm
Slide 20: Residential Lumber
PLAN IN ACTION Residential Lumber Stella-JoneS a—
Slide 21: Residential Lumber: Overview
Residential Lumber: Overview Stella-Jones manufactures and distributes premium grade residential treated lumber, composite decking products and accessories to Canadian and American retailers 2023 Sales 19% of Total Sales Stella-JoneS ai— $645M 5-Year Sales $773M $744M $665M $645M $471M 2019 2020 202
Slide 22: Product Category Overview
Product Category Overview Dy Treated Lumber and Distribution ‘O— Oo: Facilities: 6 in Canada and 2 in US Products: Treated Lumber and PAN Wood Accessories, Composite Decking and Complementary Attachments 920 Customers: ~70% Big Box, CZF ~30% Dealer Network Stella-joneS
Slide 23: Premium-Quality Products
ue Premium-Quality Products Competitive Strengths fe) ah Speed to Market 090 amp: Res’, Strong Procurement Team Dedicated Distribution Centres with Exceptional Service and Support Offers premium grade lumber to customers Lumber grade is enhanced by additional visual inspections, removing defects in
Slide 24: Growth Drivers
Growth Drivers és Product Expansion Sourcing and Through Retail Partners Procurement Opportunities > ‘catenin avec * Strong supplier relationships * Growth in premium lumber treated = Expanded supply network outside of North program and complementary products . America = Well-established distributio
Slide 25: ESG
PLAN IN ACTION ESG Stella-J
Slide 26: Sustainability at Stella-Jones
Sustainability at Stella-Jones Our products store significantly more Carbon than emitted over their lifetime and a ae can be an effective solution to mitigate _ == — climate change Stella-JoneS a
Slide 27: Sustainability at Stella-Jones
Sustainability at Stella-Jones How Stella-Jones is positioned to support the low carbon economy of tomorrow Elecar ification Increased Utility Poles us! SUPPORTING fea THE GREEN seworks to Mitigate Increased Fire-Wrapped Poles TRANSITION Impact from Wildfires Transition to Low Carbon Transportation
Slide 28: Our ESG Strategy
Our ESG Strategy Climate Change & GHG Emi We commit to reducing our emissions intensity and maximizing the carbon sequestered in our products. Health & Safety ‘We keep our people safe by reducing risks through a culture of teamwork, ownership, and continuous improvement. Our Peop We attract and reta
Slide 29: Financial Outlook
PLAN IN ACTION Financial Outlook Stella-JoneS a—.
Slide 30: Track Record of Sustainable and Profitable Growth
Track Record of Sustainable and Profitable Growth (in millions of dollars) Sales cee . ‘4 ae XM ae . newer ~ me 2.551 SB WV i +8% | [ou] _ 2020 2021 2022 2023 " Strong and steady maintenance-driven demand Stella-JoneS ‘—— EBITDA ween > Gh ce os 448 i $400 $ 18.3% , 14.6 36% 14.5%| 2020 2021 2022 = =
Slide 31: Updated 2023-2025 Financial Guidance
Updated 2023-2025 Financial Guidance (in millions of Canadian dollars, except percentages and ratios) 2023-2025 Objectives May 20230 Updated November 2024 Sales > $3,600 organic Approx. $3,600 total EBITDA Margin® 16% > 17% Return to Shareholder: cumulative > $500 > $500 Net Debt-to-EBITDA® ©) 2.0x-
Slide 32: Updated Sales Growth Forecast
Updated Sales Growth Forecast Utility Poles Railway Ties Low single digit range Residential Lumber $600-$650M Stella-JoneS gnc Slide updated November 2024
Slide 33: Disciplined Capital Allocation
Disciplined Capital Allocation Net Leverage Target: 2.0x-2.5x Return to Shareholders Capital Expenditures Target: eae over Acquisitions Asset maintenance, productivity and Pursue accretive sustainability initiatives Dividends transactions to enhance strategic Target: $65M-$75M annually Target: 20-30
Slide 34: Appendix
33 as 5 Cc 7 QO QO <
Slide 35: 2023 - Financial Highlights
2023 - Financial Highlights (in millions of Canadian dollars, except per share data and margins) 2023 2022 vores vero Sales 3,319 3,065 254 8% Gross Profit 688 524 164 31% Gross Profit margin 20.7% 17.1% n/a 360 bps EBITDA 608 448 160 36% EBITDA Margin 18.3% 14.6% n/a 370 bps Operating income 499 35
Slide 36: 2023 Cash Flow and Capital Allocation
2023 Cash Flow and Capital Allocation Liquidity Uses: * Maintained and upgraded assets and invest in network * Expanded and secured production capacity * Three utility-pole related acquisitions ¢ Returned $195 million to shareholders in 2023 * Renewed NCIB through November 2024 Increased dividend fo
Slide 37: Plan in Action
PLAN IN ACTION Stella-JoneS