Stella-Jones Inc. · TSX:SJ
Stella-Jones — Investor Presentation (March 2024)
40 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 Stella-JoneS 5 re ni
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 R4Z Market Cap WS! Tsx & * ef ~70% Wood Treating foul Facilities 29 U.S. Sales and 16 Canada in the U.S. 0 EB 72,900 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 LOGS 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 we. To ae ¢ d o $5 5 r) aS leon a i ewe é e. Se o* s environmental responsibility and integrity.
Slide 7: Investment Highlights
Investment Highlights ° ° Leader in im Qi) Infrastructure- Driven Markets Prudent Capital S Allocation and <7 Balance Sheet Management “7 Favorable Oo Tailwinds © Track Record of a Shareholder Value Creation Stella-JoneS gnc Leading North American manufacturer of treated wood infrastructure products
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: Competitive Strengths
Stella-Jone OO 4 Be ty) + kis Robust Procurement Network & Consistent Access to Wood Fibre Competitive Strengths — ~~ Expansive Inventory Manufacturing Network Extensive Transportation Network & Broad and Diversified Customer Base = Production facilities strategically located close to various wood s
Slide 14: Growth Drivers
Growth Drivers Stella-Jone ai Utility Pole Maintenance Fire-Resistant Wrap Utility Poles >) Broadband Expansion & eso Renewable Generation/ Transmission Wheeling E> Electric Vehicle Expansion = Most significant growth driver = Utilities have not undergone significant capital investments for pole mai
Slide 15: Railway Ties
PLAN IN ACTION Railway Ties Stella-JoneS 5 re
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 oe Established Customer Relationships Extensive Manufacturing, Distribution & Procurement Networks Differentiated Offering rT | ooo Robust Inventory Levels " Long-term contracts with Class | carriers in North America = Established strong relationships with Class | customers due
Slide 18: Large & Diversified North American Presence
Large & Diversified North American Presence 1. Prince George, BC 2. Delson, QC 3. Russellville, AR 4. Alexandria, LA 5. Bangor, WI 6. Fulton, KY 7. Winslow, IN 8. Montevallo, AL 9. Clanton, AL 10. Goshen, VA Tl. Dubois, PA 12. McAlisterville, PA Stella-joneS —rsz—. 12 Treating Facilities 2 in Canada
Slide 19: Growth Drivers
Growth Drivers fe) WA 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 5 re
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 DB Treated Lumber and Distribution -o— Oo: Facilities: 6 in Canada and 2 in US Products: Treated Lumber and AN Wood Accessories, Composite Decking and Complementary Attachments 920 Customers: ~70% Big Box, ZF ~30% Dealer Network Stella-joneS
Slide 23: Competitive Strengths: Premium-Quality Products
Ye 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 th
Slide 24: Growth Drivers
Growth Drivers és Product Expansion Sourcing and Through Retail Partners Procurement Opportunities © cation pad ese * Strong supplier relationships = Growth in premium lumber treated = Expanded supply network outside of North program and complementary products . America = Well-established distributi
Slide 25: ESG
PLAN IN ACTION ESG Stella-JoneS a—.
Slide 26: Sustainability at Stella-Jones
Sustainability at Stella-Jones Our products store significantly more Carbon than emitted over their life-time and ~ ~ can be an effective solution to mitigate aaa —_— climate change Stella-JoneS al
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 awe [ J ae KT . anne ~~ wee $2,551 $2,750 S | +8% | [ou] 2017 2020 2021 2022 a " Strong and steady maintenance-driven demand Stella-JoneS ‘i EBITDA veneer . Gh anne os $400 $448 18.3% + 36% 14.62%} 14.5%| 2020 2021 2022
Slide 31: Financial Objectives: 2023 - 2025
a Financial Objectives: 2023 - 2025 Industry leading Organic Sales infrastructure-related businesses expected to account for EBITDA Margi 75%-80% of sales argin Net Debt-to- EBITDA ratio Stella-JoneS gnc
Slide 32: Sales Growth Forecast
Sales Growth Forecast Utility Poles Railway Ties Residential Lumber Stella-JoneS —_—,—. 15% Low single digit range $600-$650M Total sales: >$3.6B organic sales by 2025 Projected CAGR of 6% from 2022-2025
Slide 33: EBITDA Growth Drivers
EBITDA Growth Drivers xY Strong Demand in Utility Poles Higher pricing and higher volumes Growth in Railway Ties Stable source of revenue © Strong Partnerships in Residential Lumber Levels to stabilize © Stella-JoneS gnc Improvement in Product Mix an —! EBITDA Margin target of 16%, a 9% CAGR from 20
Slide 34: 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-$75M annually Target: 20-30
Slide 35: Financial Objectives: Progress in 2023
Financial Objectives: Progress in 2023 In the first year of its 2023-2025 financial plan, the Company delivered a strong performance and made significant progress towards the achievement of its financial objectives, as summarized in the table below. (in millions of dollars, except percentages 2023-2
Slide 36: Appendix
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Slide 37: Q4 2023 - Financial Highlights
Q4 2023 - Financial Highlights Stella-] (in millions of Canadian dollars, except per share data and margins) Q4-23 Q4-22 Variation ($) Variation (%) Sales 688 665 23 3% Gross Profit 137 12 25 22% Gross Profit margin 19.9% 16.8% n/a 310 bps EBITDA 120 87 33 38% EBITDA Margin 17.4% 13.1% n/a 430 bps O
Slide 38: 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 39: 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 40: Plan in Action
PLAN IN ACTION Stella-JoneS