Stella-jones Inc. · TSX:SJ
Stella-jones — Shareholder Meeting (May 2020)
44 slides from Stella-jones's shareholder meeting presentation, May 7, 2020
Slide 1: Annual and Special Meeting of Shareholders
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS May 7, 2020
Slide 2: Agenda
AGENDA 1 Opening of the Meeting Chair, Secretary and Scrutineers Notice of Meeting Scrutineer’s Report Minutes of Previous Meeting Annual Report & Independent Auditor’s Report Election of the Directors Appointment of Auditors Advisory Vote on the Corporation’s Approach to Executive Compensation Prop
Slide 3: Management
MANAGEMENT Eric Vachon, CPA, CA Silvana Travaglini, CPA, CA Marla Eichenbaum President and Senior Vice-President and Chief Vice-President, General Counsel Chief Executive Officer Financial Officer and Secretary 3
Slide 4: Caution Regarding Forward-Looking Information
Caution Regarding Forward-Looking Information This presentation contains statements that are forward-looking in nature. Such statements involve known and unknown risks and uncertainties that may cause the actual results of the Company to be materially different from those expressed or implied by suc
Slide 5: Adoption of IFRS 16, Leases
ADOPTION OF IFRS 16, LEASES (“IFRS 16”) • On January 1, 2019, the Company retrospectively adopted IFRS 16 • Comparatives for the 2018 reporting period have not been restated, as permitted • The application of this new standard resulted in: – The addition of right-of-use assets and lease liabilities
Slide 6: Katherine A. Lehman
Katherine A. Lehman Chair of the Board 6
Slide 7: Agenda
AGENDA Opening of the Meeting 2 Chair, Secretary and Scrutineers 3 Notice of Meeting 4 Scrutineer’s Report 5 Minutes of Previous Meeting 6 Annual Report & Independent Auditor’s Report 7 Election of the Directors Appointment of Auditors Advisory Vote on the Corporation’s Approach to Executive Compens
Slide 8: Election of Directors
ELECTION OF DIRECTORS Robert Coallier Rhodri J. Harries Karen Laflamme Katherine A. Lehman James A. Manzi, Jr. Corporate Director Executive Vice-President, Corporate Director Chair of the Board, Corporate Director Chief Financial and Stella-Jones Inc. Administration Officer, Managing Partner, Gildan
Slide 9: Agenda
AGENDA Opening of the Meeting Chair, Secretary and Scrutineers Notice of Meeting Scrutineer’s Report Minutes of Previous Meeting Annual Report & Independent Auditor’s Report Election of the Directors 8 Appointment of Auditors 9 Advisory Vote on the Corporation’s Approach to Executive Compensation 10
Slide 10: Éric Vachon
Éric Vachon President and Chief Executive Officer 10
Slide 11: Proactively Managing COVID-19
PROACTIVELY MANAGING COVID-19 • Seasoned management team in place • Implemented rigorous hygiene practices and physical distancing policies throughout the organization • Committed to support essential businesses and allow them to operate resiliently during this pandemic • Resilient business model, f
Slide 12: 2019 – Growth in Sales and Profitability
2019 – GROWTH IN SALES AND PROFITABILITY Sales EBITDA(1) Net income $281M $313M $163M $2.1B $2.2B Pre-IFRS $138M $244M 14% $2.37 13% 12% $1.98 2018 2019 2018 2019 2019 2018 2019 19th consecutive Improved pricing and Growth in operating year of sales growth positive product mix income (1)This is a no
Slide 13: Forward Driven, Customer Focused
FORWARD DRIVEN, CUSTOMER FOCUSED Grow the Business Return Value Respond to to Shareholders Customer Needs 13
Slide 14: Utility Poles
UTILITY POLES 2019 Sales Sales Variation $779M $725M +8% $779M 36% 2018 2019 Organic Growth $36M 5% 14
Slide 15: Railway Ties
RAILWAY TIES 2019 Sales Sales Variation $678M $662M +2% $678M 31% 2018 2019 Sales remained stable 15
Slide 16: Residential Lumber
RESIDENTIAL LUMBER 2019 Sales Sales Variation $474M $472M (1%) $472M 22% 2018 2019 Organic Growth ($15M) (3%) 16
Slide 17: Industrial Products
INDUSTRIAL PRODUCTS 2019 Sales Sales Variation $128M $109M +17% $128M 6% 2018 2019 Organic Growth $12M 11% 17
Slide 18: Logs & Lumber
LOGS & LUMBER 2019 Sales Sales Variation $153M (27%) $112M $112M 5% 2018 2019 Organic Growth ($42M) (28%) 18
Slide 19: Lower Lumber Costs Impacting Results
LOWER LUMBER COSTS IMPACTING RESULTS Lumber costs peaked in May 2018 700 600 500 400 300 200 100 0 2014-12-31 2015-12-31 2016-12-31 2017-12-31 2018-12-31 2019-12-31 19
Slide 20: Growing by Acquisitions
GROWING BY ACQUISITIONS July 2003 Cambium Group Inc. (Canada) August 2005 Webster Wood Preserving (U.S.) July 2006 Bell Pole Company (Canada) February 2007 Wood utility pole business of J.H. Baxter (U.S.) April 2008 The Burke-Parsons-Bowlby Corporation (U.S.) April 2010 Tangent Rail Corporation (U.S
Slide 21: The Strength of Our Continental Network
THE STRENGTH OF OUR CONTINENTAL NETWORK 21
Slide 22: Silvana Travaglini, Senior Vice-President and CFO
Silvana Travaglini, CPA, CA Senior Vice-President and Chief Financial Officer 22
Slide 23: Driving Growth Forward
DRIVING GROWTH FORWARD Sales EBITDA(1)(2) $313M $2,169M $561M $71M 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Net Income Cash Flow(1)(3) $305M $163M $34M $78M 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016
Slide 24: 2019 – Sales Increased for 19th Consecutive Year
2019 – SALES INCREASED FOR 19TH CONSECUTIVE YEAR SALES VARIANCE $2.1B $2.2B +2% 2018 Sales (M) $2,124 Acquisitions 11 Currency variations 42 Organic growth Pressure treated wood 34 Logs and lumber (42) 2019 Sales (M) $2,169 2018 2019 Utility Poles Railway Ties Residential Lumber Industrial Products
Slide 25: 2019 – Higher Gross Profit and Margin
2019 – HIGHER GROSS PROFIT(1) AND MARGIN $359M $328M 17% 15% Higher selling prices for utility poles and railway ties drove the gross profit improvement 2018 2019 (1)This is a non-IFRS financial measure. Please refer to the Company’s MD&A. 25
Slide 26: 2019 – Higher EBITDA and Margins
2019 – HIGHER EBITDA(1) AND MARGINS EBITDA(1) Operating Income(1) $281M $313M Pre-IFRS $242M $244M Driven by $206M 14% improved pricing 13% 11% and favourable 12% product mix 10% 2018 2019 2019 2018 2019 (1) This is a non-IFRS financial measure. Please refer to the Company’s MD&A. 26
Slide 27: 2019 – Higher Net Income & EPS
2019 – HIGHER NET INCOME & EPS Net income EPS $163M $2.37 $138M $1.98 Driven by sales growth 2018 2019 2018 2019 27
Slide 28: 2019 – Lower CFO Due to Increased Inventory
2019 – LOWER CFO DUE TO INCREASED INVENTORY Cash Flow before certain items(1)(2) Cash Flow from Operating Activities Increase in $305M inventory in anticipation $128M of 2020 sales $258M $90M 2018 2019 2018 2019 (1) This is a non-IFRS financial measure. Please refer to the Company’s MD&A. (2) Before
Slide 29: Allocating Capital for Growth & Returns
ALLOCATING CAPITAL FOR GROWTH & RETURNS $198M $192M $175M $143M $71M $122M Share buybacks $105M $95M $97M $87M $45M 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Acquisitions Capex Dividends Share buyback 29
Slide 30: Increasing Dividends Consistently
INCREASING DIVIDENDS CONSISTENTLY 15th consecutive year of dividend increase $0.56 $0.48 $0.44 $0.40 $0.32 $0.28 $0.20 $0.16 $0.13 $0.10 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 30
Slide 31: Maintaining a Solid Financial Position
MAINTAINING A SOLID FINANCIAL POSITION 800 $605M 700 600 3.0x 500 2.8x 2.5x 2.6x 400 2.2x 2.4x 2.1x 1.9x 1.9x 300 1.9x 200 100 - 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Long-term debt Long-term debt to EBITDA (1) (1)This is a non-IFRS financial measure. Please refer to the Company’s MD&A.
Slide 32: Q1-2020 Financial Results
Q1-2020 FINANCIAL RESULTS 32
Slide 33: Q1-20 – Sales Up 14%
Q1-20 – SALES UP 14% SALES VARIANCE $503M 14% Q1-19 Sales (M) $441 $414M Currency variations 3 Organic growth Pressure treated wood 56 Logs and lumber 3 Q1-20 Sales (M) $503 Q1-19 Q1-20 Utility Poles Railway Ties Residential Lumber Industrial Products Logs & Lumber 33
Slide 34: Q1-20 – Stable EBITDA and Operating Income
Q1-20 – STABLE EBITDA(1) AND OPERATING INCOME(1) EBITDA(1) Operating Income(1) $70M $52M $64M Impacted by $46M $45M $63M $60M mark-to-market $42M 14.5% derivative 10.4% 10.3% 13.9% commodity 13.6% 9.5% 12.5% contracts 9.0% Q1-19 Q1-19 Q1-20 Q1-20 Q1-19 Q1-19 Q1-20 Q1-20 Q1-19 Q1-19 Q1-20 Q1-20 Q1-19
Slide 35: Q1-20 – Stable Net Income & EPS
Q1-20 – STABLE NET INCOME & EPS Net income EPS $29M $28M $0.43 $0.41 Q1-19 Q1-20 Q1-19 Q1-20 35
Slide 36: Q1-20 – Lower CFO Due to Increased Inventory
Q1-20 – LOWER CFO DUE TO INCREASED INVENTORY Cash Flow before certain items(1)(2) Cash Flow Used in Operating Activities $69M $93M $60M $76M Seasonal increase in working capital Q1-19 Q1-19 Q1-20 Q1-20 Q1-19 Q1-20 (1) This is a non-IFRS financial measure. Please refer to the Company’s MD&A. (2) Befo
Slide 37: Maintaining a Solid Financial Position
MAINTAINING A SOLID FINANCIAL POSITION Over $130M in financial flexibility* $766M 900 800 700 600 3.0x 2.8x 2.6x 500 2.5x 2.5x 2.4x 400 2.1x 1.9x 1.9x 1.9x 300 200 100 - 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1-20 Long-term debt Long-term debt to EBITDA (1) (1) This is a non-IFRS financial me
Slide 38: Increasing Dividends Consistently
INCREASING DIVIDENDS CONSISTENTLY 16th consecutive year of dividend increase $0.60 0.56 $0.48 $0.44 $0.40 $0.32 $0.28 $0.20 $0.16 $0.13 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020P 38
Slide 39: Éric Vachon
Éric Vachon President and Chief Executive Officer 39
Slide 40: Updated 2020 Outlook
UPDATED 2020 OUTLOOK GUIDANCE MATERIAL ASSUMPTIONS • Updated EBITDA guidance in the • Gradual lift in government-imposed range of $300 to $325 million restrictions by the end of Q2 • EBITDA margin is expected to be • Limited disruptions to operations lower than 2019 • No significant reduction in dem
Slide 41: Agenda
AGENDA Opening of the Meeting Chairman, Secretary and Scrutineers Notice of Meeting Scrutineer’s Report Minutes of Previous Meeting Annual Report & Independent Auditor’s Report Election of the Directors Appointment of Auditors Advisory Vote on the Corporation’s Approach to Executive Compensation Pro
Slide 42: Dial-in Numbers
Dial-in Numbers For Toronto and overseas participants: 647 788-4922 For all other North American participants: 1 877 223-4471 42
Slide 43: Stella-Jones
Stella-JoneS — WWW.STELLA-JONES.COM
Slide 44: Annual and Special Meeting of Shareholders
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS May 7, 2020