Stella-jones Inc. · TSX:SJ
Stella-jones — Shareholder Meeting (May 2019)
40 slides from Stella-jones's shareholder meeting presentation, May 2, 2019
Slide 1: Annual Meeting of Shareholders
ANNUAL MEETING OF SHAREHOLDERS May 2, 2019
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 Directors Appointment of Auditors Termination of the Meeting Management Presentations Question Period 2
Slide 3: Management
MANAGEMENT Brian McManus Eric Vachon, CPA, CA Marla Eichenbaum President and Senior Vice-President and Vice-President, General Counsel Chief Executive Officer Chief 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: Katherine A. Lehman
Katherine A. Lehman Chair of the Board
Slide 6: 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 Directors Appointment of Auditors Termination of the Meeting Management Presentations Question Period
Slide 7: Election of Directors
ELECTION OF DIRECTORS Katherine A. Lehman George J. Bunze Brian McManus Karen Laflamme Chair of the Board, Vice-Chairman, President and CEO, Executive Vice-President and Stella-Jones Inc. Kruger Inc. Stella-Jones Inc. Chief Financial Officer, Retail Managing Partner, Ivanhoe Cambridge Hilltop Privat
Slide 8: 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 Directors 8 Appointment of Auditors 9 Termination of the Meeting 10 Management Presentations Question Period 8
Slide 9: Brian McManus
Brian McManus President and Chief Executive Officer
Slide 10: 2018 - Sales Surpassing the $2 Billion Mark
2018 - Sales Surpassing the $2 Billion Mark Sales Net income EPS $167.9M $2.12B $137.6M $2.42 $1.89B $1.98 2017 2018 2017 2018 2017 2018 10.1% Organic Earnings benefited by a one-time item Growth in 2017 10
Slide 11: Rising Lumber Costs
Rising Lumber Costs Lumber costs peaked in May 2018 700 600 500 400 300 200 100 0 2014-02-28 2015-02-28 2016-02-29 2017-02-28 2018-02-28 2019-02-28 11
Slide 12: Building on Our Reputation for Quality & Service
Building on Our Reputation for Quality & Service Value Proposition Availability of Scope of Flexible inventory continental network service 12
Slide 13: Utility Poles
Utility Poles 2018 Sales Sales Variation Organic Growth $725M $654M +10.9% $725 M $73.0 M 34.1% 11.2% 2017 2018 13
Slide 14: Railway Ties
Railway Ties 2018 Sales Sales Variation Organic Growth $662M $652M +1.7% $662 M $17.8 M 31.2% 2.7% 2017 2018 14
Slide 15: Residential Lumber
Residential Lumber 2018 Sales Sales Variation Organic Growth $475M $366M +29.6% $475 M $66.3 M 22.4% 18.1% 2017 2018 15
Slide 16: Industrial Products
Industrial Products 2018 Sales Sales Variation Organic Growth $109M $95M +15.3% $109 M $1.0 M 5.1% 1.1% 2017 2018 16
Slide 17: Logs & Lumber
Logs & Lumber 2018 Sales Sales Variation Organic Growth $153M $120M +27.4% $153 M $32.1 M 7.2% 26.8% 2017 2018 17
Slide 18: 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 19: Expanding our Continental Network
Expanding our Continental Network 19
Slide 20: Eric Vachon, CPA, CA
Eric Vachon, CPA, CA Senior Vice-President and Chief Financial Officer
Slide 21: Building on Solid Performance
Building on Solid Performance Sales EBITDA(1) $244M $2,124M $411M $59M 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Net Income Cash Flow(1)(2) $262M $138M $30M $41M 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014
Slide 22: 2018 – Sales Increased for 18th Consecutive Year
2018 – Sales Increased for 18th Consecutive Year 12.6% $2.12B SALES VARIANCE $1.89B 2017 Sales (M) $1,886.1 Acquisitions 60.5 Currency variations (12.9) Organic growth 190.2 2018 Sales (M) $2,123.9 2017 2018 Railway Ties Utility Poles Residential Lumber Industrial Products Logs & Lumber 22
Slide 23: 2018 – Higher Gross Profit But Lower Margin
2018 – Higher Gross Profit(1) But Lower Margin $314.2M $299.9M MARGIN PRESSURE 15.9% ① Transition of a Class 1 railroad customer from a “treating services only” program to full service “black-tie” program 14.8% ② Increasing cost of untreated railway ties and certain untreated species of poles ③ High
Slide 24: 2018 – Higher EBITDA But Lower Margin
2018 – Higher EBITDA(1) But Lower Margin EBITDA(1) Operating Income(1) $243.1M $244.4M $207.4M $206.3M 12.9% Impacted by a non- 11.0% 11.5% cash $7.9M loss on derivative commodity 9.7% contracts 2017 2018 2017 2018 (1) This is a non-IFRS financial measure. Please refer to the Company’s MD&A. 24
Slide 25: 2018 – Lower Net Income & EPS on One-Time Items
2018 – Lower Net Income & EPS on One-Time Items Net income EPS $167.9M $137.6M $2.42 $1.98 One-off positive $30.0 million non- cash benefit in Q4-17 from U.S. tax reform 2017 2018 2017 2018 25
Slide 26: 2018 – Lower CFO Due to Unfavorable Working Cap
2018 – Lower CFO Due to Unfavorable Working Cap Cash Flow before certain items(1)(2) Cash Flow from Operating Activities $301.1M $262.3M $248.2M $128.1M 2017 2018 2017 2018 Working capital investment (1) This is a non-IFRS financial measure. Please refer to the Company’s MD&A. primarily linked to in
Slide 27: Allocating Capital Equitably
Allocating Capital Equitably $198M $192M NCIB $143M $122M $97M $105M $95M $87M $45M $9M 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Acquisitions Capex Dividends Share buyback 27
Slide 28: Increasing Dividends Consistently
Increasing Dividends Consistently 14th consecutive year of dividend increase $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 28
Slide 29: Maintaining a Solid Financial Position
Maintaining a Solid Financial Position $291.6M available on the Company’s syndicated credit facilities* 800 700 $513.5M 600 3.0x 500 2.5x 2.8x 2.6x 2.4x 2.4x 400 2.2x 2.1x 300 1.9x 1.9x 200 100 - 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Debt Total Debt / EBITDA (1) (1)This is a non-IF
Slide 30: Q1-19 - Adoption of IFRS 16, Leases
Q1-19 - Adoption of IFRS 16, Leases • On January 1, 2019, the Company retrospectively adopted IFRS 16 • Comparatives for the 2018 reporting period have not been restated • The application of this new standard resulted in: – The addition of right-of-use assets and lease liabilities to the consolidate
Slide 31: Q1-19 – Strong Sales Growth
Q1-19 – Strong Sales Growth $440.7M SALES VARIANCE $398.8M Q1-18 Sales (M) $398.8 Acquisitions 11.6 +10.5% Currency variations 18.6 Organic growth 11.7 Q1-19 Sales (M) $440.7 Q1-18 Q1-19 Railway Ties Utility Poles Residential Lumber Industrial Products Logs & Lumber 31
Slide 32: Q1-19 – Increased Gross Profit and Margin
Q1-19 – Increased Gross Profit(1) and Margin $69.9M Gross profit increased due to: $59.8M 15.9% • Greater sales volumes • Lower lumber costs 15.0% Partially offset by: • Higher costs for untreated railway ties and certain treated species of poles Q1-18 Q1-19 (1)This is a non-IFRS financial measure.
Slide 33: Q1-19 – Net Income & EPS Increased
Q1-19 – Net Income & EPS Increased Net income EPS $29.5M $0.43 $23.1M $0.33 Due to the increase in operating income Q1-18 Q1-19 Q1-18 Q1-19 33
Slide 34: Managing Cash Flow for Seasonality
Managing Cash Flow for Seasonality Cash Flow before certain items(1)(2) Cash Flow Used in Operating Activities $60.8M ($75.9M) ($64.6M) $45.6M Q1-18 Q1-19 Q1-18 Q1-19 (1) This is a non-IFRS financial measure. Please refer to the Company’s MD&A. Normal seasonal working (2)Before changes in non-cash w
Slide 35: Maintaining a Solid Financial Position
Maintaining a Solid Financial Position 800 700 600 2.8x 3.0x 2.4x $514M 500 2.5x 2.6x 400 2.2x 2.1x 1.9x 300 1.9x 200 100 - 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1-19* Total Debt Total Debt / EBITDA(1) (1)This is a non-IFRS financial measure. Please refer to the Company’s MD&A *Includes long
Slide 36: Increasing Dividends Consistently
Increasing Dividends Consistently 2019 will be the 15th consecutive year of $0.56* dividend increase $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 2019P * Projected based on the latest quarterly dividend 36
Slide 37: Brian McManus
Brian McManus President and Chief Executive Officer
Slide 38: 2019 Outlook
2019 Outlook Based on current market conditions and assuming stable currencies and the current level of lumber prices Higher sales Consolidated Improved margins across all product categories Utility Poles Sales and margins are expected to increase Railway Ties Sales and margins are expected to incre
Slide 39: 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 Directors Appointment of Auditors Termination of the Meeting Management Presentations 11 Question Period 39
Slide 40: Stella-Jones
Stella-JoneS 4a WWW.STELLA-JONES.COM