Stella-jones Inc. · TSX:SJ
Stella-jones — Investor Presentation (March 2023)
43 slides from Stella-jones's investor presentation, March 2023
Slide 1: Investor Presentation March 2023
March 2023 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: Anchored in Our Strong Fundamentals
A N C H O R E D I 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, with a Focus on Infrastructure-Related Products 7% (1) 5% Industrial Logs & Lumber 2,615 (1) 43 Products Wood Treating Facilities Employees 24% 28 U.S. and 15 Canada Railway Ties (1) (2) 2
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 Over $3 Billion Foundation Offering 4 for 1 stock split in sales in sales ACQUISITION CONTRIBUTIONS • Stronger industry player 1993 1994 2010 2012 2013 2015 2018 202
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 69% of total sales $3,065M Sales $1,559M 2015 2016 2017 2018 2019 2020 2021 2022 Infrastructure-related products: utility poles, railway ties and industrial products Residen
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 40% the North American market poles is typi
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 2022 Sales 5-Year Sales $1,227M $741
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 2022 Sales 5-Ye
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 2022 Sales 5-Year Sales $744M $744M $475M 24% 2018 2019 2020 2021 2022 8 Facilities Tran
Slide 16: Residential Lumber – Offering
RESIDENTIAL LUMBER - OFFERING Competitive Advantages Solid supply, dedicated distribution centres and quick delivery times Customers Product Category Size • ~70% Big box retailers • Dealer network • Unique value-added offering of premium lumber products Contracts • Renewed annually Services Wood Spe
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 2022 Sales 5-Year Sales $201M $153M $201M 7% 2018 2019 2020 2021 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. We keep 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 $448M Sales(1) $3,065M EBITDA(2)(3) $2,144M $244M 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 Cash Flow From Operating Activities(4) $457M Net Income $241M $258M $138M 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 (1) 2018 - 2019 figures were adjusted to reclass
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 2.5x $800 2.2x 2.3x 1.9x $600 2.1x $400 $200 $0 2018 2019 2020 2021 2022 Net debt (1) Net Debt-to-EBITDA (1) (1) Please refer to the section “Non-GAAP and other financial measures” in Stella-Jones’ Management Discussion & Anal
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 2.2x 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 2022 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 $534M in growth investments and returned $630M in cash to shareholders since 2018 $372M $332M $175M $143M $142M 2018 2019 2020 2021 2022 Growth Investments: $534M Cash returned to shareholders: $630M Acquis
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 26% $0.80 CAGR $0.72 $0.32 $0.60 $0.56 2018 2019 2020 2021 2022 28
Slide 29: Q4-2022 & 2022 Financial Results
Q4 -2022 & 2022 FIN A N C IA L R ESU LTS 29
Slide 30: Q4 & 2022 – Sales
Q4 & 2022 – SALES $3,065M $2,750M SALES VARIANCE Q4 YTD 6% 12% Organic 2021 Sales ($M) 545 2,750 Organic Growth Growth Acquisitions 19 66 Currency variations 36 76 $665M $545M Organic growth 65 173 Pressure-treated wood 60 206 Logs and lumber 5 (33) Q4-21 Q4-21 Q4-22 Q4-22 2021 2021 2022 2022 2022 S
Slide 31: 2022 – Sales Variance
2 0 2 2 – S A L E S VA R I A N C E Infrastructure-Related Businesses Organic Growth of 14% (in millions of Residential Industrial TOTAL PRESSURE Logs & Utility Poles Railway Ties CONSOLIDATED SALES dollars) Lumber Products TREATED WOOD Lumber 2021 925 700 773 121 2,519 231 2,750 Acquisitions 66 - -
Slide 32: Q4 & 2022 – Profitability
Q 4 & 2 0 2 2 – P R O F I TA B I L I T Y EBITDA(1) & Operating Income Net Income & Earnings Per Share (“EPS”) (in millions of $) (in millions of $, except per share data) $448 $400 $241 $227 $359 $326 $3.93 14.6% $3.49 13.1% 14.5% $0.61 9.5% $0.34 $87 $61 $36 $52 $32 $22 Q4-21 Q4-22 2021 2022 Q4-21
Slide 33: Q4 & 2022 – Cash Flow and Capital Allocation
Q 4 & 2 0 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 (in millions of $) (in millions of $) $457 $372 Dividends $388 (in $ per share) $332 $0.80 $0.72 $188 $128 $94 $47 2021 2022 Q4-21 Q4-22 2021 2022 Q4-21 Q4-22 2021 2022 Acquisitions C
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: 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 37: 2022-2024 Financial Objectives: Progress in 2022
2022-2024 FINANCIAL OBJECTIVES: PROGRESS IN 2022 2022-2024 Financial (in millions of dollars, except percentages) Objectives 2022 Result published March 9, 2022 (2) Sales $2,700-$3,000 $3,065 ✓ Infrastructure-Related 75-80% of sales 69% Businesses • Compound annual sales growth rate in Residential
Slide 38: 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 5% 6% 8% 7% ~2%-5% 22% ~20%-25% 26% 28% 24% ~75%-80% 73% 68% 69% 64% 2019 Pre- 2020 2021 2022 …............ 2024 Projected Pandemic Utility Poles, Railway Ties Residential Lumber Logs & Lumber and Industrial Products Please ref
Slide 39: 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% 2022-2024 2023-2024 • The Company expects to return 2022 2019- $230M Projected $270M- $370M approximately $500 to $600 million to 2021 shareholders in the 2022-2024 period. • $230M returned in 2022. $365M $500M-$600M cumulative cumulativ
Slide 40: Appendix
APPENDIX 40
Slide 41: 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 2022 2021 2020 2019 2018(1) Sales(2) 3,065 2,750 2,551 2,189 2,144 Gross Profit(3) 524 456 446 358 328 Gross Profit margin(3) 17.1% 16.6% 17.5% 16.4% 15.3% EBITDA(3) 448 400 385 313 244 EBITDA margin(3) 14.6% 14.5% 15.1% 14.3% 11.4% Operat
Slide 42: 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 2022 2021 2020 2019 2018(1) Working capital(2) 1,324 1,146 1,101 1,010 909 Total assets 3,073 2,665 2,426 2,281 2,062 Long-term debt(4) 941 734 606 605 514 Lease liabilities(4) 167 144 139 118 - Shareholders’ equity 1,557 1,448 1,373
Slide 43: Stella-Jones
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