TSE:SJ Stella-Jones Q4 2023 Earnings Report C$67.60 +0.17 (+0.25%) As of 04:00 PM Eastern Earnings HistoryForecast Stella-Jones EPS ResultsActual EPSC$0.98Consensus EPS C$0.90Beat/MissBeat by +C$0.08One Year Ago EPSN/AStella-Jones Revenue ResultsActual Revenue$688.00 millionExpected Revenue$722.50 millionBeat/MissMissed by -$34.50 millionYoY Revenue GrowthN/AStella-Jones Announcement DetailsQuarterQ4 2023Date2/29/2024TimeN/AConference Call DateThursday, February 29, 2024Conference Call Time10:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptAnnual ReportEarnings HistoryCompany ProfilePowered by Stella-Jones Q4 2023 Earnings Call TranscriptProvided by QuartrFebruary 29, 2024 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Good morning and thank you for standing by. Welcome to Stella Jones' 4th Quarter and Year End 2023 Earnings Call. At this time, all participants are in listen only mode. Following the presentation, we will hold a question and answer session. I would like to remind everyone that this conference call is being recorded on Thursday, February 29, 2024. Operator00:00:30Please note that comments made on today's call may contain forward looking information and this information by its nature is subject to risks and uncertainties. Actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on SEDAR Plus. These documents are also available in the Investor Relations section of Stella Jones' website at www.stella jones.com. We have also prepared a corresponding presentation, which we encourage you to follow along with during this call. Operator00:01:03I'll now pass the call over to Eric Vachon, President and Chief Executive Officer of Stella Jones. Eric? Speaker 100:01:10Thank you, Matthew. Good morning, everyone, and thank you for joining us. With me on today's call is Silvana Travellini, Senior Vice President and Chief Financial Officer of Stella Jones. Earlier this morning, we issued a press release reporting our results for the Q1 year end 2,003. Along with our MD and A, it can be found in the Investor Relations section of our website at www dotstella jones.com, as well as on SEDAR Plus. Speaker 100:01:43As a reminder, all figures expressed on today's call are in Canadian dollars otherwise stated. Our strong operating and financial performance made 2023 a resounding success for Stella Jones, recorded a 23rd year of continuous sales growth and we generated a record increase in profitability. Our solid results not only reflect the continued growth and momentum of our infrastructure product categories, they're also indicative of our team's forward looking preparedness and ability to leverage their expertise and industry intelligence to take action and seize opportunities for the business. Much of last year was focused on building additional capacity and inventory levels to meet growing demand for our infrastructure products. Standing on the heels of 2023, a number of factors support a solid demand environment over the long term. Speaker 100:02:43For utility poles, we have several of our customers shift to long term sales commitment to secure supply for their ongoing maintenance program and expansion projects. Utilities and governments, both in Canada and the U. S, have also publicly announced broadband expansion and electrical grid hardening projects. The railway tie product category remains underpinned by steady demand driven by railroad maintenance and our railway tie and industrial products are expected to benefit from important government infrastructure investments and mandates. In addition to the strong long term fundamental of our infrastructure businesses, the value driven dynamics of our residential lumber customer base provide a relative steadiness and positive prospect for this business. Speaker 100:03:33Our loyal and dedicated customers recognize Stella Jones' value added proposition of premium lumber products, accessories and composite products distribution. In the face of these trends, we've taken a proactive approach to both procurement and capacity. With our robust growth CapEx program for utility poles, we actively expanded our peeling, drying and treating capabilities, making significant investments in 6 peeling and treating facilities in the US and Canada. Additionally, we bolstered these investments with targeted and accretive acquisitions. In 2023, we completed 3 acquisitions, which added 2 treating facilities and 2 pole filling operations to our network in the Southeastern United States. Speaker 100:04:24These capital expenditure projects and acquisitions reinforced our procurement and production capabilities and enabled us to secure new customers and expand our customer base. Our strategic approach to augmenting capacity was upheld by our procurement capabilities and financial strength to secure ample wood supply. In 2023, we seized procurement opportunities benefiting from fiber availability and prioritizing mutually beneficial relationships with sawmills and loggers across North America to build a robust inventory position. As always, ESG is a significant company wide focus. Through our formalized ESG strategy titled Connecting Our Sustainable Future, we identified long term and measurable near term targets across 6 strategic topics including climate change, greenhouse emissions, as well as health and safety. Speaker 100:05:24In 2024, we look forward to reporting on our progress and to move forward on key initiatives that will drive sustainable improvements across our value chain. All of these initiatives coupled with the strong performance from each of our key product categories enabled us to finish 2023 satisfied with our performance and with the progress we are making on our business objectives. Allow me now to elaborate on the performance of our key product categories. Our infrastructure products sales benefited from strong organic growth and the contribution of strategic investments. Utility pole sales grew organically by 18% in 2023, profiting from favorable pricing dynamics and the emergence of growth investments during the year. Speaker 100:06:20While the long term market fundamentals and growth prospects for this product category remain unchanged, we experienced lower volumes year over year and noted a softer pace of purchase, mostly attributable to certain customers' capital budget constraints. During the year, we've shifted our focus to preserve existing and capture new business for the long term. As electrical and telecommunication utilities across North America remain dedicated to grid maintenance and upgrades, their request for sales contracts with a long term horizon instills confidence in the upcoming demand for our products and in our investments to meet this demand. Turning to railway ties. Following 20 22 when the industry was faced with fiber availability challenges, our focus in 2023 moved to replenishing and maintaining adequate inventory levels to meet demand. Speaker 100:07:21We were successful in that regard and are now well positioned to cater to the commercial side of the market. Railway tie sales grew above our expectations in 2023, driven largely by the pass through of untreated tie cost increases from the previous year. Looking ahead into 2024, we expect the cost of untreated ties to remain relatively stable. While maintenance programs for Class 1 railroad customers should remain comparable to those in 2023, we anticipate additional sales volumes from our commercial business supported by a healthier inventory position. As we see railway tie customer agreement gain in maturity in the coming years, a key area of focus in contractual discussions will be to reset pricing and establish improved cost recovery by reviewing agreements to ensure costs are better incorporated in our pass through clauses. Speaker 100:08:21Lastly, we remain pleased with the performance of our residential lumber product category in in 2023. We continue to prove our ability to provide consistent supply to big box retailers, which comprise approximately 70% of our customer mix. Though the consumer base is contending with macroeconomic headwinds brought on namely by interest rates, our customers are noting good demand driven by persistent consumer trends such as homeowners expanding their living spaces outdoors. This bodes well for our business and will certainly support our premium treated products as well as our composite products we distribute. On the procurement front of residential lumber, Canadian sawmills have curtailed production in the last year, which has brought on challenges making it difficult to source specific components in Canada. Speaker 100:09:15In response, our resourceful procurement team has started turning to alternate geographical regions to secure required materials and help maintain a healthy mix of inventory, and I commend them for their creativity. With that, I will turn the call over to Silvana. Speaker 200:09:32Thank you, Eric, and good morning, everyone. As Eric stated at the top of the call, Stella Jones delivered another year of solid financial performance, marked by increased sales and a record improvement in profitability. Sales for the year were $3,300,000,000 up $254,000,000 from last year. This increase was driven by the 13% organic sales growth of our infrastructure products. All of our infrastructure products benefited from favorable pricing dynamics, while residential lumber and Marroquin Lumber sales pulled back due to the decrease in the market price of lumber. Speaker 200:10:12The acquisition of Texas Electric Cooperative late in 2022 and more recently Baldwin as well as the favorable currency conversion effect also contributed to the higher sales in 2023. For the Q4, sales amounted to $688,000,000 compared to sales of $665,000,000 for the same period in 2022. The increase continued to be driven by the sales growth in utility poles and railway ties, offset in part by lower residential lumber sales. For utility poles, we generated $383,000,000 of sales in the 4th quarter, up 17% over the same period last year. Pricing gains and contribution from acquisitions were partly offset by lower volumes, mainly due to the slower pace of purchases of certain utilities. Speaker 200:11:07Volumes were down 5% versus Q4 of last year. For the 4th quarter, sales of railway ties were $165,000,000 up 2% compared to $161,000,000 in the Q4 of last year. Pricing was up 8%, but was largely offset by lower non Class I volumes compared to Q4 last year. Similarly to previous quarters, sales of residential lumber decreased compared to last year. Sales were $82,000,000 in the Q4 of 2023, down from $100,000,000 in the Q4 of 2022. Speaker 200:11:48While pricing in 2023 pulled back, residential lumber sales benefited from higher sales volume due to solid consumer demand. We ended the year with sales of $645,000,000 within our $600,000,000 to $650,000,000 target range. Turning now to profitability. EBITDA for the year increased to $608,000,000 up by a record 36% compared to last year. The higher EBITDA was largely driven by the margin expansion of the company's infrastructure businesses. Speaker 200:12:26The utility pole acquisitions in late 2022 and in 2023 and the positive impact of currency conversion further contributed to the increase in EBITDA. We ended the year with an EBITDA margin of 18.3%, up from 14.6% last year. As a percentage of sales, EBITDA also benefited from better product mix led by the strong growth of utility pole sales and the lower relative proportion of residential lumber sales now representing 19% of the company's total sales. For the quarter, EBITDA increased $120,000,000 an increase of 38% compared to the EBITDA generated in Q4 last year, and the margin grew from 13.1% in the 4th quarter last year to 17.4%. Compared to the Q3, all product categories generated similar margins as a percentage of sales. Speaker 200:13:29The sequential decrease in EBITDA margin was a result of the lower volumes and operating leverage that is typical in Q4 versus Q3 when the margin percentage benefits from strong seasonal volumes. Consistent with the EBITDA growth in 2023, net income for the year increased 35 percent to $326,000,000 Earnings per share also continued to benefit from our share buybacks and grew by 43% to $5.62 per share. During the quarter, we initiated another normal course issuer bid as part of our strategy to return capital to shareholders. During the year, we deployed the cash generated from operations of $107,000,000 and available credit to maintain our network assets, make capacity enhancing investments which included the acquisition of 3 businesses as well as return capital shareholders. In line with our capital allocation policy, in 2023, we increased dividend by 15% to $0.92 per share. Speaker 200:14:44And yesterday, given the record increase in profitability, the Board of Directors announced a 22% increase in its quarterly dividend to $0.28 per common share. This marks the 20th consecutive year that we have increased our dividend, which speaks to our overall confidence in the long term fundamentals of our business. We ended the year with a net debt to EBITDA ratio of 2.6 times, deviating slightly from our leverage target as we invested in strategic growth CapEx and acquisitions. These growth opportunities totaled over $150,000,000 and are expected to contribute to future profitable growth. At year end, inventories stood at approximately $1,600,000,000 an increase from $1,200,000,000 at the close of last year. Speaker 200:15:38In addition to the increase in inventories in the Q4 due to the slower pace of purchases of certain utilities, we also built inventory to support the anticipated infrastructure demand growth and to secure longer term utility coal sales commitments. Further, following the limited availability of untreated ties in 2022, we see procurement opportunities in 2023 to replenish our railway ties inventories. This higher investment in inventory places the company in a good position to service the anticipated increase in customer demand. Subsequent to year end, we amended our syndicated credit agreement in order to increase the amount available under the revolver to US600 $1,000,000 and extend the maturity, demonstrating our lenders' confidence in our ability to execute our plan and grow the business. In summary, with a healthy financial and inventory position as well as solid market fundamentals, we have confidence in the financial strength of our business and believe Celebisone is well positioned for success in 2024. Speaker 200:16:50I will now turn the call back to Eric for his closing remarks. Speaker 100:16:55Thank you, Silvana. By all measures, we had a strong year and a strong start to our 3 year strategic plan. After the 1st year, sales reached $3,300,000,000 but were $3,200,000,000 on an organic basis. Based on our progress in 2023, we remain confident in the sustained growth of the company and our ability to attain or exceed the $3,600,000,000 organic sales objective set out in our financial guidance. In 2023, our infrastructure product categories represented 77% of sales mix and residential lumber sales represented 20% in line with our expectations. Speaker 100:17:41Looking ahead, we expect continued profitability for the business. External factors like the continued higher cost of capital and increased supply from the utility pole industry bear undetermined effects, which could impact our EBITDA margin. In light of this, we remain confident in attaining our 16% objective through 2025. We are also optimistic that the proactive planning and execution of our business strategy will enable us to continue returning capital to shareholders, having already returned almost 40% of the minimum of $500,000,000 objective outlined in our guidance. We are focused on maintaining our leadership position in North America, and that requires us to evolve with the needs of our customers. Speaker 100:18:30With our growth CapEx program largely complete, our attention in 2024 will remain on growing our business. Acquisition on the wood treating side of the business as well as investing organically in our network remain key elements of our strategy, but we will also pursue growth through acquisitions and other infrastructure products and services where we can leverage our Continental network, industry leading customer relationships and solid reputation. In closing, I want to mention that we have high standards for our business. And if I'm confident in our capabilities, it's because of our nearly 3,000 employees. Whether our products enable power to flow through the electrical grid, help move merchandise on the continent's rail network or help retailers in North America supply lumber products and accessories, our employees are the ones who make it all happen. Speaker 100:19:28I want to thank everyone for their contributions in 2023 beyond and for their ongoing dedication customer service and maintaining our leading reputation in the industry. Stella Jones is ready for the future and this is in great part, thanks to you. And with that, I will open the line for the questions. Operator00:19:48Thank you, Eric. The line is now open for questions. Our first question is from James McGarrigle from RBC Capital Markets. Please go ahead. Speaker 300:20:03Thanks for taking my question. Yes, good morning. On the utility pole segment, you mentioned some constraints. And we've heard a slow pace of federal funding has some utilities cautious about their pace of purchases. But to what extent do you see this as a temporary headwind? Speaker 300:20:23I mean, you're making significant investments in inventory. I guess, what gives you that confidence that this situation will resolve during the remainder of the year? Speaker 100:20:33Right. Well, thank you for the question. I mean, several factors, right? So let me address first the slowdown piece. In our view, it's not necessarily related to federal funding, it's the timing of the availability of capital budget at our customers. Speaker 100:20:50Many leaders in North American utilities have pointed out to me that the cost of capital right now is a bit of a headwind as obviously increased cost of capital is making certain projects a bit harder to get off the ground. That being said, I'm not an economist, but I think we all feel generally or seen the news that interest rates will be dropping in the next year, let's say, and I think all this will resolve itself. On the second part of your question, we have secured long term contracts with several customers in the United States. We have secured new customers in 2024 that Doug has not serviced in the past. So we've definitely built some inventory to be able to address those customer demands. Speaker 100:21:45Most of our customers, although at a slower pace, are still increasing demand for their maintenance projects going forward. I'm very optimistic and looking forward to see those projects execute, but we're quite confident as we look at the remainder of our let's say our guidance period that we will continue to see growth to our 2025 objectives and it would be driven by some volumes. And lastly, I just want to point out some public information that you're probably aware of and maybe for everybody listening, Obviously, there's been some public announcements from Canadian utilities, U. S. Utilities as well as the governments, which indicate that and all of these announcements talk about decades' worth of work. Speaker 100:22:31So when we say we're future ready, we have definitely positioned ourselves in the last 18 months as building the capacity, building the procurement, getting the long term contracts, we hold all the right cards to be very successful for the long term. Speaker 300:22:49I appreciate that. And just my other question is going to be on margins and the longer term outlook. You put up a really strong margin in a seasonally weak quarter in Q4. I know there's some uncertainty due to potential cost inflation, pricing can move around with some of the new pool supply coming online. But anything to call out specifically in the quarter? Speaker 300:23:11Looking ahead, it looks like should continue to shift towards poles. You mentioned some of those extremely long term investments on the utility side. Just trying to better understand the puts and takes in the quarter and to what extent these levels of margin would be sustainable in 'twenty four and potentially longer term? Speaker 100:23:34Well, with regards to the quarter, we're actually very pleased with the percentage margin. I haven't checked in the books, but it's probably one of the highest on the record for us. You know that we have a cycle throughout the year. The Q4 is usually a lower volume quarter, which makes that such that the margin percentage compresses to some extent because we have a certain network that has its base cost that we need to support. We're very happy with the year over year performance at least 4 points plus compared to last year. Speaker 100:24:10And maybe if I understand your question, going into the future, we finished the year at a very strong year sitting at over 18%. We were had a very good product mix, definitely weighted towards utility poles. So we're very pleased with the performance. And we are cautioning in my last remarks, there's certain dynamics in the spot markets, not a long term contract piece of it, but the more the spot market or the contractor market where we feel that additional capacity in the industry right now might and will probably put some pricing pressures later in the year on that part of the business. Speaker 300:24:51And just a quick follow-up on that. The spot market, I think, you mentioned last quarter is about 30% of your overall pull mix. So that if we're going to see as an example, 100 basis points decrease in your consolidated margin, that would imply extremely significant drops on the spot market. Any color you can kind of share with regard to what you're seeing in the spot market? And after that, I can turn the line over. Speaker 300:25:18Thank you. Speaker 100:25:19No, certainly. So we haven't seen it as of today. So we're calling it out because we're observing the dynamic in the market and we're paying close attention to it. By default, Stella Jones getting into long term agreements and welcoming new customers and suppliers, every action we take has a reaction in the market and I would expect dynamics in the spot market to become a bit more active. So that could be compensated by a very healthy demand throughout the rest of the year and we may never talk about it, but I do think it's something we'll observe this year and it most likely will be short lived. Speaker 100:26:02I think it's a bit of a it will follow a bit of the trends in the general market as interest rates subside a bit. We see some pickup with the bigger utilities with their business. Hard to predict at this point. I can't give you much color. I'm just sort of explaining to you a bit of my logic and how we're seeing things. Speaker 100:26:18And we're being cautious, I guess, not initially wanting you as an analyst to take this 18% and sort of project it straight line out. I think we can deliver through a few cycles here, a few quarters to see where this is going to lead. Speaker 300:26:33Thank you very much. Thank you very much. Operator00:26:37Thank you. Our following question is from Hamir Patel from CIBC Capital Markets. Please go ahead. Speaker 400:26:45Good morning. Good morning, Eric. Just sticking with the poles category, what type of volume growth would you expect there in 2024? And just given some of your comments around near term demand being perhaps less robust. Do you think you'll be capacity constrained or is your growth in the capacity front going to likely track ahead of demand in 2024? Speaker 100:27:13So obviously with the investments in the acquisition we've done, we were obviously planning ahead. So capacity constraint, not one of my concerns at all at this point. To answer your the first part of your question, I guess I will answer it referring you to our guidance in 2025. If you look at our 1st year of our performance, call it, dollars 3,200,000,000 organic, but sorry, talk about, yes, and the utility pole business in there to be able to reach that objective. We're probably looking at a call it 14% to 16%, like midpoint of 15% CAGR for the next 2 years for utility poles and that would mostly be volume. Speaker 400:28:02Mostly volume. Okay, that's helpful. And Eric, in terms of the share of holes that is spot, just given the capacity you're bringing on, would you expect that share to change or is that already kind of contracted out? Speaker 100:28:24I don't think so. It's part of the a bit of the general approach on where we are planning production. We have our steady base, which is great and we are growing it obviously as I mentioned because we have new customers. But part of it is to, I guess, to plug the hole, we will sort of fit in where it makes sense that this is a spot market business as We've grown the network. Obviously, we've got new treating facilities with our Baldwin acquisition and we've increased cylinder sizes at certain facilities last year. Speaker 100:28:56So we've grown the capacity, we're growing the long term and then we'll continue complementing with the spot market and with certain strategic partners also, should I say. Speaker 400:29:09Okay. That's helpful. And just last question I had was on res lumber. Could you give us a breakdown of how the volume and price mix was for 2023? And are you expecting any volume growth in red lumber in 'twenty four? Speaker 100:29:32Yes. So for 'twenty and 'twenty four, we keep guiding to our $6,000,000 to $6,50,000,000 and I think could there be marginal growth there perhaps? I do we do feel like there's good consumer dynamics. So last year, we had some volume growth in the business around, call it, 7% and that was obviously all overshadowed with the reduction in price of lumber. So coming out of a good year on the volume side, I would say relatively comparable. Speaker 100:30:06If I listen to our customers, they feel that there's some potential increase, call it, the mid single digits. That's sort of the discussions. I mean, looking outside today, it looks like spring here in Montreal and obviously it gets those projects started earlier. So that could also be very helpful for us. But if you look at our guidance, I still think we're going to be in that range of the $6,000,000 to $6,500,000,000 and we got a great customer basis to support that basis and maybe a bit of growth there, but we'll see how the season rolls out. Operator00:30:51Thank you. Our following question is from Jonathan Goldman from Scotia Capital. Please go ahead. Speaker 500:30:59Good morning and thanks for taking my questions. Maybe just a housekeeping one to start off with on weather. Have you noticed any impact on your business from the flooding in California or even the colder weather in Northeast? Do you anticipate that impacting any sales levels, anything in that regard? Speaker 100:31:16Paul? Obviously, we had cold snaps in January and some ice storms in the south and obviously that doesn't help. But there are winter conditions and last year we had these river storms in California and mud flies and actually record snowfall. So it seems like every year we have some of these weather events. So I guess, it might does slow down a bit business, but it's 1 month out of a year. Speaker 100:31:47I think our customers have plenty of time ahead of us to readjust. I'm not really concerned about that unless we keep seeing continued storms in specific geographical areas which would have a long term trend, but right now it's down slightly, but it's 1 month. Speaker 500:32:11Okay. Thank you for that. And then maybe switching to capital allocation priorities for 2024. Maybe you can just remind us what the priorities are and then whether or not you earmarked any CapEx this year for additional capacity that would be required in 2025 to support additional potential spend in infrastructure related investments? Speaker 100:32:31Certainly. I'll let Silvana take that one. Speaker 200:32:34So Jonathan, for 2024, we our priority is first to complete the capital expenditures related to our growth CapEx or utility growth CapEx that we had told the market that in total we had a 5 year project and capital expenditures to grow our utility pools of $115,000,000 So there's about $25,000,000 to $30,000,000 left to complete that in 2024. We have maintenance and other efficiency projects being looked at and targeted and we always mention somewhere between $65,000,000 $75,000,000 of let's call it more regular CapEx. So that is always top priorities for us. We continue, as I noted in the conference call, that we have initiated a new NCIB program. So still committed to returning capital to shareholders, both through dividends and through repurchase of shares, always keeping in mind that we have a 3 year commitment to return $500,000,000 to shareholders. Speaker 200:33:42We do not have specifically earmarked any additional growth CapEx in 2024 that will be looked at as we prepare for our budgets for 2025. Speaker 500:33:55Perfect. And maybe just a quick follow-up, Eric. How long would it take to bring on additional capacity? I guess, you can quantify it however you want, it's meaning similar magnitude to the capacity you're bringing on this year, what would be the sort of ramp phase? Speaker 600:34:12So, we do have a Speaker 100:34:13it's an interesting question. So, we do have a bit of a cheat sheet of what we could do in the next 12 months and what we could do in 18 months to execute quickly on capacity. And when I hear that question, I think of a few things. When I think of Sun Yellow Pine, it's a drying capacity. And we do have quick access to kilns if we need to execute on that. Speaker 100:34:41I would say within 6 months, I could get kilns installed or additional kilns installed at facilities. The quickest way to increase treating capacity right now would be to add treating cylinders or increase the size of cylinders at certain facilities and we have those earmarked and lead time currently right now is about 6 months to get it and call it another 2 months to put it in place or maybe 8 months to install the cylinder. So I would say pretty much anything we want to do within 12 months, we put mostly most likely execute on that. I'm excluding a greenfield plant because that's a bigger endeavor because permitting and finding a facility and working with the community, So that's a longer piece. So Greenfield plant is something that if you ever hear us talk about that, it will be announced ahead of time, it will be well thought out plan. Speaker 100:35:37Right now, I think we've got enough capacity to execute on what we want to do for at least 18 months. And I feel comfortable that in our 5 year planning exercise that we'll be doing in the next few months. And we've already started talking about what could happen and what we need to do to capacity. So trying to give you a bit of flavor, but I think within a year we could easily execute if something would happen quickly as far as demand. But we are what we've done in the last 18 months was really trying to plan for increased demand, potential new customers that we have now, and I am hoping for some other new customers in 'twenty five at this point that we keep talking to. Speaker 100:36:20So I think we're well positioned to address any unexpected demand coming our way. Operator00:36:35Our following question is from Benoit Poirier from Desjardins Securities. Please go ahead. Speaker 600:36:42Good morning, Selvana. Just to come back on the utility pole volume, I think you mentioned earlier on the call that you felt comfortable with 14%, 16% growth in the coming 2 years. I'm just wondering about pricing expectation, what we could expect in 2024, whether pricing could play could be incremental to volume. Speaker 100:37:11So was the question for me or for Silvana? Speaker 600:37:14The one of you. Speaker 100:37:16So So it is mostly volume. I think so if you recall, we've had 2 years of growth or good pricing growth. I'm very confident that we will hold those prices. Could we see a bit of an uptick maybe offset by what I was talking about pricing headwinds in the spot market Okay. Speaker 600:37:52And just Okay. And just coming back on railway ties, you made great color about the flat expectation from Class 1, although you have additional ties to serve the commercial customers. So what could be reasonable in terms of overall organic growth expectation? And I would be curious to get your thoughts about the pricing environment. It looks like there was an improved pricing in Q4, and I don't know how significant it was on the organic growth. Speaker 100:38:30The pricing on the organic growth was trying to figure it out, because obviously we had lower volume. So we had lower volumes because obviously we focused our inventory to service our Class I numbers. So that overshadowed the sales growth, call it 5 ish percent pricing increase over the year just as a pass through of untreated high cost passing through. As I said, going forward, we think the untreated price of ties would be relatively stable. So going forward, I know we're missing an all on volume, so you can call it in that low single digit range. Speaker 100:39:28And I'll leave up to you to define the low single digits. In my mind, it's not 1 or 2, but I'll let you model it out. Speaker 600:39:37Okay, perfect. Plus some pricing on top of that? Speaker 100:39:42Depending on the price of ties, well, there's always a bit of it's true for Paws also. Every year, there's a bit of a our Paws has like inflation indicators and different things that can give us a couple of percent here or there. That would be part of it. But yes, I would agree with that. Speaker 600:40:03And given the favorable mix, Enicore Silvana in 2024, talking about bigger contribution from utility pole, stabilized residential lumber, better mix from commercial on the railway ties. Could it be enough to offset the potential risk around additional post supply toward the back half of twenty twenty four? Just wondering if you could sustain kind of an 18% margin profile, if one could offset the other positive implication from a mix standpoint? Speaker 200:40:38I guess it would be difficult for us to say because obviously we could quantify quite easily what the improved mix would do to our margin, but harder for us to sort of determine what potential impact the spot market pricing would have. Speaker 100:40:55Yes. The negative impact, as I mentioned in a previous answer is, we haven't seen it or felt it. And it's something we're monitoring. So it's kind of hard to quantify. So I do think we'll see some of that. Speaker 100:41:13To what extent it'll be significant or not, we will have to Speaker 600:41:17see. Okay. And just, Silvana, in terms of working cap, any thoughts about working cap requirements for 2020 4? I understand you're still growing, but there might be some reversal at one point given the build up in 2023. So if you could provide some color on that and maybe given the leverage situation a little bit higher than the targeted range, should we expect you to be maybe less focused on the buyback activity in 2024? Speaker 200:41:50No. So to answer the first of the question, in terms of the working capital going into 2024, we would not be expecting any significant increase. We think it would be fairly flattish when we compare end of this year end of 2023 to end of 2024. Keeping in mind there will be some seasonal variations as you know in the Q1 there will be a pickup but then there will be a release expected in the second half of the year. In terms of the leverage, no, I do not expect the higher leverage to impact the buybacks. Speaker 200:42:29We are still focused on returning that $500,000,000 over 3 years. So the buybacks will be in line with that target. Comfortable again that the uptick in our leverage was really based on our opportunities to invest in the 3 acquisitions that we did as well as our growth CapEx. So expect the leverage as it usually does to go a little bit higher in the Q1, but then to leverage back down subsequently in the second half. Speaker 600:43:04Perfect. Thank you very much for the time. Thank you, Manav. Operator00:43:09Thank you. Our following question is from Michael Tupholme from TD Securities. Speaker 700:43:19Eric, maybe just to start on the utility poles product category. For Q4 2023, can you talk more specifically about the pricing versus volume changes seen in the quarter in terms of pricing being a tailwind and volume being a headwind, what the kind of what the actual numbers were for those 2? Speaker 100:43:41The pricing was about sorry, the volume was about 5%. So obviously, organic growth you see is net of that and the sorry, the volume was a bit of a 5% downside. Speaker 700:43:58Okay. And then we can back into the pricing? Speaker 100:44:01Exactly. By difference, it will give you 22%, right? That's a simple math. Speaker 700:44:07And then just to be clear, I guess, just to go back, I think it's been asked a few times now. But as far as the outlook for organic growth in pools, I think if I'm understanding correctly, you're talking about something in and around the 15% range. Organic growth for pools over the next 2 years is sort of a CAGR. Speaker 100:44:26Yes. I guess first question is Speaker 700:44:27just if you can reconfirm that for me. And then just to follow on though, how do we think about that over the next 2 years for modeling? Is there much variance from 1 year to the next as we look at 'twenty four versus 5? Or is that a fairly steady state expectation in each of the next couple of years? Speaker 100:44:51So you understood properly, call it 15% CAGR over 2 years and it would be sort of even between the 2 years evenly spread out. Speaker 700:45:01Got it. Okay. And this is just to be clear, this is organic growth for pools or is this 15% inclusive of the benefit of the acquisitions you announced? Purely Speaker 100:45:15organic. I'm carving out whatever gains you would have in the 1st 6 months for the Baldwin acquisition. Speaker 700:45:21Okay, perfect. Thank you. Speaker 300:45:24And then I guess just Speaker 700:45:27talking about the you mentioned some of these announcements from North American utilities about longer term CapEx plans as far as meeting increased power demands and how they're going to do that. In your conversations with utilities, I mean, this is an area you've been excited about for some time now. But the conversations you've been having more recently, I mean, are you feeling more encouraged by the medium to longer term outlook than previously? Or is it is this just sort of unfolding as you would have expected as far as your views on that? Speaker 100:46:01The slowdown that we sort of called out today, I guess, was not in our 3 year guidance. It's not something that we saw coming. But to your point, in talking with leaders of utilities, they have a lot of projects and a lot of work to do. There's lots of maintenance and grid hardening and upgrades to be done across North America. And I'll say it's even before considering the impact of electric vehicles, because that is apparently something that is still very difficult to model. Speaker 100:46:36Everybody knows that there will be an expansion that is going to be some hardening and some adjustments because you'll need more transformers and more cables in the network. But right now, it's not clear for our customers. And I understand it actually. It's not clear for them to how to model, where do we upgrade and how much. So until they see where the different projects are going to get established, they're not necessarily even modeling that. Speaker 100:47:05So I'm very optimistic about what our customers have to do. It is unfolding as it goes. But as I pointed out, it's not by coincidence that all of these announcements usually cover a 10 or 15 period year period, and we're now signing supply agreements that cover those periods. So it's and as utility CapEx budgets increase over time, we do observe a correlation with our utility pole division sales increase on the volume side. So as all of this sort of unfolds and we will benefit and see continued growth. Speaker 100:47:48And I don't want to stress myself, but I would say beyond our current guidance. And yes, to answer your question, in my discussions with leaders of utilities in the U. S, I am quite optimistic of what the next 2 years for our guidance hold, but also probably the next decade as I sort of look at those announcements. Speaker 700:48:09Okay. That's very helpful. Thank you. And then just back on the margin question, you've also had a few times about strong margins in 2023 and you've highlighted a couple of potential headwinds. Doesn't sound like you've necessarily seen much impact as it relates to any kind of spot market pricing for pools so far. Speaker 700:48:29So understandably that could come and you're right for correct to be cautious about that I gather. But should we be thinking about margins sort of holding in at least through the early part of the year given that you have yet to see those kinds of pressures materialize yet? Speaker 100:48:51I think that's a fair assumption for now. Mike, because if I follow my statement, I did say we haven't seen it yet and before we get those quotes done and delivered probably a few months out. So we could see you're right that we could see a good first part of the year with softening if it happens in the summer in the back half of the year. Speaker 700:49:20Maybe just lastly, the I don't know you've been asked about this, but just on the acquisition front, is that still a focus area for you? And if so, what are you seeing and what are you looking at right now, if you can comment? Speaker 100:49:37Certainly. I was interested in increasing our network and doing some acquisitions. We have a very large and strong network in North America. So there are geographical regions where I don't necessarily need more capacity in other parts of the world Codman where I would definitely consider some acquisitions. So definitely, utility poles is top of mind. Speaker 100:50:07If that business comes with good assets, a good book of business, we'd be really interested in that. There's still some opportunities potentially on the railway's high side and we keep our eyes open. We are very patient, but I think there's some opportunities that could come there. And last but not least, I've expressed infrastructure products that support our customer base remains very appealing to us. It's something that we keep investigating and studying and had discussions in the last year with different parties to see what could the future look like. Speaker 100:50:52But I guess my top of mind is how do we better service our current customers. And I do have a positive signaling from our customers of encouraging us to consider other products and even services, I'll add actually. So we're very structured and disciplined in how we're approaching this, but it's definitely something of interest, especially when we got the green light from imported customers. I think it's it really makes things easier to consider. We just want to make sure that whatever or whenever we do it, we will be very successful at what we in our new endeavors. Speaker 700:51:37Okay, perfect. And so just one follow on to that. This latter part that you were just discussing there that ways to better serve existing customers. Could these be impactful opportunities or are these sort of more likely to be smaller tuck in type situations? Speaker 100:51:56They vary in sizes, Mike, from very impactful to small. And my view is if we are going to enter something that is different than treating wood, it would be of a certain size where there's good structure, good leadership, good knowledge, a strong base to ensure what I just mentioned about being very successful at what we do. I don't think we buy a small shop thinking we're going to grow it to $1,000,000,000 I think we'd probably buy a medium size, if I can make it the analogy, a medium size that has a good engineering team and a good footprint and good customer access and ROV thriving with that us potentially adding on with our customer relationship and distribution network as potential synergies. Speaker 700:52:49Okay. That's all very helpful. Thank you. Speaker 100:52:51My pleasure. Operator00:52:53Thank you. Our following question is from Maxim Sytchev from National Bank Financial. Please go ahead. Speaker 800:53:06Eric, so just in terms of to think about the Paul's dynamics, so you don't think it's a reaction to the price increases that we've seen over the last 2 years and that's really in relation to kind of the CapEx pacing on the public clients. Is that how you guys are thinking in Toronto? Speaker 100:53:24Yes. That's 100%. No doubt in my mind, it's nothing to do with impressing. Speaker 800:53:31Okay. And then in terms of like obviously you said minus 5% in terms of volume in Q4, but what are you guys seeing in Q1? Like are the rates of sort of volume headwinds, are they similar, different? What can you tell us? Speaker 100:53:48For now, I would say similar. Obviously, we've got 1 month really under our belt. And the last few weeks, I've been focused on our quarterly. So I have to say, I haven't spent much on our February. But it's a bit of the same for now, but as someone asked earlier about weather in January, that's sort of a bit of a headwind, so I can't draw a conclusion on that part. Speaker 100:54:11And maybe a thought, Maxim, is our customers work for I was talking about decades a few minutes ago. We're working on the long term aspects. So the quarter to quarter impact, quarterly, We want to deliver great results and we typically do. But you also need to keep in mind what does that trend look like for the year for 'twenty four and 'twenty five because part of our team is now actually planning on 2025 business and looking at contracts and renewals and extension and new customers. So it's a bit of that long term play when we talk to utilities. Speaker 800:54:52Right. Yes, makes sense. And then Silvana, just in terms of thinking about sort of the margin profile for Pulse, like we're not in a situation where kind of like a higher cost inventory cycling through the P and L, right? So I mean that's kind of the comment around margins staying relatively stable in poles. Is that how should we think about this? Speaker 200:55:16Yes. So the increase in the inventory was mostly volume, right, and not cost. So no impact on the expected margins on that volume. Speaker 800:55:31Okay. That's great. Thanks so much. And then, Erez, just circling back to kind of the like obviously, you're looking at M and A and I think also the market appreciates that. But in terms of commitment to sort of all the verticals in your current platform, No incremental thoughts in relation to the resi exposure, if that's something that you need in the long term, maybe any thoughts there? Speaker 800:55:59Thanks. Speaker 100:56:02Well, actually the way we look at it, that business, out of the 3 product categories that the business turns its inventory 4 or 5 times a year, healthy margin and definitely is a good contributor to the business. So I don't know what the future holds as far as dynamics and what comes our way. We've always obviously been vocal that we're investing in our infrastructure business and that business is proportionately shrinking, although stable revenue and very steady on the margin piece, it is shrinking. So as long as it's accretive contributing to the business, it's wood treating, which is part of our core knowledge. It still fits very well with what we do. Speaker 800:56:49Okay, perfect. And then, so just one last question, clarification. When you talk about sort of additional services potentially for your time post clients, So you would not be averse to potentially looking at something which is sort of less manufacturing and maybe a little bit more kind of headcount driven in terms of M and A assuming that it meets certain ROIC targets. Is that the way we should think about this? Speaker 100:57:14Yes, definitely. If we find the right partner that is, I could say, these Stella Jones equivalent in their own segment, I wouldn't hesitate, especially as we got customers saying 100 percent Teladrone can bring value in a combined service product offering. Operator00:57:45We have no further questions in the queue. Thank you. Speaker 100:57:49Well, thank you, Matthew, and thank you everyone for joining us today. We look forward to updating you on our Q1 results in May. Have a great day. Operator00:57:59Ladies and gentlemen, this concludes today's call.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallStella-Jones Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsAnnual report Stella-Jones Earnings HeadlinesStella-Jones Appoints Wesley Bourland as Chief Operating OfficerApril 11, 2025 | marketwatch.comStella-Jones’ First Quarter Results Conference Call and Annual Meeting of ShareholdersApril 9, 2025 | markets.businessinsider.comURGENT: This Altcoin Opportunity Won’t Wait – Act NowThe July 23rd Crypto Trigger Could Mark the Beginning of Bitcoin’s Next Big Move Bitcoin’s early 2024 ETF rally made headlines—but according to veteran crypto strategist Joel Peterson, the real wave of opportunity is about to start… and it hinges on one little-known event scheduled to take place on July 23rd.April 28, 2025 | Crypto Swap Profits (Ad)Stella-Jones' (TSE:SJ) Upcoming Dividend Will Be Larger Than Last Year'sMarch 29, 2025 | finance.yahoo.comThe Returns At Stella-Jones (TSE:SJ) Aren't GrowingMarch 23, 2025 | finance.yahoo.comStella-Jones Full Year 2024 Earnings: Beats ExpectationsMarch 5, 2025 | finance.yahoo.comSee More Stella-Jones Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Stella-Jones? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Stella-Jones and other key companies, straight to your email. Email Address About Stella-JonesStella-Jones (TSE:SJ) Inc produces and sells lumber and wood products. The company operates in two segments: Pressure-treated wood, which includes utility poles, railway ties, residential lumber, and industrial products; and Logs & Lumber segment comprises of the sales of logs harvested in the course of the company's procurement process that is determined to be unsuitable for use as utility poles, it also includes the sale of excess lumber to local home-building markets. The vast majority of its revenue comes from the Pressure-treated wood segment. 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There are 9 speakers on the call. Operator00:00:00Good morning and thank you for standing by. Welcome to Stella Jones' 4th Quarter and Year End 2023 Earnings Call. At this time, all participants are in listen only mode. Following the presentation, we will hold a question and answer session. I would like to remind everyone that this conference call is being recorded on Thursday, February 29, 2024. Operator00:00:30Please note that comments made on today's call may contain forward looking information and this information by its nature is subject to risks and uncertainties. Actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on SEDAR Plus. These documents are also available in the Investor Relations section of Stella Jones' website at www.stella jones.com. We have also prepared a corresponding presentation, which we encourage you to follow along with during this call. Operator00:01:03I'll now pass the call over to Eric Vachon, President and Chief Executive Officer of Stella Jones. Eric? Speaker 100:01:10Thank you, Matthew. Good morning, everyone, and thank you for joining us. With me on today's call is Silvana Travellini, Senior Vice President and Chief Financial Officer of Stella Jones. Earlier this morning, we issued a press release reporting our results for the Q1 year end 2,003. Along with our MD and A, it can be found in the Investor Relations section of our website at www dotstella jones.com, as well as on SEDAR Plus. Speaker 100:01:43As a reminder, all figures expressed on today's call are in Canadian dollars otherwise stated. Our strong operating and financial performance made 2023 a resounding success for Stella Jones, recorded a 23rd year of continuous sales growth and we generated a record increase in profitability. Our solid results not only reflect the continued growth and momentum of our infrastructure product categories, they're also indicative of our team's forward looking preparedness and ability to leverage their expertise and industry intelligence to take action and seize opportunities for the business. Much of last year was focused on building additional capacity and inventory levels to meet growing demand for our infrastructure products. Standing on the heels of 2023, a number of factors support a solid demand environment over the long term. Speaker 100:02:43For utility poles, we have several of our customers shift to long term sales commitment to secure supply for their ongoing maintenance program and expansion projects. Utilities and governments, both in Canada and the U. S, have also publicly announced broadband expansion and electrical grid hardening projects. The railway tie product category remains underpinned by steady demand driven by railroad maintenance and our railway tie and industrial products are expected to benefit from important government infrastructure investments and mandates. In addition to the strong long term fundamental of our infrastructure businesses, the value driven dynamics of our residential lumber customer base provide a relative steadiness and positive prospect for this business. Speaker 100:03:33Our loyal and dedicated customers recognize Stella Jones' value added proposition of premium lumber products, accessories and composite products distribution. In the face of these trends, we've taken a proactive approach to both procurement and capacity. With our robust growth CapEx program for utility poles, we actively expanded our peeling, drying and treating capabilities, making significant investments in 6 peeling and treating facilities in the US and Canada. Additionally, we bolstered these investments with targeted and accretive acquisitions. In 2023, we completed 3 acquisitions, which added 2 treating facilities and 2 pole filling operations to our network in the Southeastern United States. Speaker 100:04:24These capital expenditure projects and acquisitions reinforced our procurement and production capabilities and enabled us to secure new customers and expand our customer base. Our strategic approach to augmenting capacity was upheld by our procurement capabilities and financial strength to secure ample wood supply. In 2023, we seized procurement opportunities benefiting from fiber availability and prioritizing mutually beneficial relationships with sawmills and loggers across North America to build a robust inventory position. As always, ESG is a significant company wide focus. Through our formalized ESG strategy titled Connecting Our Sustainable Future, we identified long term and measurable near term targets across 6 strategic topics including climate change, greenhouse emissions, as well as health and safety. Speaker 100:05:24In 2024, we look forward to reporting on our progress and to move forward on key initiatives that will drive sustainable improvements across our value chain. All of these initiatives coupled with the strong performance from each of our key product categories enabled us to finish 2023 satisfied with our performance and with the progress we are making on our business objectives. Allow me now to elaborate on the performance of our key product categories. Our infrastructure products sales benefited from strong organic growth and the contribution of strategic investments. Utility pole sales grew organically by 18% in 2023, profiting from favorable pricing dynamics and the emergence of growth investments during the year. Speaker 100:06:20While the long term market fundamentals and growth prospects for this product category remain unchanged, we experienced lower volumes year over year and noted a softer pace of purchase, mostly attributable to certain customers' capital budget constraints. During the year, we've shifted our focus to preserve existing and capture new business for the long term. As electrical and telecommunication utilities across North America remain dedicated to grid maintenance and upgrades, their request for sales contracts with a long term horizon instills confidence in the upcoming demand for our products and in our investments to meet this demand. Turning to railway ties. Following 20 22 when the industry was faced with fiber availability challenges, our focus in 2023 moved to replenishing and maintaining adequate inventory levels to meet demand. Speaker 100:07:21We were successful in that regard and are now well positioned to cater to the commercial side of the market. Railway tie sales grew above our expectations in 2023, driven largely by the pass through of untreated tie cost increases from the previous year. Looking ahead into 2024, we expect the cost of untreated ties to remain relatively stable. While maintenance programs for Class 1 railroad customers should remain comparable to those in 2023, we anticipate additional sales volumes from our commercial business supported by a healthier inventory position. As we see railway tie customer agreement gain in maturity in the coming years, a key area of focus in contractual discussions will be to reset pricing and establish improved cost recovery by reviewing agreements to ensure costs are better incorporated in our pass through clauses. Speaker 100:08:21Lastly, we remain pleased with the performance of our residential lumber product category in in 2023. We continue to prove our ability to provide consistent supply to big box retailers, which comprise approximately 70% of our customer mix. Though the consumer base is contending with macroeconomic headwinds brought on namely by interest rates, our customers are noting good demand driven by persistent consumer trends such as homeowners expanding their living spaces outdoors. This bodes well for our business and will certainly support our premium treated products as well as our composite products we distribute. On the procurement front of residential lumber, Canadian sawmills have curtailed production in the last year, which has brought on challenges making it difficult to source specific components in Canada. Speaker 100:09:15In response, our resourceful procurement team has started turning to alternate geographical regions to secure required materials and help maintain a healthy mix of inventory, and I commend them for their creativity. With that, I will turn the call over to Silvana. Speaker 200:09:32Thank you, Eric, and good morning, everyone. As Eric stated at the top of the call, Stella Jones delivered another year of solid financial performance, marked by increased sales and a record improvement in profitability. Sales for the year were $3,300,000,000 up $254,000,000 from last year. This increase was driven by the 13% organic sales growth of our infrastructure products. All of our infrastructure products benefited from favorable pricing dynamics, while residential lumber and Marroquin Lumber sales pulled back due to the decrease in the market price of lumber. Speaker 200:10:12The acquisition of Texas Electric Cooperative late in 2022 and more recently Baldwin as well as the favorable currency conversion effect also contributed to the higher sales in 2023. For the Q4, sales amounted to $688,000,000 compared to sales of $665,000,000 for the same period in 2022. The increase continued to be driven by the sales growth in utility poles and railway ties, offset in part by lower residential lumber sales. For utility poles, we generated $383,000,000 of sales in the 4th quarter, up 17% over the same period last year. Pricing gains and contribution from acquisitions were partly offset by lower volumes, mainly due to the slower pace of purchases of certain utilities. Speaker 200:11:07Volumes were down 5% versus Q4 of last year. For the 4th quarter, sales of railway ties were $165,000,000 up 2% compared to $161,000,000 in the Q4 of last year. Pricing was up 8%, but was largely offset by lower non Class I volumes compared to Q4 last year. Similarly to previous quarters, sales of residential lumber decreased compared to last year. Sales were $82,000,000 in the Q4 of 2023, down from $100,000,000 in the Q4 of 2022. Speaker 200:11:48While pricing in 2023 pulled back, residential lumber sales benefited from higher sales volume due to solid consumer demand. We ended the year with sales of $645,000,000 within our $600,000,000 to $650,000,000 target range. Turning now to profitability. EBITDA for the year increased to $608,000,000 up by a record 36% compared to last year. The higher EBITDA was largely driven by the margin expansion of the company's infrastructure businesses. Speaker 200:12:26The utility pole acquisitions in late 2022 and in 2023 and the positive impact of currency conversion further contributed to the increase in EBITDA. We ended the year with an EBITDA margin of 18.3%, up from 14.6% last year. As a percentage of sales, EBITDA also benefited from better product mix led by the strong growth of utility pole sales and the lower relative proportion of residential lumber sales now representing 19% of the company's total sales. For the quarter, EBITDA increased $120,000,000 an increase of 38% compared to the EBITDA generated in Q4 last year, and the margin grew from 13.1% in the 4th quarter last year to 17.4%. Compared to the Q3, all product categories generated similar margins as a percentage of sales. Speaker 200:13:29The sequential decrease in EBITDA margin was a result of the lower volumes and operating leverage that is typical in Q4 versus Q3 when the margin percentage benefits from strong seasonal volumes. Consistent with the EBITDA growth in 2023, net income for the year increased 35 percent to $326,000,000 Earnings per share also continued to benefit from our share buybacks and grew by 43% to $5.62 per share. During the quarter, we initiated another normal course issuer bid as part of our strategy to return capital to shareholders. During the year, we deployed the cash generated from operations of $107,000,000 and available credit to maintain our network assets, make capacity enhancing investments which included the acquisition of 3 businesses as well as return capital shareholders. In line with our capital allocation policy, in 2023, we increased dividend by 15% to $0.92 per share. Speaker 200:14:44And yesterday, given the record increase in profitability, the Board of Directors announced a 22% increase in its quarterly dividend to $0.28 per common share. This marks the 20th consecutive year that we have increased our dividend, which speaks to our overall confidence in the long term fundamentals of our business. We ended the year with a net debt to EBITDA ratio of 2.6 times, deviating slightly from our leverage target as we invested in strategic growth CapEx and acquisitions. These growth opportunities totaled over $150,000,000 and are expected to contribute to future profitable growth. At year end, inventories stood at approximately $1,600,000,000 an increase from $1,200,000,000 at the close of last year. Speaker 200:15:38In addition to the increase in inventories in the Q4 due to the slower pace of purchases of certain utilities, we also built inventory to support the anticipated infrastructure demand growth and to secure longer term utility coal sales commitments. Further, following the limited availability of untreated ties in 2022, we see procurement opportunities in 2023 to replenish our railway ties inventories. This higher investment in inventory places the company in a good position to service the anticipated increase in customer demand. Subsequent to year end, we amended our syndicated credit agreement in order to increase the amount available under the revolver to US600 $1,000,000 and extend the maturity, demonstrating our lenders' confidence in our ability to execute our plan and grow the business. In summary, with a healthy financial and inventory position as well as solid market fundamentals, we have confidence in the financial strength of our business and believe Celebisone is well positioned for success in 2024. Speaker 200:16:50I will now turn the call back to Eric for his closing remarks. Speaker 100:16:55Thank you, Silvana. By all measures, we had a strong year and a strong start to our 3 year strategic plan. After the 1st year, sales reached $3,300,000,000 but were $3,200,000,000 on an organic basis. Based on our progress in 2023, we remain confident in the sustained growth of the company and our ability to attain or exceed the $3,600,000,000 organic sales objective set out in our financial guidance. In 2023, our infrastructure product categories represented 77% of sales mix and residential lumber sales represented 20% in line with our expectations. Speaker 100:17:41Looking ahead, we expect continued profitability for the business. External factors like the continued higher cost of capital and increased supply from the utility pole industry bear undetermined effects, which could impact our EBITDA margin. In light of this, we remain confident in attaining our 16% objective through 2025. We are also optimistic that the proactive planning and execution of our business strategy will enable us to continue returning capital to shareholders, having already returned almost 40% of the minimum of $500,000,000 objective outlined in our guidance. We are focused on maintaining our leadership position in North America, and that requires us to evolve with the needs of our customers. Speaker 100:18:30With our growth CapEx program largely complete, our attention in 2024 will remain on growing our business. Acquisition on the wood treating side of the business as well as investing organically in our network remain key elements of our strategy, but we will also pursue growth through acquisitions and other infrastructure products and services where we can leverage our Continental network, industry leading customer relationships and solid reputation. In closing, I want to mention that we have high standards for our business. And if I'm confident in our capabilities, it's because of our nearly 3,000 employees. Whether our products enable power to flow through the electrical grid, help move merchandise on the continent's rail network or help retailers in North America supply lumber products and accessories, our employees are the ones who make it all happen. Speaker 100:19:28I want to thank everyone for their contributions in 2023 beyond and for their ongoing dedication customer service and maintaining our leading reputation in the industry. Stella Jones is ready for the future and this is in great part, thanks to you. And with that, I will open the line for the questions. Operator00:19:48Thank you, Eric. The line is now open for questions. Our first question is from James McGarrigle from RBC Capital Markets. Please go ahead. Speaker 300:20:03Thanks for taking my question. Yes, good morning. On the utility pole segment, you mentioned some constraints. And we've heard a slow pace of federal funding has some utilities cautious about their pace of purchases. But to what extent do you see this as a temporary headwind? Speaker 300:20:23I mean, you're making significant investments in inventory. I guess, what gives you that confidence that this situation will resolve during the remainder of the year? Speaker 100:20:33Right. Well, thank you for the question. I mean, several factors, right? So let me address first the slowdown piece. In our view, it's not necessarily related to federal funding, it's the timing of the availability of capital budget at our customers. Speaker 100:20:50Many leaders in North American utilities have pointed out to me that the cost of capital right now is a bit of a headwind as obviously increased cost of capital is making certain projects a bit harder to get off the ground. That being said, I'm not an economist, but I think we all feel generally or seen the news that interest rates will be dropping in the next year, let's say, and I think all this will resolve itself. On the second part of your question, we have secured long term contracts with several customers in the United States. We have secured new customers in 2024 that Doug has not serviced in the past. So we've definitely built some inventory to be able to address those customer demands. Speaker 100:21:45Most of our customers, although at a slower pace, are still increasing demand for their maintenance projects going forward. I'm very optimistic and looking forward to see those projects execute, but we're quite confident as we look at the remainder of our let's say our guidance period that we will continue to see growth to our 2025 objectives and it would be driven by some volumes. And lastly, I just want to point out some public information that you're probably aware of and maybe for everybody listening, Obviously, there's been some public announcements from Canadian utilities, U. S. Utilities as well as the governments, which indicate that and all of these announcements talk about decades' worth of work. Speaker 100:22:31So when we say we're future ready, we have definitely positioned ourselves in the last 18 months as building the capacity, building the procurement, getting the long term contracts, we hold all the right cards to be very successful for the long term. Speaker 300:22:49I appreciate that. And just my other question is going to be on margins and the longer term outlook. You put up a really strong margin in a seasonally weak quarter in Q4. I know there's some uncertainty due to potential cost inflation, pricing can move around with some of the new pool supply coming online. But anything to call out specifically in the quarter? Speaker 300:23:11Looking ahead, it looks like should continue to shift towards poles. You mentioned some of those extremely long term investments on the utility side. Just trying to better understand the puts and takes in the quarter and to what extent these levels of margin would be sustainable in 'twenty four and potentially longer term? Speaker 100:23:34Well, with regards to the quarter, we're actually very pleased with the percentage margin. I haven't checked in the books, but it's probably one of the highest on the record for us. You know that we have a cycle throughout the year. The Q4 is usually a lower volume quarter, which makes that such that the margin percentage compresses to some extent because we have a certain network that has its base cost that we need to support. We're very happy with the year over year performance at least 4 points plus compared to last year. Speaker 100:24:10And maybe if I understand your question, going into the future, we finished the year at a very strong year sitting at over 18%. We were had a very good product mix, definitely weighted towards utility poles. So we're very pleased with the performance. And we are cautioning in my last remarks, there's certain dynamics in the spot markets, not a long term contract piece of it, but the more the spot market or the contractor market where we feel that additional capacity in the industry right now might and will probably put some pricing pressures later in the year on that part of the business. Speaker 300:24:51And just a quick follow-up on that. The spot market, I think, you mentioned last quarter is about 30% of your overall pull mix. So that if we're going to see as an example, 100 basis points decrease in your consolidated margin, that would imply extremely significant drops on the spot market. Any color you can kind of share with regard to what you're seeing in the spot market? And after that, I can turn the line over. Speaker 300:25:18Thank you. Speaker 100:25:19No, certainly. So we haven't seen it as of today. So we're calling it out because we're observing the dynamic in the market and we're paying close attention to it. By default, Stella Jones getting into long term agreements and welcoming new customers and suppliers, every action we take has a reaction in the market and I would expect dynamics in the spot market to become a bit more active. So that could be compensated by a very healthy demand throughout the rest of the year and we may never talk about it, but I do think it's something we'll observe this year and it most likely will be short lived. Speaker 100:26:02I think it's a bit of a it will follow a bit of the trends in the general market as interest rates subside a bit. We see some pickup with the bigger utilities with their business. Hard to predict at this point. I can't give you much color. I'm just sort of explaining to you a bit of my logic and how we're seeing things. Speaker 100:26:18And we're being cautious, I guess, not initially wanting you as an analyst to take this 18% and sort of project it straight line out. I think we can deliver through a few cycles here, a few quarters to see where this is going to lead. Speaker 300:26:33Thank you very much. Thank you very much. Operator00:26:37Thank you. Our following question is from Hamir Patel from CIBC Capital Markets. Please go ahead. Speaker 400:26:45Good morning. Good morning, Eric. Just sticking with the poles category, what type of volume growth would you expect there in 2024? And just given some of your comments around near term demand being perhaps less robust. Do you think you'll be capacity constrained or is your growth in the capacity front going to likely track ahead of demand in 2024? Speaker 100:27:13So obviously with the investments in the acquisition we've done, we were obviously planning ahead. So capacity constraint, not one of my concerns at all at this point. To answer your the first part of your question, I guess I will answer it referring you to our guidance in 2025. If you look at our 1st year of our performance, call it, dollars 3,200,000,000 organic, but sorry, talk about, yes, and the utility pole business in there to be able to reach that objective. We're probably looking at a call it 14% to 16%, like midpoint of 15% CAGR for the next 2 years for utility poles and that would mostly be volume. Speaker 400:28:02Mostly volume. Okay, that's helpful. And Eric, in terms of the share of holes that is spot, just given the capacity you're bringing on, would you expect that share to change or is that already kind of contracted out? Speaker 100:28:24I don't think so. It's part of the a bit of the general approach on where we are planning production. We have our steady base, which is great and we are growing it obviously as I mentioned because we have new customers. But part of it is to, I guess, to plug the hole, we will sort of fit in where it makes sense that this is a spot market business as We've grown the network. Obviously, we've got new treating facilities with our Baldwin acquisition and we've increased cylinder sizes at certain facilities last year. Speaker 100:28:56So we've grown the capacity, we're growing the long term and then we'll continue complementing with the spot market and with certain strategic partners also, should I say. Speaker 400:29:09Okay. That's helpful. And just last question I had was on res lumber. Could you give us a breakdown of how the volume and price mix was for 2023? And are you expecting any volume growth in red lumber in 'twenty four? Speaker 100:29:32Yes. So for 'twenty and 'twenty four, we keep guiding to our $6,000,000 to $6,50,000,000 and I think could there be marginal growth there perhaps? I do we do feel like there's good consumer dynamics. So last year, we had some volume growth in the business around, call it, 7% and that was obviously all overshadowed with the reduction in price of lumber. So coming out of a good year on the volume side, I would say relatively comparable. Speaker 100:30:06If I listen to our customers, they feel that there's some potential increase, call it, the mid single digits. That's sort of the discussions. I mean, looking outside today, it looks like spring here in Montreal and obviously it gets those projects started earlier. So that could also be very helpful for us. But if you look at our guidance, I still think we're going to be in that range of the $6,000,000 to $6,500,000,000 and we got a great customer basis to support that basis and maybe a bit of growth there, but we'll see how the season rolls out. Operator00:30:51Thank you. Our following question is from Jonathan Goldman from Scotia Capital. Please go ahead. Speaker 500:30:59Good morning and thanks for taking my questions. Maybe just a housekeeping one to start off with on weather. Have you noticed any impact on your business from the flooding in California or even the colder weather in Northeast? Do you anticipate that impacting any sales levels, anything in that regard? Speaker 100:31:16Paul? Obviously, we had cold snaps in January and some ice storms in the south and obviously that doesn't help. But there are winter conditions and last year we had these river storms in California and mud flies and actually record snowfall. So it seems like every year we have some of these weather events. So I guess, it might does slow down a bit business, but it's 1 month out of a year. Speaker 100:31:47I think our customers have plenty of time ahead of us to readjust. I'm not really concerned about that unless we keep seeing continued storms in specific geographical areas which would have a long term trend, but right now it's down slightly, but it's 1 month. Speaker 500:32:11Okay. Thank you for that. And then maybe switching to capital allocation priorities for 2024. Maybe you can just remind us what the priorities are and then whether or not you earmarked any CapEx this year for additional capacity that would be required in 2025 to support additional potential spend in infrastructure related investments? Speaker 100:32:31Certainly. I'll let Silvana take that one. Speaker 200:32:34So Jonathan, for 2024, we our priority is first to complete the capital expenditures related to our growth CapEx or utility growth CapEx that we had told the market that in total we had a 5 year project and capital expenditures to grow our utility pools of $115,000,000 So there's about $25,000,000 to $30,000,000 left to complete that in 2024. We have maintenance and other efficiency projects being looked at and targeted and we always mention somewhere between $65,000,000 $75,000,000 of let's call it more regular CapEx. So that is always top priorities for us. We continue, as I noted in the conference call, that we have initiated a new NCIB program. So still committed to returning capital to shareholders, both through dividends and through repurchase of shares, always keeping in mind that we have a 3 year commitment to return $500,000,000 to shareholders. Speaker 200:33:42We do not have specifically earmarked any additional growth CapEx in 2024 that will be looked at as we prepare for our budgets for 2025. Speaker 500:33:55Perfect. And maybe just a quick follow-up, Eric. How long would it take to bring on additional capacity? I guess, you can quantify it however you want, it's meaning similar magnitude to the capacity you're bringing on this year, what would be the sort of ramp phase? Speaker 600:34:12So, we do have a Speaker 100:34:13it's an interesting question. So, we do have a bit of a cheat sheet of what we could do in the next 12 months and what we could do in 18 months to execute quickly on capacity. And when I hear that question, I think of a few things. When I think of Sun Yellow Pine, it's a drying capacity. And we do have quick access to kilns if we need to execute on that. Speaker 100:34:41I would say within 6 months, I could get kilns installed or additional kilns installed at facilities. The quickest way to increase treating capacity right now would be to add treating cylinders or increase the size of cylinders at certain facilities and we have those earmarked and lead time currently right now is about 6 months to get it and call it another 2 months to put it in place or maybe 8 months to install the cylinder. So I would say pretty much anything we want to do within 12 months, we put mostly most likely execute on that. I'm excluding a greenfield plant because that's a bigger endeavor because permitting and finding a facility and working with the community, So that's a longer piece. So Greenfield plant is something that if you ever hear us talk about that, it will be announced ahead of time, it will be well thought out plan. Speaker 100:35:37Right now, I think we've got enough capacity to execute on what we want to do for at least 18 months. And I feel comfortable that in our 5 year planning exercise that we'll be doing in the next few months. And we've already started talking about what could happen and what we need to do to capacity. So trying to give you a bit of flavor, but I think within a year we could easily execute if something would happen quickly as far as demand. But we are what we've done in the last 18 months was really trying to plan for increased demand, potential new customers that we have now, and I am hoping for some other new customers in 'twenty five at this point that we keep talking to. Speaker 100:36:20So I think we're well positioned to address any unexpected demand coming our way. Operator00:36:35Our following question is from Benoit Poirier from Desjardins Securities. Please go ahead. Speaker 600:36:42Good morning, Selvana. Just to come back on the utility pole volume, I think you mentioned earlier on the call that you felt comfortable with 14%, 16% growth in the coming 2 years. I'm just wondering about pricing expectation, what we could expect in 2024, whether pricing could play could be incremental to volume. Speaker 100:37:11So was the question for me or for Silvana? Speaker 600:37:14The one of you. Speaker 100:37:16So So it is mostly volume. I think so if you recall, we've had 2 years of growth or good pricing growth. I'm very confident that we will hold those prices. Could we see a bit of an uptick maybe offset by what I was talking about pricing headwinds in the spot market Okay. Speaker 600:37:52And just Okay. And just coming back on railway ties, you made great color about the flat expectation from Class 1, although you have additional ties to serve the commercial customers. So what could be reasonable in terms of overall organic growth expectation? And I would be curious to get your thoughts about the pricing environment. It looks like there was an improved pricing in Q4, and I don't know how significant it was on the organic growth. Speaker 100:38:30The pricing on the organic growth was trying to figure it out, because obviously we had lower volume. So we had lower volumes because obviously we focused our inventory to service our Class I numbers. So that overshadowed the sales growth, call it 5 ish percent pricing increase over the year just as a pass through of untreated high cost passing through. As I said, going forward, we think the untreated price of ties would be relatively stable. So going forward, I know we're missing an all on volume, so you can call it in that low single digit range. Speaker 100:39:28And I'll leave up to you to define the low single digits. In my mind, it's not 1 or 2, but I'll let you model it out. Speaker 600:39:37Okay, perfect. Plus some pricing on top of that? Speaker 100:39:42Depending on the price of ties, well, there's always a bit of it's true for Paws also. Every year, there's a bit of a our Paws has like inflation indicators and different things that can give us a couple of percent here or there. That would be part of it. But yes, I would agree with that. Speaker 600:40:03And given the favorable mix, Enicore Silvana in 2024, talking about bigger contribution from utility pole, stabilized residential lumber, better mix from commercial on the railway ties. Could it be enough to offset the potential risk around additional post supply toward the back half of twenty twenty four? Just wondering if you could sustain kind of an 18% margin profile, if one could offset the other positive implication from a mix standpoint? Speaker 200:40:38I guess it would be difficult for us to say because obviously we could quantify quite easily what the improved mix would do to our margin, but harder for us to sort of determine what potential impact the spot market pricing would have. Speaker 100:40:55Yes. The negative impact, as I mentioned in a previous answer is, we haven't seen it or felt it. And it's something we're monitoring. So it's kind of hard to quantify. So I do think we'll see some of that. Speaker 100:41:13To what extent it'll be significant or not, we will have to Speaker 600:41:17see. Okay. And just, Silvana, in terms of working cap, any thoughts about working cap requirements for 2020 4? I understand you're still growing, but there might be some reversal at one point given the build up in 2023. So if you could provide some color on that and maybe given the leverage situation a little bit higher than the targeted range, should we expect you to be maybe less focused on the buyback activity in 2024? Speaker 200:41:50No. So to answer the first of the question, in terms of the working capital going into 2024, we would not be expecting any significant increase. We think it would be fairly flattish when we compare end of this year end of 2023 to end of 2024. Keeping in mind there will be some seasonal variations as you know in the Q1 there will be a pickup but then there will be a release expected in the second half of the year. In terms of the leverage, no, I do not expect the higher leverage to impact the buybacks. Speaker 200:42:29We are still focused on returning that $500,000,000 over 3 years. So the buybacks will be in line with that target. Comfortable again that the uptick in our leverage was really based on our opportunities to invest in the 3 acquisitions that we did as well as our growth CapEx. So expect the leverage as it usually does to go a little bit higher in the Q1, but then to leverage back down subsequently in the second half. Speaker 600:43:04Perfect. Thank you very much for the time. Thank you, Manav. Operator00:43:09Thank you. Our following question is from Michael Tupholme from TD Securities. Speaker 700:43:19Eric, maybe just to start on the utility poles product category. For Q4 2023, can you talk more specifically about the pricing versus volume changes seen in the quarter in terms of pricing being a tailwind and volume being a headwind, what the kind of what the actual numbers were for those 2? Speaker 100:43:41The pricing was about sorry, the volume was about 5%. So obviously, organic growth you see is net of that and the sorry, the volume was a bit of a 5% downside. Speaker 700:43:58Okay. And then we can back into the pricing? Speaker 100:44:01Exactly. By difference, it will give you 22%, right? That's a simple math. Speaker 700:44:07And then just to be clear, I guess, just to go back, I think it's been asked a few times now. But as far as the outlook for organic growth in pools, I think if I'm understanding correctly, you're talking about something in and around the 15% range. Organic growth for pools over the next 2 years is sort of a CAGR. Speaker 100:44:26Yes. I guess first question is Speaker 700:44:27just if you can reconfirm that for me. And then just to follow on though, how do we think about that over the next 2 years for modeling? Is there much variance from 1 year to the next as we look at 'twenty four versus 5? Or is that a fairly steady state expectation in each of the next couple of years? Speaker 100:44:51So you understood properly, call it 15% CAGR over 2 years and it would be sort of even between the 2 years evenly spread out. Speaker 700:45:01Got it. Okay. And this is just to be clear, this is organic growth for pools or is this 15% inclusive of the benefit of the acquisitions you announced? Purely Speaker 100:45:15organic. I'm carving out whatever gains you would have in the 1st 6 months for the Baldwin acquisition. Speaker 700:45:21Okay, perfect. Thank you. Speaker 300:45:24And then I guess just Speaker 700:45:27talking about the you mentioned some of these announcements from North American utilities about longer term CapEx plans as far as meeting increased power demands and how they're going to do that. In your conversations with utilities, I mean, this is an area you've been excited about for some time now. But the conversations you've been having more recently, I mean, are you feeling more encouraged by the medium to longer term outlook than previously? Or is it is this just sort of unfolding as you would have expected as far as your views on that? Speaker 100:46:01The slowdown that we sort of called out today, I guess, was not in our 3 year guidance. It's not something that we saw coming. But to your point, in talking with leaders of utilities, they have a lot of projects and a lot of work to do. There's lots of maintenance and grid hardening and upgrades to be done across North America. And I'll say it's even before considering the impact of electric vehicles, because that is apparently something that is still very difficult to model. Speaker 100:46:36Everybody knows that there will be an expansion that is going to be some hardening and some adjustments because you'll need more transformers and more cables in the network. But right now, it's not clear for our customers. And I understand it actually. It's not clear for them to how to model, where do we upgrade and how much. So until they see where the different projects are going to get established, they're not necessarily even modeling that. Speaker 100:47:05So I'm very optimistic about what our customers have to do. It is unfolding as it goes. But as I pointed out, it's not by coincidence that all of these announcements usually cover a 10 or 15 period year period, and we're now signing supply agreements that cover those periods. So it's and as utility CapEx budgets increase over time, we do observe a correlation with our utility pole division sales increase on the volume side. So as all of this sort of unfolds and we will benefit and see continued growth. Speaker 100:47:48And I don't want to stress myself, but I would say beyond our current guidance. And yes, to answer your question, in my discussions with leaders of utilities in the U. S, I am quite optimistic of what the next 2 years for our guidance hold, but also probably the next decade as I sort of look at those announcements. Speaker 700:48:09Okay. That's very helpful. Thank you. And then just back on the margin question, you've also had a few times about strong margins in 2023 and you've highlighted a couple of potential headwinds. Doesn't sound like you've necessarily seen much impact as it relates to any kind of spot market pricing for pools so far. Speaker 700:48:29So understandably that could come and you're right for correct to be cautious about that I gather. But should we be thinking about margins sort of holding in at least through the early part of the year given that you have yet to see those kinds of pressures materialize yet? Speaker 100:48:51I think that's a fair assumption for now. Mike, because if I follow my statement, I did say we haven't seen it yet and before we get those quotes done and delivered probably a few months out. So we could see you're right that we could see a good first part of the year with softening if it happens in the summer in the back half of the year. Speaker 700:49:20Maybe just lastly, the I don't know you've been asked about this, but just on the acquisition front, is that still a focus area for you? And if so, what are you seeing and what are you looking at right now, if you can comment? Speaker 100:49:37Certainly. I was interested in increasing our network and doing some acquisitions. We have a very large and strong network in North America. So there are geographical regions where I don't necessarily need more capacity in other parts of the world Codman where I would definitely consider some acquisitions. So definitely, utility poles is top of mind. Speaker 100:50:07If that business comes with good assets, a good book of business, we'd be really interested in that. There's still some opportunities potentially on the railway's high side and we keep our eyes open. We are very patient, but I think there's some opportunities that could come there. And last but not least, I've expressed infrastructure products that support our customer base remains very appealing to us. It's something that we keep investigating and studying and had discussions in the last year with different parties to see what could the future look like. Speaker 100:50:52But I guess my top of mind is how do we better service our current customers. And I do have a positive signaling from our customers of encouraging us to consider other products and even services, I'll add actually. So we're very structured and disciplined in how we're approaching this, but it's definitely something of interest, especially when we got the green light from imported customers. I think it's it really makes things easier to consider. We just want to make sure that whatever or whenever we do it, we will be very successful at what we in our new endeavors. Speaker 700:51:37Okay, perfect. And so just one follow on to that. This latter part that you were just discussing there that ways to better serve existing customers. Could these be impactful opportunities or are these sort of more likely to be smaller tuck in type situations? Speaker 100:51:56They vary in sizes, Mike, from very impactful to small. And my view is if we are going to enter something that is different than treating wood, it would be of a certain size where there's good structure, good leadership, good knowledge, a strong base to ensure what I just mentioned about being very successful at what we do. I don't think we buy a small shop thinking we're going to grow it to $1,000,000,000 I think we'd probably buy a medium size, if I can make it the analogy, a medium size that has a good engineering team and a good footprint and good customer access and ROV thriving with that us potentially adding on with our customer relationship and distribution network as potential synergies. Speaker 700:52:49Okay. That's all very helpful. Thank you. Speaker 100:52:51My pleasure. Operator00:52:53Thank you. Our following question is from Maxim Sytchev from National Bank Financial. Please go ahead. Speaker 800:53:06Eric, so just in terms of to think about the Paul's dynamics, so you don't think it's a reaction to the price increases that we've seen over the last 2 years and that's really in relation to kind of the CapEx pacing on the public clients. Is that how you guys are thinking in Toronto? Speaker 100:53:24Yes. That's 100%. No doubt in my mind, it's nothing to do with impressing. Speaker 800:53:31Okay. And then in terms of like obviously you said minus 5% in terms of volume in Q4, but what are you guys seeing in Q1? Like are the rates of sort of volume headwinds, are they similar, different? What can you tell us? Speaker 100:53:48For now, I would say similar. Obviously, we've got 1 month really under our belt. And the last few weeks, I've been focused on our quarterly. So I have to say, I haven't spent much on our February. But it's a bit of the same for now, but as someone asked earlier about weather in January, that's sort of a bit of a headwind, so I can't draw a conclusion on that part. Speaker 100:54:11And maybe a thought, Maxim, is our customers work for I was talking about decades a few minutes ago. We're working on the long term aspects. So the quarter to quarter impact, quarterly, We want to deliver great results and we typically do. But you also need to keep in mind what does that trend look like for the year for 'twenty four and 'twenty five because part of our team is now actually planning on 2025 business and looking at contracts and renewals and extension and new customers. So it's a bit of that long term play when we talk to utilities. Speaker 800:54:52Right. Yes, makes sense. And then Silvana, just in terms of thinking about sort of the margin profile for Pulse, like we're not in a situation where kind of like a higher cost inventory cycling through the P and L, right? So I mean that's kind of the comment around margins staying relatively stable in poles. Is that how should we think about this? Speaker 200:55:16Yes. So the increase in the inventory was mostly volume, right, and not cost. So no impact on the expected margins on that volume. Speaker 800:55:31Okay. That's great. Thanks so much. And then, Erez, just circling back to kind of the like obviously, you're looking at M and A and I think also the market appreciates that. But in terms of commitment to sort of all the verticals in your current platform, No incremental thoughts in relation to the resi exposure, if that's something that you need in the long term, maybe any thoughts there? Speaker 800:55:59Thanks. Speaker 100:56:02Well, actually the way we look at it, that business, out of the 3 product categories that the business turns its inventory 4 or 5 times a year, healthy margin and definitely is a good contributor to the business. So I don't know what the future holds as far as dynamics and what comes our way. We've always obviously been vocal that we're investing in our infrastructure business and that business is proportionately shrinking, although stable revenue and very steady on the margin piece, it is shrinking. So as long as it's accretive contributing to the business, it's wood treating, which is part of our core knowledge. It still fits very well with what we do. Speaker 800:56:49Okay, perfect. And then, so just one last question, clarification. When you talk about sort of additional services potentially for your time post clients, So you would not be averse to potentially looking at something which is sort of less manufacturing and maybe a little bit more kind of headcount driven in terms of M and A assuming that it meets certain ROIC targets. Is that the way we should think about this? Speaker 100:57:14Yes, definitely. If we find the right partner that is, I could say, these Stella Jones equivalent in their own segment, I wouldn't hesitate, especially as we got customers saying 100 percent Teladrone can bring value in a combined service product offering. Operator00:57:45We have no further questions in the queue. Thank you. Speaker 100:57:49Well, thank you, Matthew, and thank you everyone for joining us today. We look forward to updating you on our Q1 results in May. Have a great day. Operator00:57:59Ladies and gentlemen, this concludes today's call.Read morePowered by