TSE:DBM Doman Building Materials Group Q1 2024 Earnings Report C$6.84 +0.15 (+2.24%) As of 04/28/2025 04:00 PM Eastern Earnings HistoryForecast Doman Building Materials Group EPS ResultsActual EPSC$0.16Consensus EPS C$0.16Beat/MissMet ExpectationsOne Year Ago EPSN/ADoman Building Materials Group Revenue ResultsActual Revenue$602.48 millionExpected Revenue$665.05 millionBeat/MissMissed by -$62.57 millionYoY Revenue GrowthN/ADoman Building Materials Group Announcement DetailsQuarterQ1 2024Date5/9/2024TimeN/AConference Call DateFriday, May 10, 2024Conference Call Time12:00PM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress ReleaseEarnings HistoryCompany ProfilePowered by Doman Building Materials Group Q1 2024 Earnings Call TranscriptProvided by QuartrMay 10, 2024 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Greetings. Welcome to the Doman Building Materials Group Limited's First Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. Operator00:00:22I'll now turn the conference over to Ali Mandaiya. Please go ahead, Ali. Speaker 100:00:29Thank you. Good afternoon, everyone, and thank you for joining us for Dohmen Building Materials' 1st quarter 2024 Financial Results Conference Call. Joining me this morning are Amar Dohmen, Chairman and Chief Executive Officer and James Coe, Chief Financial Officer of the company. If you have not seen the news release, which was issued yesterday, it is available on the company's website at dohmanbm.com as well as on SEDAR Plus along with our MD and A and financial statements. I would also like to remind you that a replay of this call will be accessible until midnight on May 24. Speaker 100:01:02Following the presentation of the quarter pardon me, following the presentation of the Q1 2024 financial results, we will conduct a Q and A session for analysts only. Instructions will be provided at that time for you to join the queue for questions. Before we begin, we are required to provide the following statements regarding forward looking information, which is made on behalf of Dohmen Building Materials Group Limited and all of its representatives on this call. Remarks and answers to your questions today may contain forward looking information about future events or the company's future performance. This information is subject to risks and uncertainties that may cause actual events to result to differ materially. Speaker 100:01:44Any information regarding forward looking statements is made as of the date of this call, and the company does not undertake to update any forward looking statements. Please read the forward looking statements and risk factors in the MD and A as these outline the material factors which could cause or would cause actual results to differ. The company will not provide guidance regarding future earnings during today's call, and management does not anticipate providing guidance in future quarterly or interim communications with investors. I'll now turn the call over to Omar. Speaker 200:02:15Thanks, Eli, and thanks, everybody, for joining us on today's call. Since we spoke last during our Q4 year end 2023 results conference call, we remain focused and excited with the business across all divisions and on both of the border. Despite the impact of a slowing construction materials market, our business units continue to show resilience in volumes, while delivering very strong gross margin performance. Our financial and operational performance in the Q1 continues to be a testament to our ability to work through challenging conditions and our team's track record on managing the business through these types of cycles. Throughout the quarter, we remained focused as always on gross margin and optimizing our balance sheet. Speaker 200:02:56The strength in our Q1 results came from the combination of the impact of our strategic acquisitions, steady volumes in key markets and ongoing disciplined inventory management. Further, our ongoing cost management, focus on operational efficiencies and successful integration efforts enabled the company to realize strong gross margin and EBITDA margin performance. 2024 is off to a decent start. We are encouraged with the overall level of our activity in our end markets and we delivered strong performance across all of our key financial metrics, including revenues coming in at just over $600,000,000 gross margin at 16.7 percent, just over 100,000,000 dollars adjusted EBITDA at $45,600,000 net earnings of $14,400,000 and lastly, another quarterly dividend of $0.14 per share was declared. These results basically are on the back of our continued strength of our business platform in Canada and the U. Speaker 200:03:58S. I'm extremely pleased with our financial performance, which has resulted in the continued successful unfolding of our overall growth strategy. As always, we remain confident, focused on closely managing our costs and servicing the needs of our customers with the highest level of quality and service as we have done in the past. During the quarter, we also completed the acquisition of Southeast Forest Products, including 2 large lumber treating plants in Richmond, Indiana and near Birmingham, Alabama. We are very excited with this acquisition. Speaker 200:04:33The plants complement our central U. S. Operations and strengthen our footprint by introducing coverage in 8 new states, including the strong Southeastern U. S. Markets in select Eastern States. Speaker 200:04:45This strategic acquisition exemplifies our strategy of adding scale and volume to our U. S. Operations in pressure treated lumber and specialty wood products. The acquisition is in line with our growth strategy and consistent with our view of value for what we are purchasing and value creation for our shareholders. Our integration efforts are on track and coming together successfully and pretty much we can say we fully integrated the company within 60 days. Speaker 200:05:11The lumber markets have been very soft in Q2 as we know and as always, we do remain confident in our ability to work through good and challenging markets diligently while serving our customer needs with the highest level of service. We believe the market is starting to bottom out here in lumber and we'll talk about that in the Q and A I'm sure. We remain excited about growth profile and the overall prospects of the business. And with that, I would now like to ask Jay Code, our CFO to take over and provide a review of the company's Q1 2024 financial results in greater detail and then we are going to open the call for questions. Jay, over to you. Speaker 300:05:46Thank you, Amar, and good day everyone. Sales for the 3 month period ended March 31, 2024 were 602,500,000 dollars versus 609,100,000 last year, representing a year over year decrease of 6 point $6,000,000 or 1%. The impact of a slowing construction materials market was partially offset by contributions from our March 1, 2024 acquisition of Southeast Forest Products. Domon sales composition in the quarter included 70 6% construction materials compared with 75% last year, with the remaining balance of sales driven by specialty and allied products of 20% and other sources of 4%. Our gross margin was 100 400,000 versus 98,200,000 last year, an increase of $2,200,000 and gross margin percentage was 16.7 percent in the quarter, an improvement from the 16.1% achieved last year, largely driven by disciplined and strategic inventory purchasing and our continuing focus on sales of value added products. Speaker 300:07:12Expenses in the quarter were 72 point 3,000,000 compared to 70,500,000 last year, an increase of $1,800,000 or 2.6 percent. Expenses equated to 12% of sales in the quarter compared to 11.6% last year. Distribution, selling and administration expenses were subject to broad inflationary pressures over the previous 12 months and we continue to manage this category very tightly in this environment. As a percentage of sales, DS and A expenses were 9.1% in the quarter compared to 8.8% last year. Finance costs for our Q1 were $10,800,000 compared to $10,600,000 last year, an increase of 2.7%, largely related to higher year over year interest rates on our variable rate loan facilities. Speaker 300:08:15Q1 2024 adjusted EBITDA was 45.6 $1,000,000 compared to 44.8 excludes acquisition related costs of $817,000 in the current quarter. This quarter's slight increase in adjusted EBITDA was driven by stronger gross margins and disciplined expense control despite broad inflationary pressures. Adjusted net earnings before these non recurring acquisition costs were $15,000,000 this quarter, slightly above last year's comparative net earnings. Turning now to the statement of cash flows. Operating activities before non cash working capital changes generated 37,800,000 in cash, largely in line with the 38,100,000 generated last year. Speaker 300:09:15Seasonal increases in non cash working capital items consumed $167,600,000 in cash compared to $114,400,000 in the prior year. Increased strategic spring buildup of inventory this year contributed to the increased use of cash. Overall financing activities generated a total of 153,500,000 in cash compared to $77,400,000 in Q1 'twenty three. We borrowed 100 and 71,600,000 on our revolving loan facility compared to $96,200,000 last year, largely reflecting the previously discussed seasonal working capital changes. We note that the purchase price consideration Operator00:10:10for Speaker 300:10:13its lending covenants during the quarter and subsequent to quarter end on April 30, we reported that our revolving loan facility was renewed and extended through April 2028. This marks the 7th consecutive renewal of the $500,000,000 ABL facility spanning over a 25 year relationship with lead lender Wells Fargo. Shortly after the renewal of the revolver, rating agency Moody's issued a ratings upgrade for DOMIN, increasing our corporate family rating by 1 notch to BA3 from B1 and increasing the rating on our 2026 senior unsecured notes by 2 notches to B1 from B3. Moody's reported that the upgrades reflect Dolmen's strong operational performance despite a trough pricing environment for wood products, as well as continued progress in reducing debt. The company also returned 12,200,000 dollars to shareholders through dividends paid during the quarter consistent with 2023 and payment of lease liabilities including interest consumed $6,600,000 of cash largely in line with last year. Speaker 300:11:38We note that the company's lease obligations generally require monthly installments and these payments are 100 percent current. Investing activities consumed total of $63,800,000 of cash this quarter, including payment for the Southeast acquisition as well as ongoing purchases of new property, plant and equipment. This concludes the formal commentary and we would now be happy to respond to any questions that you may have. Thank you. Operator? Operator00:12:10Thank you. At this time, we will be conducting a question and answer And our first question is from the line of Yuri Tsareta with Canaccord Genuity. Please proceed with your questions. Speaker 400:12:45Thank you and good morning everyone. Operator00:12:48Good morning. Speaker 400:12:49So last quarter it seemed like you were seeing strong demand activity across the board with construction materials pricing declines being the main headwind. Q1 against an easier pricing comp, however, was slightly lower year on year. So I was just wondering if you could provide more color on where that weakness is coming from? Speaker 200:13:13Yes, certainly Ken. And we're off 1% sales. So I'm not really crying too much about that in this environment. So really when you look at across the regions, there are certain pockets. It's variable across different markets. Speaker 200:13:27Canada was a little bit weaker, longer winter, etcetera, but now we're seeing those volumes pick up nicely here in Q2 and recover as they always do depending on how long the winter goes. And then certain states, it was just sporadic, some were up, some were down and we're starting to get the northern states, Illinois, Missouri, those states where they open up a little bit later start to kick in. Texas has kicked in and Arkansas and some of the new states we're in as well we're starting to see good volumes there. So not too concerned about the start of the year with lower lumber prices hopefully bottomed maybe last week. We're kind of feeling that a little bit and starting to see curtailments take effect. Speaker 200:14:05I think you might see a little bit more buying activity happen while pricing is favorable to the buy side. Speaker 400:14:15Okay. Thank you. That's helpful. So as a quick follow-up, since so based on your answer, you're seeing those volumes perhaps start to pick up. How are the pricing dynamics looking? Speaker 400:14:29And would you say your expectations for the year remain largely unchanged in the sense of being flat? Speaker 200:14:40Yes, the one thing we can't control of course is the base price. We move along up with that or down with that as things go along. But as you can see 5 straight quarters through some pretty different gyrations of the market one way or the other. We're steady hitters through these kind of markets. So I think you'll continue to see that and yes, we haven't really changed our outlooks as far as internal goes. Speaker 200:15:02And we believe that the lumber markets bottomed. Do we see it running up? No, we just don't. There's a lot of production. It seems to be in a nice back and fill area. Speaker 200:15:13The producers, some of them are feeling these lower prices right now and hence the curtailments which we need to I think shore up the price on the base. But we don't see a big rally coming. We just a personal opinion from our office. We think we're coming off the bottom here now, but prices are going to be lower for longer. And I think there's a bit of an interest rate cloud on housing, which is kind of holding back new builders doing big projects and things like that. Speaker 200:15:37But the repair and renovation market for us seems to be still carrying on decently and everyone's watching their inventories on the customer side. So we don't expect people to be loading up on lumber in this environment. They're selling to and buying to and that's just the way it works. Speaker 400:15:55Okay. Thank you. That's helpful color. I'll turn it over. Operator00:15:59Thanks. Our next question is from the line of Amir Patel with CIBC Capital Markets. Please proceed with your question. Speaker 500:16:08Hi. Amar, how did your organic sales fair in Q1 if you strip out the Southeast Steel? And any comments you have on how the sort of organic business is faring here in Q2 compared to a year ago? Speaker 200:16:25Yes, just slightly off in the Q1 and Q1 is obviously our weakest quarter with weather and everything like that. It's a tough yardstick to use, But off maybe very low single digits in some markets on volume. But really again it's if you're 1% to 3% here and there in different markets to us we're not we don't really stay awake worried about that. And we started to see the momentum come back in Q2. We don't see the market being super strong on lumber. Speaker 200:16:55We don't see it being super strong on takeaway. Just a steady year is kind of how we're seeing this in the 5th month of the year now, I mean organically and through acquisition. Speaker 500:17:06Great. Thanks, Amar. That's helpful. And we saw Home Depot make a large acquisition in the distribution space and looks like they're paying quite a high multiple. Do you see any impact from that transaction on your own business? Speaker 200:17:210. Those are categories we're not in at all. It's more of a roofing and other products that we really don't participate in. And so it was a non event for us. Speaker 500:17:35Fair enough. That's all I had. I'll turn it over. Thanks. Speaker 200:17:39Thanks, Sameer. Operator00:17:41The next question is from the line of Zachary Evershed with National Bank Financial. Please proceed with your question. Speaker 600:17:48Thank you. Good morning, everyone. Good morning, everyone. Good morning, Matt. Good morning, Matt. Speaker 600:17:52Good morning. So as we saw pricing on cash lumber take a dip in Q2, how are you thinking about the sustainability of your 16% plus gross margins going forward? Speaker 200:18:05Yes. In down markets, it's always a little bit more of a challenge because you can't quite always be on the mark. Having said that, we've seen the market decline and go back up and decline in the last 5 quarters and you've seen our margins kind of hold in here. I wouldn't see them moving up past that, Zach. I wouldn't be afraid or excited, let's say. Speaker 200:18:27I think we're going to be in those zip codes somewhere near that in this type of an environment. And on Southern Yellow Pine, it got pretty tough. There was 2 handles on lumber, which we haven't seen since 2013. So that kind of surprised the whole market how cheap certain grades and tallies got. Spruce was a bit better, Doug first started to peel off. Speaker 200:18:48So we can't say that margins are going to go up from here. I just we don't see any kind of collapse happening, but be a little softer I think just a little bit, Zach, as we unfold into Q2 and Q3. Speaker 600:19:01That makes sense. Thanks. And given that backdrop, what are your working capital expectations in 2024 versus 2023? Speaker 300:19:12Hi, Zach, it's Jay here. So, we haven't altered those working capital expectations somewhat at all actually from our internal projections other than to allow for a little bit more working capital from the Southeast acquisition. So these prices are kind of within the range of what we plan for, maybe a little bit on the low side right now as it bottoms out. But you should see the usual seasonal working capital fluctuations with peak working capital around that 1st last week of April, 1st week of May and then it starts to come off through November. And that range from peak to trough is generally going to be in the $100,000,000 to $120,000,000 range. Speaker 600:20:09That's good color. Thanks. Operator00:20:12So I think Speaker 600:20:13you addressed this fairly directly in terms of the pricing trends that you're seeing. You think that we're maybe bottoming out here and volumes have been fairly uninspired thus far given the cloud from interest rates. You have hope for the pickup in the back half maybe as we see backlogs come through? Speaker 200:20:36Yes. I think what will drive that, Zach, we need some more information as far as, I would say, curtailment announcements and the realities of those not just extended mill holidays or the odd weekend long weekend and shutting the mills down. If we see some serious production come off, you'll see a torque up because the volumes haven't collapsed. It's just that everybody is in kind of a rhythm of back and fill. No one wants to order inventory. Speaker 200:21:01So if you start pulling a lot of material off from the sawmill side, you will see a torque up. I can't say we're counting on it. We're counting on kind of maybe up 10% to 15% here as a peak towards the maybe mid part of the year if the curtailments come in. Otherwise, we're going to kind of bump along where we are. I think I said last quarter, we're going to be range bound. Speaker 200:21:23I think we're going to be range bound with a $50 bill. That's just kind of how it feels internally and that's kind of what we're looking for. Are we getting some good deals from mills that need to move material? Yes, we are. So we try to take advantage and help our sawmill partners when they've got some stuff to move and maybe a little bit underneath print so that can help us. Speaker 200:21:44So we're trying to do those things and take some chances when needed to buy under. But we're being conservative as well. But until we see our curtailment announcements and some serious ones, I think we're just going to be range bound and no trajectory to the sky here on lumber. So it's kind of steady and boring as you go, Zach. Speaker 600:22:05Good enough for me. Then just one last one. We're hearing commentary from other distributors that early stage construction products are moving quicker than late stages as construction times are kind of blowing out in new residential. Are you guys seeing that bifurcation in your own catalog? Speaker 200:22:25Well, a lot of our material in Canada of course is driven towards a new home start with our distribution activities with plywood, studs, OSB, those types of items, insulation. And then of course, the majority of what we're doing with the pressure treated categories are backyard. So a lot of that can be repair and remodel, which is disconnected from that timing cycle that you're mentioning. It's just people doing R and R. And when lumber is low like this and the retailers move their sets down, decks go back into the 20,000. Speaker 200:22:57It starts to really make it hard to price against composite. Composite is still 5 times the cost of wood. That gap widens and it makes lumber more attractive. So there is a benefit in lower lumber prices, if you will, because of that demand picking up because it's cheaper and people can do projects. And in this inflationary world, they don't a lot of people don't have a lot of extra dollars floating around. Speaker 200:23:21And so when things are cheaper, I think it just helps the consumer quite frankly. Operator00:23:33Our final question is from the line of Matthew McElher with RBC Capital Markets. Speaker 700:23:42Most of what I had has been asked and answered, but maybe a question on your private stimulants. Any early thoughts on Canada's improved forest management and private land protocol that was recently introduced. With that, would you expect to evaluate the opportunities to develop forest garden projects? Speaker 200:24:01Yes, Jake can chime in here as well. We've had several interested parties approach us and we've been studying our timberlands to see what is the best use for that asset that we're proud to have. And I could say that we're just kind of in early innings of that exploration and maybe Jay can finish off. Speaker 300:24:20Yes, I'd echo what Amar has described there. Certainly, the interest in carbon credits that comes our way is very active right now. And we're not really seriously considering that at this point, but as that market develops, we can we certainly will continue to monitor the carbon markets and be prepared to look at that more seriously. Speaker 200:24:49What I can tell you is on the standing timber that we provide to sawmill partners in the area is the demand for that has been very strong due to the British Columbia public cutback of the AAC, the annual allowable cuts almost in half from where they were a couple of years ago. So our pricing on our timber, it's been slow getting out of it because of the weather. But when we're delivering our pricing on timber, we have a lot of customers pulling for logs. So it's nice to see those yields and margins on the timber. We just need some clear weather, which is approaching now and getting it out of the bush. Speaker 200:25:28But that side of it Speaker 300:25:29will go well. Yes. And I would add that we discussed curtailments. We're certainly seeing no curtailments in the region of our private managed forest. So the demand is still strong for our timber. Operator00:25:50Thank you. At this time, we've reached the end of our question and answer session. I'll hand the floor back to Ali Mondavi for closing remarks. Speaker 100:25:58Thank you. On behalf of the Domon Building Materials team, thank you again for joining us today. We look forward to speaking with you all during our Q2 financial results conference call. That concludes today's call. I will turn it over to the operator. Operator00:26:13Thank you. Today's conference has concluded. You may now disconnect your lines at this time and have a wonderful day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallDoman Building Materials Group Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release Doman Building Materials Group Earnings HeadlinesTSE:DBM Q1 EPS Lowered by National Bank FinancialApril 28 at 1:19 AM | americanbankingnews.comBrokerages Set Doman Building Materials Group Ltd. (TSE:DBM) Price Target at C$10.07April 24, 2025 | americanbankingnews.comTrump Treasure April 19Thanks to President Trump… A $900 investment across5 specific cryptos… Could gain 12,000% so quickly that, just 12 months later…April 29, 2025 | Paradigm Press (Ad)Royal Bank of Canada Issues Pessimistic Forecast for Doman Building Materials Group (TSE:DBM) Stock PriceApril 24, 2025 | americanbankingnews.comDoman Building Materials Group (TSE:DBM) Lowered to Hold Rating by Cibc World MktsApril 24, 2025 | americanbankingnews.comCIBC Downgrades Doman Building Materials Group (TSE:DBM) to NeutralApril 23, 2025 | americanbankingnews.comSee More Doman Building Materials Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Doman Building Materials Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Doman Building Materials Group and other key companies, straight to your email. Email Address About Doman Building Materials GroupDoman Building Materials Group (TSE:DBM) Ltd is a wholesale distributor of building materials and home renovation products. The company services the new home construction, home renovation and industrial markets by supplying the retail and wholesale lumber and building materials industry, hardware stores, industrial and furniture manufacturers and similar concerns. Its operations also include timber ownership and management of private timberlands and forest licenses, and agricultural post-peeling and pressure treating through CanWel Fibre Corp. 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There are 8 speakers on the call. Operator00:00:00Greetings. Welcome to the Doman Building Materials Group Limited's First Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. Operator00:00:22I'll now turn the conference over to Ali Mandaiya. Please go ahead, Ali. Speaker 100:00:29Thank you. Good afternoon, everyone, and thank you for joining us for Dohmen Building Materials' 1st quarter 2024 Financial Results Conference Call. Joining me this morning are Amar Dohmen, Chairman and Chief Executive Officer and James Coe, Chief Financial Officer of the company. If you have not seen the news release, which was issued yesterday, it is available on the company's website at dohmanbm.com as well as on SEDAR Plus along with our MD and A and financial statements. I would also like to remind you that a replay of this call will be accessible until midnight on May 24. Speaker 100:01:02Following the presentation of the quarter pardon me, following the presentation of the Q1 2024 financial results, we will conduct a Q and A session for analysts only. Instructions will be provided at that time for you to join the queue for questions. Before we begin, we are required to provide the following statements regarding forward looking information, which is made on behalf of Dohmen Building Materials Group Limited and all of its representatives on this call. Remarks and answers to your questions today may contain forward looking information about future events or the company's future performance. This information is subject to risks and uncertainties that may cause actual events to result to differ materially. Speaker 100:01:44Any information regarding forward looking statements is made as of the date of this call, and the company does not undertake to update any forward looking statements. Please read the forward looking statements and risk factors in the MD and A as these outline the material factors which could cause or would cause actual results to differ. The company will not provide guidance regarding future earnings during today's call, and management does not anticipate providing guidance in future quarterly or interim communications with investors. I'll now turn the call over to Omar. Speaker 200:02:15Thanks, Eli, and thanks, everybody, for joining us on today's call. Since we spoke last during our Q4 year end 2023 results conference call, we remain focused and excited with the business across all divisions and on both of the border. Despite the impact of a slowing construction materials market, our business units continue to show resilience in volumes, while delivering very strong gross margin performance. Our financial and operational performance in the Q1 continues to be a testament to our ability to work through challenging conditions and our team's track record on managing the business through these types of cycles. Throughout the quarter, we remained focused as always on gross margin and optimizing our balance sheet. Speaker 200:02:56The strength in our Q1 results came from the combination of the impact of our strategic acquisitions, steady volumes in key markets and ongoing disciplined inventory management. Further, our ongoing cost management, focus on operational efficiencies and successful integration efforts enabled the company to realize strong gross margin and EBITDA margin performance. 2024 is off to a decent start. We are encouraged with the overall level of our activity in our end markets and we delivered strong performance across all of our key financial metrics, including revenues coming in at just over $600,000,000 gross margin at 16.7 percent, just over 100,000,000 dollars adjusted EBITDA at $45,600,000 net earnings of $14,400,000 and lastly, another quarterly dividend of $0.14 per share was declared. These results basically are on the back of our continued strength of our business platform in Canada and the U. Speaker 200:03:58S. I'm extremely pleased with our financial performance, which has resulted in the continued successful unfolding of our overall growth strategy. As always, we remain confident, focused on closely managing our costs and servicing the needs of our customers with the highest level of quality and service as we have done in the past. During the quarter, we also completed the acquisition of Southeast Forest Products, including 2 large lumber treating plants in Richmond, Indiana and near Birmingham, Alabama. We are very excited with this acquisition. Speaker 200:04:33The plants complement our central U. S. Operations and strengthen our footprint by introducing coverage in 8 new states, including the strong Southeastern U. S. Markets in select Eastern States. Speaker 200:04:45This strategic acquisition exemplifies our strategy of adding scale and volume to our U. S. Operations in pressure treated lumber and specialty wood products. The acquisition is in line with our growth strategy and consistent with our view of value for what we are purchasing and value creation for our shareholders. Our integration efforts are on track and coming together successfully and pretty much we can say we fully integrated the company within 60 days. Speaker 200:05:11The lumber markets have been very soft in Q2 as we know and as always, we do remain confident in our ability to work through good and challenging markets diligently while serving our customer needs with the highest level of service. We believe the market is starting to bottom out here in lumber and we'll talk about that in the Q and A I'm sure. We remain excited about growth profile and the overall prospects of the business. And with that, I would now like to ask Jay Code, our CFO to take over and provide a review of the company's Q1 2024 financial results in greater detail and then we are going to open the call for questions. Jay, over to you. Speaker 300:05:46Thank you, Amar, and good day everyone. Sales for the 3 month period ended March 31, 2024 were 602,500,000 dollars versus 609,100,000 last year, representing a year over year decrease of 6 point $6,000,000 or 1%. The impact of a slowing construction materials market was partially offset by contributions from our March 1, 2024 acquisition of Southeast Forest Products. Domon sales composition in the quarter included 70 6% construction materials compared with 75% last year, with the remaining balance of sales driven by specialty and allied products of 20% and other sources of 4%. Our gross margin was 100 400,000 versus 98,200,000 last year, an increase of $2,200,000 and gross margin percentage was 16.7 percent in the quarter, an improvement from the 16.1% achieved last year, largely driven by disciplined and strategic inventory purchasing and our continuing focus on sales of value added products. Speaker 300:07:12Expenses in the quarter were 72 point 3,000,000 compared to 70,500,000 last year, an increase of $1,800,000 or 2.6 percent. Expenses equated to 12% of sales in the quarter compared to 11.6% last year. Distribution, selling and administration expenses were subject to broad inflationary pressures over the previous 12 months and we continue to manage this category very tightly in this environment. As a percentage of sales, DS and A expenses were 9.1% in the quarter compared to 8.8% last year. Finance costs for our Q1 were $10,800,000 compared to $10,600,000 last year, an increase of 2.7%, largely related to higher year over year interest rates on our variable rate loan facilities. Speaker 300:08:15Q1 2024 adjusted EBITDA was 45.6 $1,000,000 compared to 44.8 excludes acquisition related costs of $817,000 in the current quarter. This quarter's slight increase in adjusted EBITDA was driven by stronger gross margins and disciplined expense control despite broad inflationary pressures. Adjusted net earnings before these non recurring acquisition costs were $15,000,000 this quarter, slightly above last year's comparative net earnings. Turning now to the statement of cash flows. Operating activities before non cash working capital changes generated 37,800,000 in cash, largely in line with the 38,100,000 generated last year. Speaker 300:09:15Seasonal increases in non cash working capital items consumed $167,600,000 in cash compared to $114,400,000 in the prior year. Increased strategic spring buildup of inventory this year contributed to the increased use of cash. Overall financing activities generated a total of 153,500,000 in cash compared to $77,400,000 in Q1 'twenty three. We borrowed 100 and 71,600,000 on our revolving loan facility compared to $96,200,000 last year, largely reflecting the previously discussed seasonal working capital changes. We note that the purchase price consideration Operator00:10:10for Speaker 300:10:13its lending covenants during the quarter and subsequent to quarter end on April 30, we reported that our revolving loan facility was renewed and extended through April 2028. This marks the 7th consecutive renewal of the $500,000,000 ABL facility spanning over a 25 year relationship with lead lender Wells Fargo. Shortly after the renewal of the revolver, rating agency Moody's issued a ratings upgrade for DOMIN, increasing our corporate family rating by 1 notch to BA3 from B1 and increasing the rating on our 2026 senior unsecured notes by 2 notches to B1 from B3. Moody's reported that the upgrades reflect Dolmen's strong operational performance despite a trough pricing environment for wood products, as well as continued progress in reducing debt. The company also returned 12,200,000 dollars to shareholders through dividends paid during the quarter consistent with 2023 and payment of lease liabilities including interest consumed $6,600,000 of cash largely in line with last year. Speaker 300:11:38We note that the company's lease obligations generally require monthly installments and these payments are 100 percent current. Investing activities consumed total of $63,800,000 of cash this quarter, including payment for the Southeast acquisition as well as ongoing purchases of new property, plant and equipment. This concludes the formal commentary and we would now be happy to respond to any questions that you may have. Thank you. Operator? Operator00:12:10Thank you. At this time, we will be conducting a question and answer And our first question is from the line of Yuri Tsareta with Canaccord Genuity. Please proceed with your questions. Speaker 400:12:45Thank you and good morning everyone. Operator00:12:48Good morning. Speaker 400:12:49So last quarter it seemed like you were seeing strong demand activity across the board with construction materials pricing declines being the main headwind. Q1 against an easier pricing comp, however, was slightly lower year on year. So I was just wondering if you could provide more color on where that weakness is coming from? Speaker 200:13:13Yes, certainly Ken. And we're off 1% sales. So I'm not really crying too much about that in this environment. So really when you look at across the regions, there are certain pockets. It's variable across different markets. Speaker 200:13:27Canada was a little bit weaker, longer winter, etcetera, but now we're seeing those volumes pick up nicely here in Q2 and recover as they always do depending on how long the winter goes. And then certain states, it was just sporadic, some were up, some were down and we're starting to get the northern states, Illinois, Missouri, those states where they open up a little bit later start to kick in. Texas has kicked in and Arkansas and some of the new states we're in as well we're starting to see good volumes there. So not too concerned about the start of the year with lower lumber prices hopefully bottomed maybe last week. We're kind of feeling that a little bit and starting to see curtailments take effect. Speaker 200:14:05I think you might see a little bit more buying activity happen while pricing is favorable to the buy side. Speaker 400:14:15Okay. Thank you. That's helpful. So as a quick follow-up, since so based on your answer, you're seeing those volumes perhaps start to pick up. How are the pricing dynamics looking? Speaker 400:14:29And would you say your expectations for the year remain largely unchanged in the sense of being flat? Speaker 200:14:40Yes, the one thing we can't control of course is the base price. We move along up with that or down with that as things go along. But as you can see 5 straight quarters through some pretty different gyrations of the market one way or the other. We're steady hitters through these kind of markets. So I think you'll continue to see that and yes, we haven't really changed our outlooks as far as internal goes. Speaker 200:15:02And we believe that the lumber markets bottomed. Do we see it running up? No, we just don't. There's a lot of production. It seems to be in a nice back and fill area. Speaker 200:15:13The producers, some of them are feeling these lower prices right now and hence the curtailments which we need to I think shore up the price on the base. But we don't see a big rally coming. We just a personal opinion from our office. We think we're coming off the bottom here now, but prices are going to be lower for longer. And I think there's a bit of an interest rate cloud on housing, which is kind of holding back new builders doing big projects and things like that. Speaker 200:15:37But the repair and renovation market for us seems to be still carrying on decently and everyone's watching their inventories on the customer side. So we don't expect people to be loading up on lumber in this environment. They're selling to and buying to and that's just the way it works. Speaker 400:15:55Okay. Thank you. That's helpful color. I'll turn it over. Operator00:15:59Thanks. Our next question is from the line of Amir Patel with CIBC Capital Markets. Please proceed with your question. Speaker 500:16:08Hi. Amar, how did your organic sales fair in Q1 if you strip out the Southeast Steel? And any comments you have on how the sort of organic business is faring here in Q2 compared to a year ago? Speaker 200:16:25Yes, just slightly off in the Q1 and Q1 is obviously our weakest quarter with weather and everything like that. It's a tough yardstick to use, But off maybe very low single digits in some markets on volume. But really again it's if you're 1% to 3% here and there in different markets to us we're not we don't really stay awake worried about that. And we started to see the momentum come back in Q2. We don't see the market being super strong on lumber. Speaker 200:16:55We don't see it being super strong on takeaway. Just a steady year is kind of how we're seeing this in the 5th month of the year now, I mean organically and through acquisition. Speaker 500:17:06Great. Thanks, Amar. That's helpful. And we saw Home Depot make a large acquisition in the distribution space and looks like they're paying quite a high multiple. Do you see any impact from that transaction on your own business? Speaker 200:17:210. Those are categories we're not in at all. It's more of a roofing and other products that we really don't participate in. And so it was a non event for us. Speaker 500:17:35Fair enough. That's all I had. I'll turn it over. Thanks. Speaker 200:17:39Thanks, Sameer. Operator00:17:41The next question is from the line of Zachary Evershed with National Bank Financial. Please proceed with your question. Speaker 600:17:48Thank you. Good morning, everyone. Good morning, everyone. Good morning, Matt. Good morning, Matt. Speaker 600:17:52Good morning. So as we saw pricing on cash lumber take a dip in Q2, how are you thinking about the sustainability of your 16% plus gross margins going forward? Speaker 200:18:05Yes. In down markets, it's always a little bit more of a challenge because you can't quite always be on the mark. Having said that, we've seen the market decline and go back up and decline in the last 5 quarters and you've seen our margins kind of hold in here. I wouldn't see them moving up past that, Zach. I wouldn't be afraid or excited, let's say. Speaker 200:18:27I think we're going to be in those zip codes somewhere near that in this type of an environment. And on Southern Yellow Pine, it got pretty tough. There was 2 handles on lumber, which we haven't seen since 2013. So that kind of surprised the whole market how cheap certain grades and tallies got. Spruce was a bit better, Doug first started to peel off. Speaker 200:18:48So we can't say that margins are going to go up from here. I just we don't see any kind of collapse happening, but be a little softer I think just a little bit, Zach, as we unfold into Q2 and Q3. Speaker 600:19:01That makes sense. Thanks. And given that backdrop, what are your working capital expectations in 2024 versus 2023? Speaker 300:19:12Hi, Zach, it's Jay here. So, we haven't altered those working capital expectations somewhat at all actually from our internal projections other than to allow for a little bit more working capital from the Southeast acquisition. So these prices are kind of within the range of what we plan for, maybe a little bit on the low side right now as it bottoms out. But you should see the usual seasonal working capital fluctuations with peak working capital around that 1st last week of April, 1st week of May and then it starts to come off through November. And that range from peak to trough is generally going to be in the $100,000,000 to $120,000,000 range. Speaker 600:20:09That's good color. Thanks. Operator00:20:12So I think Speaker 600:20:13you addressed this fairly directly in terms of the pricing trends that you're seeing. You think that we're maybe bottoming out here and volumes have been fairly uninspired thus far given the cloud from interest rates. You have hope for the pickup in the back half maybe as we see backlogs come through? Speaker 200:20:36Yes. I think what will drive that, Zach, we need some more information as far as, I would say, curtailment announcements and the realities of those not just extended mill holidays or the odd weekend long weekend and shutting the mills down. If we see some serious production come off, you'll see a torque up because the volumes haven't collapsed. It's just that everybody is in kind of a rhythm of back and fill. No one wants to order inventory. Speaker 200:21:01So if you start pulling a lot of material off from the sawmill side, you will see a torque up. I can't say we're counting on it. We're counting on kind of maybe up 10% to 15% here as a peak towards the maybe mid part of the year if the curtailments come in. Otherwise, we're going to kind of bump along where we are. I think I said last quarter, we're going to be range bound. Speaker 200:21:23I think we're going to be range bound with a $50 bill. That's just kind of how it feels internally and that's kind of what we're looking for. Are we getting some good deals from mills that need to move material? Yes, we are. So we try to take advantage and help our sawmill partners when they've got some stuff to move and maybe a little bit underneath print so that can help us. Speaker 200:21:44So we're trying to do those things and take some chances when needed to buy under. But we're being conservative as well. But until we see our curtailment announcements and some serious ones, I think we're just going to be range bound and no trajectory to the sky here on lumber. So it's kind of steady and boring as you go, Zach. Speaker 600:22:05Good enough for me. Then just one last one. We're hearing commentary from other distributors that early stage construction products are moving quicker than late stages as construction times are kind of blowing out in new residential. Are you guys seeing that bifurcation in your own catalog? Speaker 200:22:25Well, a lot of our material in Canada of course is driven towards a new home start with our distribution activities with plywood, studs, OSB, those types of items, insulation. And then of course, the majority of what we're doing with the pressure treated categories are backyard. So a lot of that can be repair and remodel, which is disconnected from that timing cycle that you're mentioning. It's just people doing R and R. And when lumber is low like this and the retailers move their sets down, decks go back into the 20,000. Speaker 200:22:57It starts to really make it hard to price against composite. Composite is still 5 times the cost of wood. That gap widens and it makes lumber more attractive. So there is a benefit in lower lumber prices, if you will, because of that demand picking up because it's cheaper and people can do projects. And in this inflationary world, they don't a lot of people don't have a lot of extra dollars floating around. Speaker 200:23:21And so when things are cheaper, I think it just helps the consumer quite frankly. Operator00:23:33Our final question is from the line of Matthew McElher with RBC Capital Markets. Speaker 700:23:42Most of what I had has been asked and answered, but maybe a question on your private stimulants. Any early thoughts on Canada's improved forest management and private land protocol that was recently introduced. With that, would you expect to evaluate the opportunities to develop forest garden projects? Speaker 200:24:01Yes, Jake can chime in here as well. We've had several interested parties approach us and we've been studying our timberlands to see what is the best use for that asset that we're proud to have. And I could say that we're just kind of in early innings of that exploration and maybe Jay can finish off. Speaker 300:24:20Yes, I'd echo what Amar has described there. Certainly, the interest in carbon credits that comes our way is very active right now. And we're not really seriously considering that at this point, but as that market develops, we can we certainly will continue to monitor the carbon markets and be prepared to look at that more seriously. Speaker 200:24:49What I can tell you is on the standing timber that we provide to sawmill partners in the area is the demand for that has been very strong due to the British Columbia public cutback of the AAC, the annual allowable cuts almost in half from where they were a couple of years ago. So our pricing on our timber, it's been slow getting out of it because of the weather. But when we're delivering our pricing on timber, we have a lot of customers pulling for logs. So it's nice to see those yields and margins on the timber. We just need some clear weather, which is approaching now and getting it out of the bush. Speaker 200:25:28But that side of it Speaker 300:25:29will go well. Yes. And I would add that we discussed curtailments. We're certainly seeing no curtailments in the region of our private managed forest. So the demand is still strong for our timber. Operator00:25:50Thank you. At this time, we've reached the end of our question and answer session. I'll hand the floor back to Ali Mondavi for closing remarks. Speaker 100:25:58Thank you. On behalf of the Domon Building Materials team, thank you again for joining us today. We look forward to speaking with you all during our Q2 financial results conference call. That concludes today's call. I will turn it over to the operator. Operator00:26:13Thank you. Today's conference has concluded. You may now disconnect your lines at this time and have a wonderful day.Read morePowered by