Stella-Jones Inc (STLJF) Q4 2024 Earnings Call Highlights: Strong Revenue Growth Amid Market ...

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Fri, Feb 28, 2025, 12:27 AM 4 min read

Annual Revenue: $3.5 billion, up 5% year-over-year.
EBITDA: $633 million, an increase from $608 million in 2023.
EBITDA Margin: Maintained over 18%.
Q4 Revenue: $730 million, a 6% increase compared to Q4 2023.
Utility Poles Sales (Q4): $385 million, slightly up from $383 million in Q4 2023.
Railway Ties Sales (Q4): $193 million, a 15% organic increase from $165 million in Q4 2023.
Residential Lumber Sales (Q4): $93 million, a 12% organic increase.
Annual Residential Lumber Sales: $614 million, within the $600 million to $650 million target range.
Q4 EBITDA: $150 million, representing 15.8% of sales.
Operating Cash Flow (Annual): $408 million.
Free Cash Flow (Annual): $275 million.
Dividend Increase: 11% increase to $0.31 per share.
Net Debt-to-EBITDA Ratio: 2.6x.
Available Liquidity: Over $800 million.

Warning! GuruFocus has detected 4 Warning Signs with WHD.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Stella-Jones Inc (STLJF) achieved sales growth for the 24th consecutive year, with a 5% increase to $3.5 billion in 2024.
The company maintained a strong EBITDA margin of over 18%, with EBITDA increasing to $633 million from $608 million in 2023.
Stella-Jones Inc (STLJF) expanded its customer base and secured several new long-term contracts with utilities, enhancing its market position.
The company completed its utility pole growth CapEx program, expanding its network footprint and improving operational efficiency.
Stella-Jones Inc (STLJF) increased its dividend payout by 22% in 2024 and announced an 11% increase for 2025, marking the 21st consecutive annual dividend increase.

Negative Points

Utility pole volumes were down 4% in the fourth quarter compared to the same period last year, impacted by continued softness in maintenance demand.
Q4 EBITDA decreased by 4% to $150 million, attributed to an unfavorable sales mix and nonrecurring expenses.
The company's net debt-to-EBITDA ratio increased to 2.6x, slightly above the target range, due to the appreciation of the US dollar relative to the Canadian dollar.
There is potential pricing pressure in the utility pole spot market due to high industry inventory levels.
The company faces uncertainties related to tariffs, which could impact cross-border transactions and pricing strategies.

Q & A Highlights

Q: Eric, last quarter, you indicated your expected pole growth going forward in the 6% to 7% range. The wording today seems to reference mid-single-digit growth. Does that suggest some further moderation in your demand expectations? A: No, Hamir. Essentially, mid-single digit can be in that range of the numbers you just quoted, the 6%, let's say.

Q: Eric, you referenced looking at expanding the offering for infrastructure customers. Can you elaborate more on what potential products that could include and the potential sales stream some of these markets could represent? A: Not ready to disclose to that level of detail, Hamir. We've been working with our Board in exploring different markets. We continue to focus on supporting the utility and rail industry. We're in discussions with potential targets, particularly in transmission or hardware that supports our customers' needs.

Q: I was wondering if you can provide a more specific EBITDA range for 2025. Consensus is at $630 million for 2025. Is that a number you're comfortable with? A: We are confident with our floor at 17% EBITDA margin. We've achieved 18% for two years, which is achievable this year. There's uncertainty in the markets, so we're maintaining our confidence in supporting at least the 17%.

Q: On the railway ties, how should we think about your sales growth on this high side for 2025? A: We finished 2024 with 6% organic growth. We believe going into 2025, we would be at that low single digit or slightly better. We have opportunities to sell more products and support customer needs.

Q: Just to come back on the utility pole. What makes you confident that the volume can be in the mid-single digits in 2025? A: We have strong demands for maintenance and replacement programs and new customers for 2025. We've seen healthy activity in certain markets, like Texas. The demand is good, and we feel it's a good target to achieve.

Q: In terms of capital allocation, you've been disciplined. Can you provide more color about the size of the M&A opportunities you're looking at? A: We're not going outside our traditional range, between USD 40 million to USD 150 million. We're looking for good investments with strong management teams. Tariffs are top of mind during due diligence, and we have options to mitigate potential impacts.

Q: Can you provide a bit of a clarification on the composition of the organic growth in the utility poles business in the fourth quarter? A: The comment was for the overall utility poles volumes, which saw a 4% decline.

Q: What are your expectations for the spot market for utility poles and how does it affect your mid-single-digit growth target? A: We expect some volume gains from contract customers. The spot market demand depends on pricing and margin. We have new customers transitioning to long-term agreements, which contributes to our growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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