Q4 2021 Stella-Jones Inc Earnings Call
Okay.
Good morning, ladies and gentlemen, thank you for standing by.
Welcome to Stella Jones, Q4, 2021 earnings conference call.
At this time all participants are in a listen only mode. Following the presentation. We will conduct a question and answer session and instructions will be provided at that time for you to queue up for questions.
If anyone has any difficulties hearing the conference. Please press star followed by zero for operator assistance at any time.
Before turning the meeting over to management. Please be advised that this conference call will contain statements that are forward looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated.
I would like to remind everyone that this conference call is being recorded on Wednesday March nine 2022.
I'll now turn the conference over to Eric Marshall President and CEO . Please go ahead.
Thank you Julie Ann and good morning, everyone.
Welcome to today's call to discuss Stella Jones is fourth quarter and year end 2021 results.
Joining me on the call the slowdown in dry Bellini CFO of Stella Jones.
Earlier today, the company issued its quarterly earnings release, and its Q4 results.
It along with our MD&A can also be found on the Stella Jones' website at Www Dot Stella Jones Dot com in the Investor Relations section and has also been posted on SEDAR today as well.
As a reminder, all figures expressed in today's call are in Canadian dollars unless otherwise stated.
I will begin today's call with an overview of our year, then I will turn it over to <unk> to review, our fourth quarter and year end results. We will conclude the call with closing remarks, and the Q&A session.
Stella Jones had a record performance in 2021, our team expertly navigated through a complex procurement challenges and leverage its strength in fiber sourcing and customer service to deliver another successful year.
We increased our sales for a record 21 consecutive year to $2 $75 billion net.
Net income improved to $227 million, an increase of 8% over a strong 2020 results.
EBITDA reached a record high of $400 million driven by increased sales across all product categories.
Cash generated in 2021 totaled $251 million or 41% year over year increase.
We returned $155 million of that cash to shareholders and today announced an 18th consecutive year of increased dividends.
Over the last three years, we have returned $365 million to shareholders.
Our consistent success is founded on a well executed and deliberate strategy of industry consolidation. Since 2003, we have made more than 20 acquisitions, including the most recent acquisition of cahaba pressure treated forest products and cahaba timber.
This consolidation effort has added to our product offerings and capacity reinforced the reliability of our raw material sourcing strengthened our management team and expanded our customer base.
We expect to fully leverage the added capacity from the acquisition of Cahaba pressure and cahaba timber to respond to the growing treated wood utility pull demand and to be immediately accretive to earnings.
As I mentioned at the start of the call much of our success can be attributed to our great team.
And I would like to highlight some of their accomplishments this past year.
And utility Poles are seasoned procurement team successfully responded to the challenges of finding the appropriate mix size and length and wood species to meet our customers' needs and we grew year over year sales organically by 9%.
And as the utility industry transitions away from the preservative Pentachlorophenol, we had been at the forefront of this evolution cooperating closely with skilled supplier to introduce D. C O I as an onboard and preserve that alternative.
With a master understanding of treating cycles for a wide range of wood preservatives, we are ready to make the investments necessary to convert our facilities to lead this transition.
In our railway tie business the strength of our procurement network has reinforced our ability to continuously meet customer needs.
Treated tie availability was tight in the second half of 2021, and we expect these headwinds to persist for the next few months.
This tightness has led to considerable fluctuation in raw material costs, but our customer agreements allows us to recoup these costs, albeit on a delayed time frame.
In residential lumber raw material prices saw their greatest volatility if history. This past year and that seems to be continuing so far in 2022.
In March 2021 lumber prices were about 850 U S dollars per thousand board feet.
By May prices more than doubled and then July they sell to nearly half of what it was in March.
Our team expertly navigated through the volatility managing complex supplier and customer relationships to end the year with a greater year over year sales and the appropriate level and cost of inventory to support demand going forward.
We entered 2022, well positioned to continue meeting our customers' needs.
Before I turn the call over to <unk>, Let me highlight a change we're making to our guidance.
Those that follow our business nor that Stella Jones of cells are primarily to critical infrastructure related businesses, namely utility Poles railway ties and industrial products.
While all product categories can be impacted by short term fluctuations. The business is mostly based on replacement and maintenance driven requirements, which are rooted in long term planning.
The company is shifting its guidance to a three year outlook to correspond to this long term horizon and to better reflect the expected sales run rate for residential lumber and reduced a shorter term impact of commodity prices.
That I will turn the call over to Sylvana.
Thank you Eric and good morning.
Today, we reported net income for the fourth quarter of $22 million or <unk> 30 per cent per share compared to $34 million or <unk> 52 cents per share last year.
For the full year net income was up 8% to $227 million.
And $210 million in 2000.
And in 'twenty.
Earnings per share was $3 49, an increase of 12% compared to 2020.
During the fourth quarter of the current year.
We generated sales of $545 million.
From $533 million for the same period in 2020.
Excluding the contribution from the acquisition for high blood pressure and Cahaba timber.
And the negative impact of the currency conversion.
Actually treated with sales rose $26 million or 5%.
This was mainly driven by higher volumes and pricing from utility poles as well as improved pricing for railway ties.
This growth was partially offset by lower demand for residential.
The sale of logs and lumber were lowered this quarter, mainly due to the lower market type of lumber.
Sales for the year reached $2 75 billion.
$199 million versus sales of $2 55 billion in 2020.
Again, excluding cahaba, Persia, and cahaba timber and the negative impact of the currency conversion of $127 million.
Pershing treated wood sales rose $232 million or 10%.
Sales of utility Poles in the quarter were 227 million.
From $201 million.
From the same period last year.
Sales increased organically by 13%, primarily due to increased maintenance and project related demand.
Higher pricing.
For the full year utility poles that were at $925 million.
Up from $888 million in 2020, representing organic sales growth of $83 million or 9%.
This was driven by strong maintenance demand for distribution pole.
Favorable price adjustments in response to raw material cost increases and a better sales mix, including the impact of incremental sales of fire resistant rat pulse.
Fourth quarter sales of railway ties were $147 million in.
In line with last year, excluding the negative currency conversion effect railway ties rose, 3%, mainly driven by improved pricing for both cost one and non class one business.
For the year sales have really tightened were $700 million.
Down from $733 million in 2020.
Excluding the currency conversion effect sales increased $13 million or 2%.
This was largely attributable to higher non class one sales compared to 2020 as continued strong demand outweighed the pricing pressures in the first half of the year.
Sales for class one customers remained relatively stable year over year.
In our residential lumber category sales in the fourth quarter were $107 million.
Down from $117 million in 2020.
Mainly due to lower sales volumes.
Despite the lower market price of lumber compared to Q4 of 2020 pricing for residential lumber remained unchanged.
For the full year residential lumber sales were $773 million.
Up from $665 million in 2020.
Excluding currency conversion effect residential lumber sales increased $127 million for 19.
Percent driven by the exceptional rise and the market price of lumber in the first half of the year.
Industrial product sales were $25 million in the quarter slightly up compared to sales of $23 million in the fourth quarter last year, primarily due to the mix of project related bridge works for.
For the full year sales were $121 million.
Mostly unchanged from $119 million last year.
Lofton lumber were $39 million in lots of numbers sales were $39 million in the quarter down 13% from last year, mainly due to the lower market price of lumber for.
For the full year sales were $231 million up 60% compared to 2020 due to the exceptional rise in the market price of lumber.
Turning to profitability.
Gross profit was $65 million in the fourth quarter of 2021, a decrease of $20 million versus the same period last year.
Margins were 11, 9% in Q4 of 2021 and 15, 9% in 2020.
The decrease was primarily attributable to the higher inventory cost of lumber at residential lumber at the end of the third quarter.
Also given the timelines and contractual price adjustments there.
Rise in costs during the quarter outpaced sales price increases across all product categories.
This further contributed to the lower gross profit in the fourth quarter compared to the same period last year.
For the full year gross profit was $456 million.
Compared to $446 million in 2020, representing a margin of 16, 6% and 17, 5% respectively.
A large part of Stella Jones is infrastructure related sales are contractual and include price adjustment mechanisms to cover increases in costs.
In an increasing cost environment as in 2021, the time delay to implement these price adjustments temporarily impacts margins and favorably.
During 2021, we generated $251 million of cash from operations, reflecting strong profitability and a decrease in working capital.
While higher fiber costs increased inventory values across all product categories. This was offset by the significantly lower level of railway ties inventory given the tight market supply of untreated ties.
We used the cash generated to invest in capital expenditures and returned $155 million to shareholders through the payment of dividends and share buybacks.
In 2021, the dividend was 72 cents per share representing a 20% increase year over year, and we repurchased two 4 million shares for $108 million.
During the fourth quarter, we purchased the hopper pressure and cahaba timber for a total of $129 million and finance these acquisitions through our existing credit facilities.
As a result, the net debt to EBITDA ratio increased to two two times as at December 31, 2021, and we had available liquidity of $329 million.
Given the company's strong performance and consistent cash flow generation subsequent to year end the company requested and received approval from the TSA to amend it and CIB to increase the maximum number of common shares that may be repurchased from 4 million to 5 million.
Sure.
Yesterday, the board of directors declared a cord a quarterly dividend of <unk> 20 per common share representing an increase of 11% over the previous quarterly dividend.
Dividend is payable on April 22022 to shareholders of record at the close of business on April 4th.
I will turn the call back to Eric for concluding remarks.
Thank you sylvana over the next three years, we expect continued sales and EBITDA growth.
On a consolidated basis, we are projected to generate sales CAGR in the mid single digit range from pre pandemic 2019 sales level and we continue to target an EBITDA margin of approximately 15% for the 2022 to 2024 period.
More specifically by product category over the next three years.
For utility Poles, we will expand our capital expenditure program and invest an additional $90 million to $100 million.
To support the anticipated high single digit organic growth.
Most of the additional capex will be invested in new upsize of treating cylinders drying capacity and pull peeling yards.
For railway ties, we continue to project an organic growth in the low single digit range.
For residential lumber, we anticipate stable long term demand, but believe the market price of lumber will normalize from the unprecedented high prices in 2021 as a result, we expect our residential lumber sales to decrease compared to 2021.
We assume sales into 2022 to 2024 period will be approximately 35% above 2019 pre pandemic levels.
The stability of our infrastructure related businesses of utility Poles railway ties and industrial products, meaning we can project a significant growth in the total amount of capital we returned to shareholders over.
Over the last three years, we returned $365 million and we expect to grow that to a cumulative $500 million to $600 million over the course of the next three years, an increase of over 50% versus the past three years.
For strategic acquisitions, we expect to use our strong balance sheet and increase our leverage in line with our capital allocation.
This financial guidance reflects our solid base case, upon which the potential upside of acquisitions and infrastructure related government spend will support further growth in our expected 2022 to 'twenty to 'twenty four results.
We are focused on pursuing acquisitions to complement our infrastructure related product offering and we plan to evaluate growth opportunities in adjacent businesses, where we can leverage our core knowledge a key attribute to generate continued strong cash flow.
Our efforts will be devoted to leveraging our solid business foundation to generate continued profitable growth and further solidified our leadership position in our core product categories, while exploring other growth opportunities.
As we saw in 2021, our strategy has been successful and we expect it to continue to drive our success in the years ahead.
Thank you very much I'll now ask the operator to open the call for your questions.
Thank you if you'd like to ask a question. Please press star followed by the number one on your telephone keypad to withdraw your question. Please press star one again, we'll pause for just a moment to compile the Q&A roster.
Our first question comes from Amir <unk> from CIBC capital markets. Please go ahead. Your line is open.
Hi, good morning.
Good morning Amir.
The the res lumber annual sales guidance of 35% above 2019 levels over the next three years how much.
That is.
Volume uplift from 2019, and how much is price.
Okay.
It's a minimal minimal uplift on volume.
Slightly up.
Okay, so mainly price.
And then Eric lets turn to cost inflation that we're seeing for for chemicals freight and labor I know some of the chemical inputs.
You might have some some contracts.
Protecting you this year, but.
Could you speak to how much of the different cost inflation buckets youre seeing is covered by the indexing arrangements that you have and ties and Poles and then do you have any plans for additional pricing action too.
Recoup any shortfall there.
Yes, certainly so that's a great question like any other.
History right now.
The effect of inflation, so I guess I have to answer your question, perhaps by product categories.
For for railway ties there are pass throughs for obviously cost of fiber, but we also have a inflationary adjustments as well as.
Any inflation in fact that would have on preservatives for example.
With regards to excuse me for utility Poles.
The fiber obviously is is covered by the annual contracts.
Oil prices as well, but that would be on an annual basis. So that's a bit of a different dynamics there.
And keep in mind that.
Our oil borne preservatives, obviously use use the oil so that the oil components, where we would see price increases, but in all cases, it might lag a bit, but we will get covered and I think nicks.
An example of that is what we saw actually in Q4, but a margin margin percentage compression there on those products, but.
First quarter of this year, where we're adjusting prices for both of those product categories to recruit <unk> cost increases.
Okay, great. Thanks, Eric that's helpful in Savannah.
I'm just wondering with respect to Capex for 2022, what sort of levels should we expect there given the <unk>.
Increase that you're expecting over the next three years.
Yes, so as we mentioned.
Building on the $50 million to $60 million annually that we've given for the additional $90 million to $100 million will be probably a large part of it in the next 12 to.
For 18 months, so the additional when you could sort of front loaded.
Over the next year and a half.
Okay, great. Thanks.
That's all I had I'll get back in the queue.
Thank you.
Our next question comes from Michael <unk> from TD Securities. Please go ahead. Your line is open.
Thank you good morning.
Mike.
Eric the growth that you've talked about over the course of the three year plan and ties and Poles specifically can.
Can you talk about how much of that growth you are calling for is volume driven versus what you might have assumed for pricing in those two product categories.
Certainly so for utility Poles I would say.
Greater than 50% over three years will be driven by by volume, which.
It explains our need to invest in the Capex will over time for increased capacity.
For railway ties I.
I would say its probably 50 50 mix as well.
Okay. Thank you that's helpful.
Just a clarification with respect to the overall sales CAGR in the mid single digits, you talked about as part of the three year outlook just to be clear that that's excluding any acquisitions acquisitions would be would be upside to that.
Yes.
Okay.
Then can you on.
On the subject of acquisitions can you comment on.
I guess, both aspects of what you're talking about so specifically the pipeline as it relates to <unk>.
Additional opportunities in the current core infrastructure related product areas.
As well as perhaps shed a bit more light on what youre thinking with respect to possible adjacent businesses and what those kinds of opportunities could look like and what the timing around those kinds of opportunities could be as well.
So.
So I know.
The comment is made some.
Reassure everybody that there is an M&A pipeline.
First and foremost focused on completing the consolidation into wood treating industry that as you know.
Our base strategic plan and as you know where we.
We are.
Addressing that.
That project of completing our consolidation, we're turning our mind to how we can better leverage customer base.
And product offering.
It's still it's still in its infancy and discussions we're exploring different avenue is not ready to disclose much today, but I was just wondering if you'll keep everybody is.
Keep keep this on everybody's radar that we are considering continued growth for our company.
Okay. That's helpful. And then maybe just to clarify though Eric on the on the.
Sort of the tuck in strategy you've been pursuing in your core your existing core areas.
Is there anything you can say just about what the opportunity set there it looks like right now.
Yes, we've always said there is a $200 million to $300 million I think we've mentioned that in the past.
We have our list of targets that we were addressing the timing of those is always on.
Uncertain, obviously, all family owned businesses and the timing is not always.
Our is to decide wed like to think that we could like to perhaps.
<unk> accelerates some of those and so we want to we wanted to complete our Arctic insulation project, but we need to be patient as we have always been.
Okay. Thank you.
Yeah.
Once again to ask a question. Please press star followed by the number one on your telephone keypad.
Our next question comes from Walter <unk> from RBC. Please go ahead. Your line is open.
Yes, very much good morning, everyone. Good morning, Walter So so just coming back to the rail tie business in the low single digit guidance, just curious with all of the congestion going on right now and I'm looking at Burlington Northern's plan just this morning on on <unk>.
On rail tie purchases of $2 7 million, they're also looking at a fairly significant $500 million in growth, where they're talking about double tracking and triple tracking some areas. So.
It's a big focus on railroad expanding capacity here and and presumably that will come both yes with steady replacement ties, but a lot of a.
A lot of new purchasing as well as Europe .
<unk> on the rail tie business.
Take into consideration.
The possibility for some.
Double track adult trucking triple tracking and extensions.
In your forecast or is it more based on what you've seen historically such.
So it's a great question, so it's not considering those additional projects so.
I've been reading about those as well, we haven't seen anything sort of materialize or be hinted, but obviously, we are strong suppliers to all the class ones, we would definitely benefit from from those opportunities.
Yes.
Maybe to add a bit of color.
We were talking about that mid single digit growth over the three year period.
You could expect with increasing cost of material this year to see sort of that contribute to sales growth, but keep in mind. It doesn't always took all the way down to the to the bottom line is we keep seeing railway tie cost continued to increase.
But then.
When the time comes if a railway tie prices pull back will be we will be adjusting prices downward so.
So.
A lot happening in that underlying assumption of that mid single digit growth, but short answer to your question is no. We have not included any further expansion of rail networks.
Okay, and then just discussing broadly now lot of the customers that you have are seeing significant opportunity to reprice their service and.
In light of some of the outsized demand they are seeing and in many cases restructure the nature of how they negotiate contracts.
Much to their advantage given given the outsized demand for those transportation services is that resulting in you at any cases looking at.
Different ways to restructure your contract to.
To take advantage as well of the.
The downstream benefit that your customers are getting and the increased negotiating leverage they have with their own customers to achieve the same for for your company as you as you negotiate with with some of your clients both.
Certainly on transportation, but could that apply as well too.
To your utilities businesses, where our utility pole those business as well right. So as you know a very large percentage of.
Our utilities and railway tie business are.
Under long term agreements. So obviously, we need to honor those those agreements, but you're completely right that are we keep educating our customers on.
On the pressures, we're seeing with regards to raw materials and oil prices and <unk> prices and so on so as you know we renegotiate price adjustments, we definitely have.
That opportunity too to pass along those costs.
So, we're going to renew or renegotiate or revisit the contracts, but the.
The discussion dynamics are definitely favor.
Our ability to let's say to put forward.
Price increases to cover our costs, we are definitely there.
The largest north American supplier for railway ties and utility Poles cusp.
Customers appreciate the level of service, we bring down our capacity to procure raw material to deliver quality product and with that also acknowledged the need to discuss with us and under and we make sure to understand about the cost increases in our cost base so to your point.
I don't say we.
Have the upper hand in the discussions, but we're we're definitely.
Listen to what do we have to have discussions with our customers. Okay. I. Appreciate the time as always thanks very much. Thank you Walter.
Our next question comes from Michael <unk> from TD Securities. Please go ahead. Your line is open.
Thank you.
On the utility Poles business.
It doesn't sound like the big growth.
Look you are calling for really takes into account any.
Many opportunities associated with sort of.
Above normal activity in terms of broadband network expansion in <unk>.
So I guess the kinds of opportunities that could arise from the U S infrastructure Bill.
So I guess first of all if you can just confirm that but secondly, if I'm understanding that correctly.
Could you talk about.
Do you yet have any sense as to what sort of upside that that could drive.
And have you seen any evidence even if it's just early evidence of any activity in that area that could begin to flow through to the Stella Jones.
Right.
So Mike Joe to answer your question, we have not incorporated any.
The assumption for increased spend that would be driven by.
Governments funding.
Suddenly for example.
And you referred to.
U S infrastructure Bill so we.
We haven't had we haven't seen any sign of that in the U S market. Yet. So that's why we have not included it sorry to your point if those funds are actually yet.
Freed up and programs are set up to be able to support infrastructure spend obviously that would be.
Oh.
And exiting the win column for us.
In Canada.
It's a different dynamics we are hearing.
We are hearing and having discussions with customers about potential government funding funded projects.
But those are still early discussions customers are enquiring about our capacity to produce to supply our sourcing. So we're getting those types of inquiries.
I guess, it's more of a scenario where customers are saying well. This happens you don't.
Stella Jones as our main supplier will you be there to supply us if we increase ex folds or demand, but it's difficult to appreciate at this point and so the indications in the U S was very very small it's not at all for now.
In Canada, there are some discussions in different provinces.
Okay I appreciate the clarification. Thank you.
Thank you Mike.
Our next question comes from Ben <unk> from Deutsche Bank. Please go ahead. Your line is open.
Thank you very much and good morning, everyone.
Just on the Capex question, just just to be clear is it fair to expect over $100 million of Capex per year for 2022, and 2023 Silvana based on the earlier comments made.
I would not expect it to be.
That much in both years.
Close enough to wait to what youre, saying, but I'm thinking probably the $100 million is there is a fair assumption for 2022, and 2023, perhaps a little bit less.
Okay, that's great and with respect to the strategy plan, what would be your expectation in terms of working capital consumption.
On the revenue guidance.
So for the current year.
Really depend on the.
The availability of the untreated ties.
As we mentioned it's fairly tight now.
So there is more availability starting in mid year, we would see a more significant investment in working capital towards the end of the year, maybe similar to what we have seen in 2019.
On a normal run rate.
Thousand 23, 2024, we will adjust.
The assumptions for the working capital is just sort of a normal build to support the additional sales.
Uh huh.
During the year.
Okay.
Great and in terms of capital deployment, you I like the 500 to 600 million over the next three years roughly what would you expect in terms of split between the buyback and the dividend.
So the dividends as <unk> seen historically, we have been increasing them.
Yes.
Over time, so we would expect.
Similar type of increases in dividends over over the next three years and the remaining being the.
The buybacks will probably add.
$50 million or solid dividends as we currently have is.
Good day is a good run rate over the next few years.
Okay.
Great color and when we look at the EBITDA margin of 15% just trying to size whether you're conservative.
Here.
I saw that the increased volume economies of scale better mix with the fire retardant mesh.
Probably push the margins a bit higher going forward. So what are kind of the pluses and minus should we take into account when assessing the.
The EBITDA margin.
So youll notice, we said approximately 15%, we're giving ourselves a bit of wiggle room, there have been obviously, but.
You are completely right over the long term to three year period, I would expect us to achieve and exceed the 15% and when I say exceed.
It's not 17% either.
You understand what I mean by that.
In the coming year, we will have the dynamics of.
Increased costs that have delayed pass through so it'll be interesting for us and navigate that exercise in the next 12 months of seeing oil price increases free price increases passing it on to customers and seeing.
You know how this goes for us and so.
Is it going to be in 2022, it will be interesting to observe because we also have price increases that are coming into effect. So it's a bit of a <unk>.
A lot of things for this year, but I agree with you that over time as we keep growing our business with the growth on our infrastructure related products.
Should see economies of scale on the SG&A piece definitely.
Okay and for 2022, I know that you want to move away from the annual guidance, but just wondering whether it would still be fair to assume stable EBITDA over 2021 in the current environment.
Okay.
That was our guidance.
Last time, we spoke in.
<unk> Q3 conference call ready for if I recall, we had guided to stable.
Stable revenues and EBITDA.
Since then what has changed is really what we're seeing in residential lumber.
Obviously, when we had that discussion lumber prices were market lumber prices were trading around let's say 700 U S. Dollars. A 1000 board feet were looking today at prices in the <unk> hundreds. So obviously that has a different.
Dynamic I would say it could have a positive impact if those prices hold for the balance of the year.
The rest.
High single digit growth for utility Poles low single digit growth.
Railway ties of industrial that holes.
So we're very comfortable with.
With those views.
It'll be a bit of headwinds obviously with cost increases so we're putting through some some some pricing increases to our customers. But then we're seeing cost continue to evolve, but all being said.
I'm not changing my views are on that front and I'll leave it up to you to predict the price of lumber to see if it if we can beat that guidance.
Okay, that's great and last one for me.
Just in terms of leverage ratio, what would still be your comfortable leverage for.
Larger acquisition.
Oh Dear.
You know.
I have no concerns leveraging up two or three times.
And I'm, just giving that number as an example, we generate.
The additional cash debt.
Acquisitions bring enables us to pay down debt back very quickly. If you take for example, we reported of two two times leverage at the end of the year that includes Cahaba acquisition that was made.
In mid November Canadian dollars was up $130 million and our leverage was two two on a pro forma basis. If we'd had 12 months of EBITDA would be 2.1, maybe even a bit less so it gives a bit of an idea of theirs.
There's enough capacity for us to execute on our capital allocation that we're announcing today within our guidance and then for any potential acquisition to lever up to over two and a half to three times.
That's not a problem we have a very healthy balance sheet strong cash flow generation. So I think I would sleep very well at night, knowing that could execute on and explain to you.
Okay. Thank you very much further apart.
My pleasure.
Our next question comes from Maxim <unk> from National Bank Financial. Please go ahead. Your line is open.
Hi, good morning.
Good morning.
No.
The first question I was wondering if you don't mind.
Money bit of color in terms of your incompletion playbook.
Bye bye.
Awesome.
Priorities.
And then whats to expect in terms.
Thanks.
Our six options.
That makes sense.
Maxim Im sorry, Theres a lot of background noise would you mind repeating the question.
Yes, sorry, I apologize for that.
Just wondering if you wouldn't mind, providing a bit of a monthly in terms of the integration playbook. We have most recent transactions in terms of kind of the priorities and looking at the 10-Q.
To be able to leverage lease transactions.
Okay. Thanks.
So with regards to the carbo acquisitions.
The.
They are fully integrated on our I D systems, that's all been done before before yearend December .
At December 31.
Since it is in in new inter region.
U S southeast we already had.
And the existing infrastructure of sales procurement, so that part when actually very smoothly as we already know.
Did the suppliers and most of the customers the hub to hub.
Acquisition actually solidifies the relationship or introduces us to formally introduces us to customers that we weren't able to access before because they were there.
Customers stronghold, if you want but so that's going very well.
I would say for the first month of operations I'm very impressed with.
The quality of execution of the team how fast returning inventory over in that facility.
<unk> family that own that business operated very well they have a very good process in place, we're very impressed with that.
And then with regards to synergies I think.
These should.
Translate in the first half of the year simply because of its efficiency is on us leveraging our total network is where we put orders being able to use that additional procurement access to be able to get good prices at the proper plants. So things are going exceptionally well I'm very happy.
Okay, that's great to hear.
Last question and again apologize for the noise in terms of labor availability portion of network change, maybe a comment on that and potential mitigation appliances as well.
Im sorry, im sorry to make him or youre talking about labor cost.
And just availability because I think a.
Reviewing that labor cost component is relatively small on the minds of <unk>.
Talking about just having been able to do good work gentlemen.
Okay. Thank you.
Like like like every company.
We're competing for the room for further human capital on the market.
We took steps last year actually to adjust wages to our employees to be able to while first retain our employees and second to be able to attract quality talent for four are opened for open positions. So.
We're still looking to fulfill certain positions, but its not necessarily a <unk>.
Big headwind.
Not a headwind for us to be able to operate unfortunately, we are compensating with a bit of overtime, which.
Is something I want to be mindful of obviously, the greater the overtime, sometimes a greater to.
Health and safety concerns come come into play so the whole team is very mindful of being able to balance it but.
So also say human resources are are adequate I'd say to be able to support our production planning, we're not suffering from that.
Okay. That's great. That's it can be six very much. Thank you makes sense.
We have no further questions in queue I'd like to turn the call back over to Ed <unk> for any closing remarks.
Thank you Julianne and thank you everyone for joining us on today's call. We look forward to speaking with you again on our next quarterly call. Thank you.
Yeah.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
Yes.
Yes.
[music].
Yes.
The host.
It has ended this call goodbye.
A question.