Q2 2024 Stella-Jones Inc Earnings Call
Speaker Change: You are in listen-only mode. If you wish to ask a question, dial star 1. This is the second quarter of 2024 earnings call. At this time, all participants are in listen-only mode.
Operator: This is the second quarter of 2024 earnings call. At this time, all participants are in listen-only mode. Following the presentation, we will hold a question and answer session. To queue up for questions by phone, please press star 1, and a moderator will contact you.
Unknown Executive: The second quarter of 2024 earnings call. At this time, all participants are in listen-only mode. Following the presentation, we will hold a question-and-answer session.
Unknown Executive: To queue up for questions by phone, please press star one, and a moderator will contact you. If anyone experiences difficulties hearing the conference call, please press star one for operator assistance at any time.
Speaker Change: Following the presentation, we will hold a question-and-answer session. To queue up for questions by phone, please press star 1 and a moderator will contact you.
Operator: If anyone experiences difficulties hearing the conference call, please press star 1 for operator assistance at any time. I would like to remind everyone that this conference call is being recorded on Wednesday, August 7th, 2024. Please note that comments made on today's call may contain forward-looking information, and this information, by its nature, is subject to risks and uncertainty. Actual results may differ materially from the views expressed today.
Speaker Change: If anyone experiences difficulties hearing the conference call, please press star 1 for operator assistance at any time.
Unknown Executive: I would like to remind everyone that this conference call is being recorded on Wednesday, August 7th, 2024. Please note that comments may be 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 Cedar Plus. These documents are also available in the Investor Relations section of Stella Jones' website at www.stella-jones.com. Additionally, during this conference call, the company may refer to non-GAAP measures, which have no standardized meaning under GAAP, and are not likely to be comparable to similar measures presented by other issuers.
Speaker Change: I would like to remind everyone that this conference call is being recorded on Wednesday, August 7th, 2024.
Operator: For further information on these risks and uncertainties, please consult the company's relevant filings on CDAR Plus. These documents are also available in the Investor Relations section of Stella-Jones' website at www.stella-jones.com. Additionally, during this conference call, the company may refer to non-GAAP measures, which have no standardized meaning under GAAP and are not likely to be comparable to similar measures presented by other issuers.
Speaker Change: Please 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.
Speaker Change: 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 CDAR Plus.
Speaker Change: These documents are also available in the Investor Relations section of Stella Jones' website at www.stella-jones.com.
Speaker Change: Additionally, during this conference call, the company may refer to non-GAAP measures, which have no standardized meaning under GAAP and are not likely to be comparable to similar measures presented by other issuers.
Unknown Executive: For more information, please refer to the company's latest MD&A, available on Stella Jones' website and on Cedar Plus.
Speaker Change: For more information, please refer to the company's latest MD&A, available on Stella Jones' website and on CDAR+.
Unknown Executive: Lastly, we have prepared a corresponding presentation, which we encourage you to follow along with during this call.
Eric Vachon: Lastly, we have prepared a corresponding presentation, which we encourage you to follow along with during this call. I'll now hand the call over to Eric Vachon, President and Chief Executive Officer of Stella Jones. Eric?
Operator: For more information, please refer to the company's latest MD&A, available on Stella-Jones's website and on CDAR+. Lastly, we have prepared a corresponding presentation, which we encourage you to follow along with during this call. I'll now hand the call over to Eric Vachon, President and Chief Executive Officer of Stella-Jones.
Unknown Executive: I'll now hand the call over to Eric Bashon, President and Chief Executive Officer of Stella Jones.
Eric Bashon: Eric? Thank you, Matthew.
Eric Bashon: Good morning, everyone. Thank you for joining us today. I'm here with Silvana Travelini, Senior Vice President and Chief Financial Officer of Stella Jones. Earlier this morning, we issued a press release reporting our results for the second quarter of 2024. Along with our MD&A, it can be found in the Investor Relations section of our website at www.stella-jones.com, as well as on Cedar Plus. As a reminder, all figures expressed on today's call. are in Canadian dollars unless otherwise stated. Our financial and operating performance during the second quarter was characterized by the continued strong organic growth in sales and increase in profitability.
Eric Vachon: Good morning, everyone, and thank you for joining us today. I'm here with Silvana Travaglini, Senior Vice President and Chief Financial Officer of Stella-Jones. Earlier this morning, we issued a press release reporting our results for the second quarter of 2024. Along with our MD&A, it can be found in the Investor Relations section of our website at www.stella-jones.com, as well as on the CD
Eric Vachon: Thank you, Matthew.
Eric Vachon: Good morning everyone and thank you for joining us today. I'm here with Silvana Travaglini, Senior Vice President and Chief Financial Officer of Stella Jones.
Eric Vachon: Earlier this morning, we issued a press release reporting our results for the second quarter of 2024.
Eric Vachon: Along with our MD&A, it can be found in the Investor Relations section of our website at www.stella-jones.com, as well as on CDAR Plus.
Eric Vachon: As a reminder, all figures expressed on today's call are in Canadian dollars unless otherwise stated. Our financial and operating performance during the second quarter was characterized by continued strong organic growth in sales and an increase in profitability. Our Q2 results reflect our proven strategy to consistently meet customer demand and leverage the breadth of our operations to solidify our long-term proposition. Standing at the halfway mark of our 3-year financial plan, we are well positioned to meet or exceed the targets we set out last year.
Eric Vachon: As a reminder, all figures expressed on today's call are in Canadian dollars unless otherwise stated.
Eric Vachon: Our financial and operating performance during the second quarter was characterized by the continued strong organic growth in sales and increase in profitability.
Eric Bashon: Our Q2 results reflect our proven strategy to consistently meet customer demand and leverage the breadth of our operations to solidify our long-term proposition. Standing at the halfway mark of our three-year financial plan, we are well positioned to meet or exceed the targets we set out last year. As part of our growth strategy, we undertook a significant CAPEX program over two years ago focused on increasing our utility polls capacity. This additional capacity allowed us to solidify our existing customer relationships as well as secure new commitments. Though we continue to note a slower pace of incremental purchases from some of our customers, their ongoing focus on strengthening the electrical grid to support heavier loads and still confidence in our long-term prospects.
Eric Vachon: Our Q2 results reflect our proven strategy to consistently meet customer demand and leverage the breadth of our operations to solidify our long-term proposition.
Eric Vachon: Standing at the halfway mark of our three-year financial plan, we are well positioned to meet or exceed the targets we set out last year.
Eric Vachon: As part of our growth strategy, we undertook a significant CapEx program over two years ago, focused on increasing our utility pole capacity. This additional capacity allowed us to solidify our existing customer relationships, as well as secure new commitments. Though we continue to note a slower pace of incremental purchases from some of our customers, their ongoing focus on strengthening the electrical grid to support heavier loads instills confidence in our long-term prospects. The projected increase in the use of electric vehicles and data centers for artificial intelligence and sustained demand for broadband projects are all catalysts for our business growth. Our utility pole CAPEX program, which will be largely completed later this year, represents the culmination of our approach to plan for long-term demand.
Eric Vachon: As part of our growth strategy, we undertook a significant CapEx program over two years ago.
Eric Vachon: focused on increasing our utility poles capacity.
Eric Vachon: This additional capacity allowed us to solidify our existing customer relationships as well as secure new commitments.
Eric Vachon: Though we continue to note a slower pace of incremental purchases from some of our customers, their ongoing focus on strengthening the electrical grid to support heavier loads instill confidence in our long-term prospects.
Eric Bashon: Their projected increase in the use of electric vehicles and data centers for artificial intelligence and sustained demand for broadband projects are all catalysts for our business growth. Our utility poll CAPEX program, which will be largely completed later this year, represents the culmination of our approach to plan for long-term demand.
Speaker Change: Your projected increase in the use of electric vehicles and data centers for artificial intelligence and sustained demand for broadband projects are all catalysts for our business growth.
Speaker Change: Our Utility Pole CAPEX program, which will be largely completed later this year, represents the culmination of our approach to plan for long-term demand.
Eric Bashon: Much of our success in recent years is a direct result of our operational expertise, solid customer relationships, and acute industry intelligence, and I'm very pleased with what we continue to accomplish as a business. Turning to an update on each of our product categories, utility polls continued on this growth trajectory in the second quarter, with sales benefiting from both favorable pricing and improved volumes. With the second quarter marking the start of a more active maintenance season, we were pleased to see the expected uptick in utility poll volumes, including the addition of new contractual customer business. For the non-contractual business, we have started to see some pricing normalization, but it is sparse and localized to regional markets.
Eric Vachon: Much of our success in recent years is a direct result of our operational expertise, solid customer relationships, and acute industry intelligence, and I'm very pleased with what we continue to accomplish as a business. Now, an update on each of our product categories. Utility polls continued on its growth trajectory in the second quarter, with sales benefiting from both favorable pricing and improved volume. With the second quarter marking the start of a more active maintenance season, we were pleased to see the expected uptick in utility poll volumes, including the addition of new contractual customer business.
Speaker Change: Much of our success in recent years is a direct result of our operational expertise, solid customer relationships, and acute industry intelligence, and I'm very pleased with what we continue to accomplish as a business.
Speaker Change: Turning to an update on each of our product categories.
Speaker Change: Utility polls continued on its growth trajectory in the second quarter, with sales benefiting from both favorable pricing and improved volumes.
Speaker Change: With the second quarter marking the start of a more active maintenance season, we were pleased to see the expected uptick in utility poll volumes, including the addition of new contractual customer business.
Eric Vachon: For the non-contractual business, we have started to see some pricing normalization, but it is sparse and localized to regional markets. As a result, it is now our expectation that it will not significantly impact our results in the second half of the year.
Speaker Change: For the non-contractual business, we have started to see some pricing normalization but it is sparse and localized to regional markets. As a result, it is now our expectation it will not significantly impact our results in the second half of the year.
Eric Bashon: As a result, it is now our expectation it will not significantly impact our results in the second half of the year. With the utility poll product category being anchored in strong fundamentals, we remain confident in the outlook for this category heading into the second half of 2024. While we are still witnessing some conservatism from utilities in terms of project spending, Dellijolt has benefited from volume gains thanks to our expensive network and established customer base. We continue to see a growing shift with both new and existing customers towards longer-term sales agreements, which aligns with our business philosophy of ensuring that we can cater to long-term needs.
Eric Vachon: With the utility bull product category being anchored in strong fundamentals, we remain confident in the outlook for this category heading into the second half of 2024, while we are still witnessing some conservatism from utilities in terms of project spending. Stella-Jones has benefited from volume gains thanks to its expansive network and established customer base. We continue to see a growing shift with both new and existing customers towards longer term sales agreements, which aligns with our business philosophy of ensuring that we can cater to long-term needs.
Speaker Change: With the Utility Bowl product category being anchored in strong fundamentals, we remain confident in the outlook for this category heading into the second half of 2024.
Speaker Change: While we are still witnessing some conservatism from utilities in terms of project spending, Stella Jones has benefited from volume gains thanks to our expansive network and established customer base.
Speaker Change: We continue to see a growing shift with both new and existing customers towards longer-term sales agreements, which alliance with our business philosophy of ensuring that we can cater to long-term needs.
Eric Bashon: Sales from our railway tie product category increased from last year, largely due to higher volumes. These trends have persisted since the beginning of 2024. We are better able to service our non-class one client base, given the ample supply and financial resources available to replenish our inventory levels. While sales growth of our non-class one business is a positive catalyst for the railway tie product category, we also continue to focus on servicing our class one customers, with whom we maintain strong relationships. These railway operators provide a stable source of revenue for the company, and this contributes to the inherent consistency in terms of growth and results of this product category.
Eric Vachon: Sales from our railway tie product category increased from last year, largely due to higher volumes, a trend that has persisted since the beginning of 2024. We are better able to serve our non-class 1 client base given the ample supply and financial resources available to replenish our inventory level. While sales growth of our non-Class 1 business is a positive catalyst for the railway-type product category, we also continue to focus on servicing our Class 1 customers, with whom we maintain strong relationships.
Speaker Change: Sales from our railway type product category increased from last year, largely due to higher volumes, a trend that has persisted since the beginning of 2024.
Speaker Change: We are better able to service our non-class 1 client base given the ample supply and financial resources available to replenish our inventory levels.
Speaker Change: While sales growth of our non-Class 1 business is a positive catalyst for the railway type product category, we also continue to focus on servicing our Class 1 customers with whom we maintain strong relationships.
Eric Vachon: These railway operators provide a stable source of revenue for the company, and this contributes to the inherent consistency in terms of growth and results for this product category. Turning now to residential lumber, sales were down relatively to the second quarter of last year, driven largely by lower consumer demand. The price of lumber has also remained lower than expected due to several factors impacting market demand, including a slowdown in housing and construction projects as well as reduced activity during the summer.
Speaker Change: These railway operators provide a stable source of revenue for the company and this contributes to the inherent consistency in terms of growth and results of this product category.
Eric Bashon: Turning now to residential lumber, sales were down relatively to the second quarter of last year, driven largely by lower consumer demand. The price of lumber has also remained lowered and expected due to several factors impacting market demand, including a slowdown in housing and construction projects as well as reduced activity from sawdives. Our focus for the residential lumber product category remains to ensure our customers stay stock in premium quality products so that when retail customers decide to move ahead with their decking and fencing projects, we will be there for them as a supplier of choice.
Speaker Change: The price of lumber has also remained lower than expected due to several factors impacting market demand, including a slowdown in housing and construction projects as well as reduced activity from sawmills.
Eric Vachon: Our focus for the residential lumber product category remains to ensure that our customers stay stocked with premium quality products so that when retail customers decide to move ahead with their decking and fencing projects, we will be there for them as a supplier. In line with its ongoing focus to be a partner of choice to all stakeholders, Stella-Jones prioritizes meaningful action across all facets of its organization and value chain to ensure its long-term sustainability.
Speaker Change: Our focus for the residential lumber product category remains to ensure our customers stay stocked in premium quality products, so that when retail customers decide to move ahead with their decking and fencing projects, we will be there for them as a supplier of choice.
Eric Bashon: In line with our ongoing focus to be a partner of choice to all stakeholders, Fellow Jones prioritizes meaningful action across all facets of its organization and value chain to ensure its long-term sustainability. As part of this commitment, on August 1st, we publish our annual environmental, social, and governance report, which articulates our ESG performance against our strategy and achievements over the past year. For the first time in our company's history, we have completed a company-wide climate transition, risk and opportunity assessment, aligning with the TCFD and ISSB, and including scope three emissions amongst our overall greenhouse gas reporting.
Eric Vachon: As part of this commitment, on August 1st, we publish our annual Environmental, Social, and Governance report, which articulates our ESG performance against our strategy and achievements over the past year. Additionally, for the first time in our company's history, we have completed a company-wide climate transition risk and opportunities assessment aligning with the TCFD and ISSB and including scope three emissions amongst our overall greenhouse gas reporting. These were significant undertakings in an industry and business such as ours, and I'm very proud of our collective accomplishments over the last year.
Speaker Change: For the first time in our company's history, we have completed a company-wide climate transition risk and opportunities assessment aligning with the TCFD and ISSB and including scope 3 emissions amongst our overall greenhouse gas reporting.
Eric Bashon: These were significant undertakings in an industry and business such as ours, and I'm very proud of our collective accomplishments over the last year. I encourage you to refer to our website to review our 2023 ESG report, and learn more about our sustainability approach.
Speaker Change: These were significant undertakings in an industry and business such as ours, and I'm very proud of our collective accomplishments over the last year.
Eric Vachon: I encourage you to refer to our website to review our 2023 ESG report and learn more about our sustainability approach. I will now hand it over to Silvana, who will provide a more detailed overview of her second quarter finances.
Silvana Travelini: I will now hand it over to Silvana, who will provide a more detailed overview of our second quarter financial results. Thank you, Eric, and good morning, everyone. We are very pleased with our strong second quarter financial performance, which translated into notable increases across all of our key metrics. Failed for the quarter increased by 8% to over $1 billion. This increase was largely attributed to higher utility polls, railway ties, and industrial product sales, which grew by 17%. These infrastructure supporting product categories benefited from volume gains and favorable pricing compared to the same period last year, as well as from the contribution of the Baldwin acquisitions.
Silvana Travaglini: Thank you, Eric, and good morning, everyone. We are very pleased with our strong second quarter financial performance, which translated into notable increases across all of our key metrics. Sales for the quarter increased by 8% to over $1 billion. This increase was largely attributed to higher utility poles, railway ties, and industrial product sales, which grew by 17 percent. These infrastructure-supporting product categories benefited from volume gains and favorable pricing compared to the same period last year, as well as from the contribution of the Baldwin acquisition.
Speaker Change: This increase was largely attributed to higher utility polls, railway ties, and industrial product sales, which grew by 17%.
Silvana Travelini: On the heels of our strong sales growth, operating income increased to $168 million from $149 million in Q2 last year. Similarly, EBITDA grew by 14% to $200 million this quarter, following a similar 14% increase in Q2 last year. We expanded the EBITDA margins from 18% in 2023 to 19.1% in the second quarter of this year. Compared to the first quarter, all product categories generated similar margins as a percentage of sales. The sequential decrease in EBITDA margin was largely a result of the product mix, given that residential number typically represents a higher relative proportion of sales in the seasonally strong second quarter.
Silvana Travaglini: On the heels of strong sales growth, operating income increased to $168 million from $149 million in Q2 last year. Similarly, EBITDA grew by 14% to $200 million this quarter, following a similar 14% increase in Q2 last year. We expanded the EBITDA margin from 18% in 2023 to 19.1% in the second quarter of this year. Compared to the first quarter, all product categories generated similar margins as a percentage of sales. The sequential decrease in EBITDA margin was largely a result of the product mix, given that residential lumber typically represents a higher relative proportion of sales in the seasonally strong second quarter.
Speaker Change: On the heels of a strong sales growth, operating income increased to $168 million from $149 million in Q2 last year.
Speaker Change: Compared to the first quarter, all product categories generated similar margins as a percentage of sales.
Silvana Travelini: We ended the quarter with net income of $110 million or $1.94 per share, which is $100 million or $1.72 per share in the second quarter of last year.
Silvana Travaglini: We ended the quarter with net income of $110 million, or $1.94 per share, versus $100 million, or $1.72 per share, in the second quarter of last year. Now, let's take a closer look at the performance of one product category.
Silvana Travelini: Now let's take a closer look at the performance of our product categories. Sales of utility polls increased to $470 million compared to $388 million per the same period in 2023, over a bus growth of over 20%. Utility poll sales benefited from our creative Baldwin acquisition and a strong organic increase of 16%. This ongoing vote was driven by price adjustments and additional volumes stemming from existing and new sales committees. The volume gains this quarter represented about 40% of the total increase. Sales of utility polls accounted for 45% of total sales for the quarter and almost 50% on a year-to-date basis.
Speaker Change: Now, let's take a closer look at the performance of our product categories.
Silvana Travaglini: Sales of utility poles increased to $470 million compared to $388 million for the same period in 2023, a robust growth of over 20 percent. Utility pole sales benefited from our accretive Baldwin acquisition and a strong organic increase of 16%. This ongoing growth was driven by price adjustments and additional volumes stemming from existing and new sales commitments. Volume gains this quarter represented about 40% of the total increase. Sales of UtilityPulse accounted for 45% of total sales for the quarter and almost 50% on a year-to-date basis.
Speaker Change: Sales of utility poles increased to $470 million compared to $388 million for the same period in 2023, a robust growth of over 20%.
Speaker Change: Utility pull sales benefited from our accretive Baldwin acquisition and a strong organic increase of 16%.
Speaker Change: This ongoing growth was driven by price adjustments and additional volumes stemming from existing and new sales commitments.
Speaker Change: The volume gains this quarter represented about 40% of the total increase.
Silvana Travaglini: Sales of railway ties grew by $27 million for a total of $265 million compared to the second quarter of 2023. This increase was largely attributed to higher volumes for non-Class 1 customers, which, as Eric noted, is a trend that has persisted since the first quarter.
Silvana Travelini: In addition to higher volumes for non-class loan customers, which Eric has noted is a trend that has persisted since the first quarter. Better pricing also contributed to the sales growth. Railway type sales accounted for 25% of overall sales for the quarter. Residential lumber sales were $243 million, a decrease of $28 million compared to sales of $271 million during the comparable period last year. While the market price of lumber has remained weak, most of the decreased quarter-over-quarter came from lower sales volume due to slower consumer demand. Given the seasonally strong second quarter volumes for residential lumber, this product category accounted for 23% of total sales in the second quarter.
Speaker Change: This increase was largely attributed to higher volumes for non-Class 1 customers, which as Eric noted, is a trend that has persisted since the first quarter.
Silvana Travaglini: Better pricing also contributed to the sales growth. Railway tie sales accounted for 25% of overall sales for the quarter. Residential lumber sales were $243 million, a decrease of $28 million compared to sales of $271 million during the comparable period last year. However, while the market price of lumber has remained weak, most of the decrease, quarter over quarter, came from lower sales volume due to slower consumer demand.
Eric Vachon: Better pricing also contributed to the sales growth.
Eric Vachon: Railway tie sales accounted for 25% of overall sales for the quarter.
Silvana Travaglini: Given the seasonally strong second quarter volumes for residential lumber, this product category accounted for 23% of total sales in the second quarter. Our company is highly cash-generative, which enables us to finance our growth plans and maintain a strong financial position. In the second quarter, we generated cash from operating activities of $177 million and used this cash to invest in our network, reduce leverage following the typical build-up of working capital in Q1, as well as return capital to shareholders.
Eric Vachon: Given the seasonally strong second quarter volumes for residential lumber, this product category accounted for 23% of total sales in the second quarter.
Silvana Travelini: Our company is highly cash-generative, which enables us to finance our growth plans and maintain a strong financial position. In the second quarter, we generated cash from operating activities of $177 million and used this cash to invest in our network, reduced leverage following the typical bill in working capital in Q1, as well as returned capital to shareholders. We ended the quarter with a net debt to EBITDA ratio of 2.5 times, which is within our target range. As part of our normal course issue bill, we purchased $20 million of shares and paid $32 million of dividends in the second quarter.
Eric Vachon: Our company is highly cash-generative, which enables us to finance our growth plan and maintain a strong financial position.
Silvana Travaglini: We ended the quarter with a net death to epithelial ratio of 2.5 times, which is within our target range. As part of our normal course issue bid, we purchased $20 million of shares and paid $32 million of dividends in the second quarter. As of the end of June, we were on track with our commitment to returning capital to shareholders, having returned over $260 million out of the $500 million committed for the 2023 to 2025 period. And yesterday, our Board of Directors approved a quarterly dividend of $0.28 per share.
Eric Vachon: We ended the quarter with a net debt-to-EBITDA ratio of 2.5 times, which is within our target range.
Eric Vachon: As part of our normal course issuer bid, we purchased $20 million of shares and paid $32 million of dividends in the second quarter.
Silvana Travelini: As at the end of June, we were on track on our commitment to returning capital to shareholders, having returned over $260 million out of a $500 million committed for the 2023 to 2025 period. And yesterday, our board of directors approved a quarterly dividend of 28 cents per share. We ended the quarter with inventories of $1.7 billion, relatively in line with the $1.6 billion of inventory as of December 31, 2023. We continued to expect inventories at EORN to be in line with levels at the beginning of the year. This investment in inventories places the company in a good position to continue to service its customers on a timely basis.
Eric Vachon: As at the end of June , we were on track on our commitment to returning capital to shareholders, having returned over $260 million out of the $500 million committed for the 2023-2025 period.
Eric Vachon: And yesterday, our Board of Directors approved a quarterly dividend of $0.28 per share.
Silvana Travaglini: We ended the quarter with inventories of $1.7 billion, relatively in line with the $1.6 billion of inventory as of December 31st, 2023. We continue to expect inventory at year-end to be in line with levels at the beginning of the year. This investment in inventory places the company in a good position to continue to serve its customers on a timely basis. In the second half of 2024, we are focused on continuing to deliver strong performance and growth while returning capital to shareholders.
Eric Vachon: We ended the quarter with inventories of $1.7 billion, relatively in line with the $1.6 billion of inventory as of December 31st, 2023.
Eric Vachon: We continue to expect inventory at year-end to be in line with levels at the beginning of the year.
Silvana Travelini: In the second half of 2024, we are focused on continuing to deliver strong performance in growth while returning capital to shareholders. In summary, with the financial strength of the business and the solid market fundamentals of our product categories, we remain well positioned for continued success.
Silvana Travaglini: In summary, with the financial strength of the business and the solid market fundamentals of our product categories, we remain well positioned for continued success. With that, I will now pass it on to Eric for his concluding remarks.
Eric Vachon: In summary, with the financial strength of the business and the solid market fundamentals of our product categories, we remain well-positioned for continued success.
Eric Bashon: With that, I will now pass it on to Eric for his concluding remarks. Thank you, Silvana. Our results from the first half of the year positioned us favorably to end 2024 on a high note. And we remain on track to meet or exceed our financial objectives for the 2023 to 2025 period. Our positive outlook is rooted in the strong industry trends underpinning our product categories. Particularly for utility polls, our largest product category. We continue to expect utility polls sales to grow at a compound annual growth rate of 15% for 2024 and 2025, now fueled by a mix of both volume and pricing.
Eric Vachon: Our results from the first half of the year position us favorably to end 2024 on a high note, and we remain on track to meet or exceed our financial objectives for the 2023-2025 period.
Eric Vachon: Our results from the first half of the year position us favorably to end 2024 on a high note, and we remain on track to meet or exceed our financial objectives for the 2023 to 2025 period.
Eric Vachon: Our positive outlook is rooted in the strong industry trends underpinning our product categories, particularly for utility poles, our largest product category. We continue to expect utility pole sales to grow at a compound annual growth rate of 15% for 2024 and 2025, now fueled by a mix of both volume and price. Though we have recorded strong railroad type performance in the first half of the year, volume gains realized so far are expected to taper off in the second half of 2024 on account of changes made by a Class 1 customer to its maintenance program.
Eric Vachon: Our positive outlook is rooted in the strong industry trends underpinning our product categories, particularly for utility poles, our largest product category.
Eric Vachon: We continue to expect utility pole sales to grow at a compound annual growth rate of 15% for 2024 and 2025, now fueled by a mix of both volume and pricing.
Eric Bashon: Though we have recorded strong rail rate type performance in the first half of the year, volume gains realized so far are expected to taper off in the second half of 2024 on account of changes made by a Class One customer to its maintenance program this year. We remain confident in the product categories' stable source revenue and its ability to deliver low single-digit sales growth, as stated in our three-year outlook. Looking forward, we expect that weaker pricing and the demand observed for residential lumber in Q2 will place a product category sales at the lower end of the 600 to 650 million dollar range target set in our objectives.
Eric Vachon: Though we have recorded strong railroad type performance in the first half of the year, volume gains realized so far are expected to taper off in the second half of 2024 on account of changes made by a Class 1 customer to its maintenance program this year.
Eric Vachon: We remain confident in the product category's stable source of revenue and its ability to deliver low single-digit sales growth, as stated in our three-year outlook. Looking forward, we expect that weaker pricing and the demand observed for residential lumber in Q2 will place the product category's sales at the lower end of the $600 to $650 million range target set in our objective. Based on our strong EBITDA margin performance in the first half of the year, we expect to surpass our targets for this year, despite the lower sales activity anticipated for railway ties and residential lumber in the second half of the year.
Eric Vachon: We remain confident in the product category's stable source of revenue and its ability to deliver low single-digit sales growth as stated in our three-year outlook.
Eric Vachon: Looking forward, we expect that weaker pricing and the demand observed for residential lumber in Q2 will place the product category's sales at the lower end of the $600 to $650 million range target set in our objectives.
Eric Bashon: Based on our strong EBITDA margin performance in the first half of the year, we expect to surpass our targets for this year despite the lower sales activity anticipated for rail rate bias and residential lumber in the second half of the year. As a result, we are forecasting to end 2024 with the margin closer to 18%.
Eric Vachon: As a result, we are forecasting to end 2024 with a margin closer to 18%. I started this call by mentioning how our strong customer relationships helped contribute to our great financial performance for the second quarter, but there's more than that. All of our employees are significant contributors to our company's success, and I want to thank everyone for your ongoing dedication and commitment to Stella-Jones. With that, I will now open the line to questions.
Eric Bashon: I started this call by mentioning how our strong customer relationships help contribute to our great financial performance for the second quarter, but there's more than that. All of our employees are significant contributors to our company's success, and I want to thank everyone for your ongoing dedication and commitment to Stella Jones.
Speaker Change: I started this call by mentioning how our strong customer relationships helped contribute to our great financial performance for the second quarter, but there's more than that.
Unknown Executive: With that, I will now open the line to questions. Thank you, Eric. The line is now open for questions. I would like to remind you that if you're on the phone and wish to ask a question, please press star one.
Speaker Change: With that, I will now open the line to questions.
Operator: Thank you, Eric. The line is now open for questions. I would like to remind you that if you are on the phone and wish to ask a question, please press star 1. Our first question is from Jonathan Goldman from Scotia Capital. Please go ahead.
Speaker Change: Thank you, Eric. The line is now open for questions.
Speaker Change: I would like to remind you that if you are on the phone and wish to ask a question, please press star 1.
Jonathan Goldman: Our first question is from Jonathan Goldman from Scotia Capital. Please go ahead. Hi, good morning. Hi, good morning, and thanks for taking me.
Speaker Change: Our first question is from Jonathan Goldman from Scotia Capital. Please go ahead.
Jonathan Goldman: Hi, good morning. Good morning, and thanks for taking the questions. I wanted to start off with a housekeeping question. Eric, in terms of the organic sales growth and polls, can you give us a breakdown of how much of that was volume driven versus price?
Eric Bashon: Good morning, Susan. I wanted to start off with a housekeeping question, Eric, in terms of the organic sales growth and polls, can you give us a breakdown of how much of that was evolving driven versus price? Yeah, so for the quarter, volume was approximately 40% growth, and obviously 60% is a pricing piece.
Jonathan Goldman: Hi, good morning. Hi, good morning and thanks for taking the questions.
Jonathan Goldman: I wanted to start off with a housekeeping question, Eric, in terms of the organic sales growth and polls, can you give us a breakdown of how much of that was volume-driven versus price? Thank you. Thank you.
Eric Vachon: Yeah, so for the quarter, volume was approximately 40% growth, and obviously 60%.
Eric Vachon: Yes, so for the quarter volume was approximately 40% growth and obviously 60% of the pricing.
Unknown Executive: Perfect, thanks for that.
Eric Vachon: Perfect. Thanks for that. And then I guess the second one is, if you can elaborate on the factors underlying the change in view, from previously expecting pricing pressure in the second half to now not expecting it to significantly impact the results. And I guess the follow-up would be, why would we not assume that the current margin levels are the new normal?
Eric Bashon: And then I guess the second one is if you can elaborate on the factors underlying the change in view from previously expecting pricing pressure in the second half to now not expecting it to significantly impact the results. And I guess like the follow-up would be, is why would we not assume that the current margin levels are the new normal? Yeah, so, you know, when we started out the year cautioning with extra capacity and some soft potential softness in the spot market. There is some softness in the spot market, actually, but we are seeing pricing whole relatively well.
Speaker Change: Perfect. Thanks for that. And then I guess the second one is, if you can elaborate on the factors underlying the change in view from previously expecting pricing pressure in the second half to now not expecting it to significantly impact results. And I guess like the follow-up would be is why would we not assume that the current margin levels are the new normal?
Eric Vachon: Yeah, so, we started out the year cautioning with extra capacity and some potential softness in the spot market. There is some softness in the spot market, actually, but we are seeing pricing hold relatively well. So, you know, after six months under our belts, our observation is that we feel quite confident that we will not feel significant headwinds from those dynamics for the balance of the year.
Speaker Change: We started out the year cautioning with extra capacity and some potential softness in the spot market.
Speaker Change: There is some softness in the spot market, actually, but we are seeing pricing hold relatively well. So, with that, after six months under our belts, our observation is that we feel quite confident that we will not feel significant headwind from those dynamics for the balance of the year.
Eric Bashon: So, you know, with that, you know, after six months under our belts, our observation is that we should be quite confident that we will not feel significant headwinds from those dynamics for the balance of the year.
Eric Bashon: With regards to your question on Ebid Dalmargin, well, a few comments. First, a reminder: our Q4 is always a softer quarter; it's a lower maintenance season. There's a bit less activity, so typically if you look at our cycle, Q4 is typically a bit lower, so that would average us down slightly. And then, obviously, I commented on less railway tie sales, and the second half of the year, our fixed cost on this surely go away, so it would have packed margin to some extent, but still confident that we can achieve, as I stated, closer to 18% margin for the year.
Eric Vachon: With regard to your question on EBITDA margin, well, a few comments. First, a reminder, our Q4 is always a softer quarter, you know; it's a lower maintenance season. You know, there's, you know, a bit less activity, so typically, if you look at our cycle, Q4 is typically a bit lower, so that would average us down slightly. And then, obviously, you know, I commented on less railway tie sales in the second half of the year. You know, our fixed costs don't necessarily go away, so it would impact margin to some extent. But I am still confident that, as I stated, we can achieve, as I stated, closer to 18% margin.
Eric Vachon: And the current market dynamics that you're observing in polls, do you see those dynamics changing in 2025, whether it's increasing competitive intensity or more capacity?
Eric Bashon: And the current market dynamics that you're observing in polls, do you see those dynamics changing in 2025, whether it's increasing, better intensity, more capacity? It's a bit early to speculate on 25; we still need to sit down as a management team and take a hard look at it, but I still feel very optimistic about what the next 12, 18 months will bring. We're currently being asked to quote several significant projects, very attractive projects that are looking for very unique size and length profile of inventory, which we do have to sell. So obviously, we do a whole bunch of strong inventory positions, so I feel very confident that we are well positioned to serve as the market needs, as they're evolving to larger size products, and we'll keep seeing that growth in volume going forward as we have it in our guidance until the end of 25.
Eric Vachon: It's... It's a bit early to speculate on 25, we still need to sit down as a management team and take a harder look at it, but I still feel very optimistic about what the next 12-18 months will bring. We're currently being asked to quote on several significant projects, very attractive projects that are looking for very unique size and length profiles of inventory which we do have to sell. So, obviously, we do hold a strong inventory position.
Speaker Change: It's aā¦
Speaker Change: It's a bit early to speculate on 25. We still need to sit down as a management team and take a harder look at it, but I still feel very optimistic about what the next 12-18 months will bring. We're currently being asked to...
Speaker Change: Quote.
Speaker Change: several significant projects, very attractive projects that are looking for a very unique size and length profile of inventory, which we do have to sell. So obviously we do hold a strong inventory position. So I feel very confident that we are well positioned to service the market needs as they're evolving to.
Eric Vachon: So, I feel very confident that we are well positioned to service the market needs as they're evolving to, you know, larger sized products and, you know, that we will keep seeing that growth in volume going forward as we have it in our guidance up till the end. Okay, thanks for taking my call.
Unknown Executive: Okay, thanks for taking my questions.
Jonathan Goldman: Okay, thanks for taking my questions.
Unknown Executive: My pleasure. Thank you.
Speaker Change: Okay, thanks for taking my questions.
James McGarragle: Our next question is from James McGarrickle from RBC Capital Markets. We go ahead. Hey, congrats on the order and appreciate you having me on. Thank you.
James McGarragle: Thank you. Our next question is from James McGarragle from RBC Capital Markets. Please go ahead.
Speaker Change: Thank you. Our next question is from James McGarragle from RBC Capital Markets. Please go ahead.
James McGarragle: Hey, congrats on the new quarter, and I appreciate you having me on. Thank you, James.
James McGarrickle: Hey, congrats on the new quarter and I appreciate you having me on.
Eric Bashon: They just want me on infrastructure spending. You know, we heard during a US reporting from a company, you know, they flagged it: only 15% of infrastructure funds, you know, from the US IRA spending it and spent. And you know that that kind of points to a very long runway for growth that, you know, it's obviously going to be. Essentially, pretty positive for you for your company. You know, so is that consistent with the long-term conversations you're having with your customers?
Eric Vachon: And just one for me on infrastructure spending, you know, we heard during U.S. reporting from a company, you know, they flagged that only 15 percent of infrastructure funds from the U.S. IRA spending have been spent. And you know, that kind of points to a very long runway for growth that, you know, is obviously going to be potentially pretty positive for you, for your company. You know, so is that consistent with the long-term conversations you're having with your customers? And I'm not asking for guidance post-2025, but just kind of any advice you can provide to help frame that type of longer-term opportunity.
Speaker Change: Thank you, James. And just one for me on infrastructure spending, you know, we heard during U.S. reporting from a company, you know, they flagged that only 15% of infrastructure funds, you know, from the U.S. IRA spending has been spent.
Speaker Change: And, you know, that kind of points to a very long runway for growth that, you know, is obviously going to be.
Speaker Change: Eric Vachon, CEO Alphabet and Google
Eric Bashon: You know, I'm not asking for guidance post 2025, which is kind of any color you can provide to help frame that type of longer term opportunity. Yeah, good question. And I think the keyword there is long term. So I think it is most likely opposed to 2025 impact. So our customers are indicating that projects are getting structured, and the funding is available. It is surprisingly taking a long time between the time the bill was passed and actually seeing the impact of those funds, you know, supporting new projects. But yeah, you're completely right. From what I understand, we could see some of those effects, you know, post-25, but it is still there as a tailwind, if you want, for demand for a product.
James McGarragle: Yeah, good question. And I think the key word there is long term. So I think it is most likely a post 2025 impact. Our customers are indicating that projects are getting structured, and funding is available. It is surprisingly taking a long time between the time the bill was passed and actually seeing the impact of those funds supporting new projects, but yeah, you're completely right. We could see some of those effects, you know, post-25, but it is still there as a tailwind if you want demand for a product.
Speaker Change: Yeah, good question. And I think the key word there is long-term. So I think it is most likely a post-2025 impact. So our customers are indicating that projects are getting structured and that the funding is available.
Speaker Change: It is surprisingly taking a long time between the time the bill was passed and actually seeing the impact of those funds supporting new projects, but yeah, you're completely right.
Speaker Change: We, from what I understand, we could see some of those effects, you know, post-25, but it is still there as a tailwind if you want for demand for our products.
Unknown Executive: Hey, thanks for the color, and then I'm an A.
James McGarragle: Hey, thanks for the call. And then on M&A, can you just comment on the pipeline right now? And, you know, any additional comments you can provide on, you know, potentially expanding into adjacent types of areas of business, you know, something like cross ties, composite poles, you know, any update on the flight there?
Eric Bashon: Can you just comment on the pipeline right now? And, you know, any additional color you can provide on, you know, potentially expanding into adjacent type of areas of business, you know, something like cross-tie, composite, poles, you know, any update that's applied there, and I can turn the line over after. Thank you.
Speaker Change: Hey, thanks for the caller. And then on M&A, can you just comment on the pipeline right now?
Speaker Change: And, you know, any additional quality you can provide on, you know, potentially expanding into adjacent type of areas of business, you know, something like cross-ties, composite poles, you know, any updates at the flight there, and I can turn the line over after. Thank you.
Eric Bashon: Yeah, certainly. So, thank you for that. So, you know, I'm happy to report, I've mentioned it, I believe in individual meetings that we do now have a Vice President responsible for business development. He also has Treasury reporting into him. And we've been actually very structured now and very active in investing in different, investigating different avenues. We obviously, we started the core. We remain focused on seeing good opportunities: these quality assets in the wood-treating business. But we have been exploring and getting ourselves very well-educated on complementary products or other types of products, maybe steel or composites, in both railways and utility poles.
Eric Vachon: And I can turn the line over afterward. Thank you. Yeah, certainly. So thank you.
Eric Vachon: Yeah, certainly. So, you know, I'm happy to report, and I believe I have mentioned it in individual meetings, that we do now have a vice president responsible for business development. He also has Treasury reporting into him.
Speaker Change: Yeah, certainly, so thank you for that.
Speaker Change: So, I'm happy to report, I have mentioned it, I believe in individual meetings, that we do now have a Vice President responsible for business development. He also has Treasury reporting into him.
Speaker Change: And we've been actually very structured now and very active in investigating different avenues.
Speaker Change: We obviously, we started at the core. We remain focused on seizing good opportunities, quality assets in the wood treating business. But we have been exploring and getting ourselves very well educated on
Eric Vachon: And we've actually been very structured now and very active in investigating different avenues. Obviously, we started at the core; we remain focused on seizing good opportunities and quality assets in the wood treating business. But we have been exploring and getting ourselves very well educated on complementary products or other types of products, maybe steel or composites in both railway tie and utility poles. So, you know, in the last six months, we've grown significantly internally as far as knowledge goes; we are exploring certain avenues and obviously looking for that, you know, that right stepping stone to start expanding our offering to our customers. Which, by the way, is something that, you know, our customers keep indicating that they would be happy to see us venture into. So I guess that's the update for now. Stay tuned for future updates.
Speaker Change: of products may be steel or composites in both railway tie and utility pole. So, you know, in the last six months we've grown significantly internally as far as knowledge goes.
Eric Bashon: So, you know, in the last six months, we've grown significantly internally as far as knowledge goes. We are exploring certain avenues and obviously looking for that, you know, that right stepping stone to start expanding our offering to our customers, which, by the way, is something that, you know, our customers keep indicating that they would be happy to see us venture into.
Speaker Change: We are exploring certain avenues and obviously looking for that right stepping stone to start expanding our offering to our customers.
Speaker Change: which, by the way, is something that our customers keep indicating that they would be happy to see us venture into. So, I guess that's the update for now. Stay tuned for future updates.
Unknown Executive: So, I guess that's the update for now.
Unknown Executive: Stay tuned for future updates. Thank you.
Hamir Patel: Thank you. Our next question is from Hamir Patel of CIBC Capital Markets. Please go ahead.
Speaker Change: Eric Vachon, Eric Vachon TV
Amir Patel: Our next question is from Amir Patel, from CIBC Capital Markets. Please go ahead. Yeah. Good morning. Eric, it looks like in Q2, your poll prices, I guess, we're up 10 percent. I think in Q1, they're up 12 percent; the quarter before that, 18 percent. So clearly the comps are decelerating, but still positive comps. So, just given, you know, your commentary earlier about you are seeing some signs of softness in spot.
Speaker Change: Thank you. Our next question is from Hamir Patel from CIBC Capital Markets. Please go ahead.
Hamir Patel: Good morning, Eric. It looks like in Q2, your pull prices were up 10%. I think in Q1, they're up 12%, and the quarter before that, 18%. So clearly, the comps are decelerating, but still positive comps. So just given your commentary earlier about you seeing some signs of softness in spot, how do we think about, maybe for the next couple of quarters, your overall price gain in polls, because clearly you still have some contractual business that's continuing to get repriced positively?
Hamir Patel: Good morning. Eric, it looks like in Q2, your pull prices, I guess, were up 10%. I think in Q1, they're up 12%, a quarter before that, 18%. So clearly, the comps are decelerating, but still positive comps. So just given your commentary earlier about you are seeing some signs of softness,
Eric Bashon: How do we think about maybe for the next couple quarters, your overall price gain in polls, because clearly you still got some contractual business that's continuing to get repriced positively? Yeah. So, going forward, so you're right, I might comment where that the spot market has shown some softness. It's not necessarily generalized.
Speaker Change: In spot, how do we think about maybe for the next couple of quarters, your overall price gain and pulse, because clearly you've still got some contractual business that's continuing to get repriced positively.
Eric Vachon: You know, going forward. You're right; my comment was that the spot market has shown some softness. Generalize So let's call it, I could say it's stable for the balance of the year, you know, but going forward, I do believe that our pricing gains will continue to be, to your point, a bit lesser, call it 20 to 30 percent, and the balance would actually come from volumes, as I mentioned earlier. We have, or are looking at a lot of opportunities, obviously, year-over-year gains with new customers, which is obviously very positive for us, and also new projects that we're being shown, you know, that'll extend over several years that we're presently quoting, could start later in the year, but definitely into early next year, and as I said, we are well-positioned with our inventory profile to service those new projects.
Speaker Change: Yeah, so.
Eric Vachon: You know, going forward, so you're right, my comment was that the spot market has shown some softness. It's not necessarily...
Eric Bashon: So, let's call it stable for the balance of the year, you know, but going forward, you know, do believe that our pricing gains will continue, to your point, to be a bit lesser, call it, call it the 20 to 30 percent, and the balance would actually come from volumes, as I mentioned earlier. We have, or looking at a lot of opportunities, obviously, year-to-year gains with new customers, which is obviously very positive for us, and also new projects that we're being shown, you know, that will extend over several years that we're presently quoting, could start later in the year, but definitely into early next year.
Eric Vachon: generalized
Eric Vachon: So, let's call it stable for the balance of the year, you know, but going forward, you know, do believe that our pricing gains will continue to your point to be a bit lesser, call it.
Speaker Change: We call it the 20-30% and the balance would actually come from volumes as I mentioned earlier. We have or are looking at a lot of opportunities, obviously year-over-year gains with new customers which is obviously very positive for us and also new projects that we're being shown that will extend over several years that we're presently coding.
Unknown Executive: And they said, well, position with our inventory profile to service those new projects. Okay, great.
Speaker Change: Could start later in the year, but definitely into early next year, and as I said, well-positioned with our inventory profile to service those new projects.
Hamir Patel: Okay, great. And Eric, how do you think about when the company would look to update the multi-year guidance? Because, you know, if you're pointing to 18% this year, right now, that 16% three-year average basically implies margins kind of plunge to like 11% next year, which clearly that doesn't appear to be the case. So when should we expect an update to the multi-year guide?
Eric Bashon: And Eric, how do you think about when the company would look to update the multi-year guidance? Because, you know, if you're looking pointing to 18 percent this year, right now, that 16 percent, three-year average basically implies margins kind of plung to like 11 percent next year, which clearly doesn't appear to be the case. So, when should we expect an update? So, thank you for the question. I think that question came up actually last quarter. So I had a few criteria as one I wanted to see how we worked through our half of this year and a better understanding of pressing the second half of the year.
Speaker Change: Okay, great. And Eric, how do you think about when the company would look to update the multi-year guidance? Because, you know, if you're looking, pointing to 18% this year,
Speaker Change: Right now that 16% three-year average basically implies margins kind of plunge to like 11% next year. Clearly, that doesn't appear to be the case. So when should we expect an update to the multi-year guide?
Eric Vachon: So, thank you for the question. You know, I think that question came up actually last quarter. So, I had a few criteria when I wanted to see how we did through our half of this year and better understand the pricing pressures in the second half of the year. I think we're sitting there at this point. I want to sit down with my management team and better understand our five-year plan and our budget for next year, but I think you're completely right.
Eric Vachon: So, thank you for the question, you know, I think...
Speaker Change: That question came up, actually, last quarter, so I had a few.
Speaker Change: Criteria is what I wanted to see how we work through half of the year and better understand the pricing pressures in the second half of the year. I think we're sitting there at this point. I want to sit down with my management team and better understand our five-year plan and our budget for next year. But I think you're completely right.
Eric Bashon: I think we're sitting there at this point.
Eric Bashon: I want to sit down with my management team and better understand our five-year plan on our budget for next year. But I think you're completely right. We're very optimistic of how we're going to finish the year. We should be very close to several of the metrics we put out in our financial guidance.
Eric Vachon: You know, we're very optimistic about how we're going to finish the year. We should be very close to several of the metrics we put out in our financial guidance. So, we're actually studying the possibility, if you want, early in the year, to meet with the investment community to discuss our next three years and what that could look like for Stella-Jones.
Speaker Change: We're very optimistic of how we're going to finish the year. We should be very close to several of the metrics we put out in our financial guidance.
Eric Bashon: So we're actually studying that possibility if you wanted early in the year to meet with the investment community to discuss about our next three years and where that could look like for Stella-Jones. Okay, but fair enough.
Speaker Change: So, we're actually studying that possibility, if you want, early in the year to meet with the investment community to discuss about, you know, our next three years and what that could look like for Stella Jones.
Hamir Patel: Okay, fair enough. But Eric, is it fair to say right now, just if you're kind of tracking towards 18% for the year, based on what you're seeing in the pull market, does that look sustainable into 2025?
Eric Bashon: Eric, is it fair to say right now, just if you're kind of tracking towards 18% for the year based on what you're seeing in the poll market, does that look sustainable into the 25th? Hard to tell at this point. I guess I won't commit to that at this point. But obviously, if our utility poll business continues to be that strong product category and obviously has the healthier margin profile, one thing or 16% now seems an easy target to achieve.
Speaker Change: Okay, fair enough. But Eric, is it fair to say right now, just if you're kind of tracking towards 18% for the year, based on what you're seeing in the pull market, does that look sustainable into 2025?
Eric Vachon: Hard to tell at this point, you know, I guess I won't commit to that at this point, but obviously, you know, if our utility pole business continues to be that strong product category and obviously has, you know, the healthier margin profile, I, you know, want to think our 16% now seems an easy target to achieve. So I wouldn't disagree with what you said, but before committing to a number, I think we really need to sit down and come up with our new guidance.
Eric Vachon: Hard to tell at this point.
Eric Vachon: You know, I guess I won't commit to that at this point, but obviously, you know, if our utility pool business continues to be, you know, that strong product category, and it obviously has, you know, the healthier margin profile, I...
Speaker Change: One thing, our 16% now seems an easy target to achieve, so I wouldn't disagree with what you said, but before committing to a number, I think we really need to sit down and come up with our new guidance.
Eric Bashon: So I wouldn't disagree with what you said, but before giving it a good number, I think we really need to sit down and come up with our new guidance.
Silvana Travelini: Fair enough, and I just saw a lot of questions for Savannah. It looks like the commentary on CAPEX with respect to the investment in the poll category may be 10 million higher now, 35 million and 2425. Is that just maybe some capital cost inflation, or does that reflect maybe additional capacity expansion?
Hamir Patel: Fair enough. And just a last question for Silvana, it looks like the commentary on CapEx with respect to the investment in the pole category, maybe $10 million higher and now $35 million and $24-25. Is that just maybe some capital cost inflation, or does that reflect maybe additional capacity expansion?
Sylvana: Fair enough. And just a last question for Silvana. It looks like the commentary on CapEx with respect to the investment in the pole category, maybe $10 million higher and now $35 million and $24, $25 million. Is that just
Speaker Change: Maybe some capital cost inflation or does that reflect maybe additional capacity expansion?
Silvana Travelini: No additional capacity. It's all related to higher inflationary costs. I guess we had not all factored in when we started that when we put out the program in 2022. Okay, fair enough. Thanks. It's all ahead.
Silvana Travaglini: No additional capacity. It's all related to higher inflationary costs that I guess we had not all factored in when we started when we put out the program in 2020. Kicked her in the butt.
Speaker Change: No additional capacity, it's all related to higher inflationary costs that I guess we had not all factored in when we started or when we put out the program in 2022.
Hamir Patel: Thanks. That's all I had. I'll turn it over.
Unknown Executive: I'll turn it over. Thank you.
Speaker Change: Okay, fair enough. Thanks. That's all I had. I'll turn it over.
Benoit Poirier: Thank you. Our next question is from Benoit Poirier from Desjardins Securities. Please go ahead. Good morning, Silvana.
Amir: Thank you, Amir.
Benoit Poirier: Our next question is from Benoit Porier, from Desjardins Securities. Please go ahead.
Speaker Change: Thank you. Our next question is from Benoit Poirier from Desjardins Securities. Please go ahead.
Benoit Poirier: Good morning, Silvana. Good morning, Eric. Just to come back on the UTLTs, when you discuss with customers, what's the overall mood when it comes to CapEx, especially as we are heading into a lower interest rate environment in the US? Are they looking to beef up CapEx for the UTLT pool?
Eric Bashon: Good morning, Savannah. Good morning, Eric. Yeah, just to come back on the utilities, when you discuss with customers, what's the overall mood when it comes to CAPEX, especially as we are adding into a lower interest rate environment in the U.S. Are they looking to beef up CAPEX for you, so people? Well, two parts of the answer. What is what do we talk to customers in general? They're really upbeat about their projects, their needs, and you know what they want to realize and accomplish. You know, in the next two to five, six years, so that's why we remain very confident in the fundamentals of our whole business and believe in continued sustained demand for products and even volume growth.
Benoit Poirier: Good morning, Silvana. Good morning, Eric.
Eric Vachon: Morning, Benoit.
Speaker Change: Yeah, just to come back on the utilities, when you discuss with customers, what's the overall mood when it comes to CapEx, especially as we are heading into a lower interest rate environment in the U.S.? Are they looking to beef up CapEx for utility people?
Eric Vachon: Well, there are two parts to the answer. One is when we talk to customers in general, they're really upbeat about their projects, their needs, and you know, what they want to realize and accomplish in the next, you know, two to five, six years. So, you know, that's why we remain very confident in the fundamentals of our pole business and believe in continued sustained demand for products and even volume growth. But definitely, to your point, a lower interest rate environment would definitely be positive.
Speaker Change: So,
Speaker Change: Well, two parts to the answer. One is when we talk to customers in general, they're really upbeat about their projects, their needs, and what they want to realize and accomplish in the NICS.
Speaker Change: We've been doing this for, you know, two to five, six years. So, you know, that's why we remain very confident in the fundamentals of our pole business and believe in continued success.
Eric Bashon: But definitely, to your point, a lower interest rate environment would definitely be a positive. So I do think some of our customers, especially for project-driven... The initiative, you know, lower interest rates obviously makes the returns more attractive for our customers.
Speaker Change: Sustained demand for products and even volume growth, but definitely to your point, a lower interest rate environment would definitely be a positive. So I do think some of our customers, especially for project-driven
Eric Vachon: So I can't, you know, I do think some of our customers, especially for project-driven initiatives, lower interest rates obviously make the returns more attractive for our customers, so I do believe that that would be very positive.
Speaker Change: Initiatives, you know, lower interest rates obviously makes the returns more attractive for our customers, so I do believe that that would be very positive.
Unknown Executive: So I do believe that we need a remodeling.
Benoit Poirier: Okay, and just on the railway ties, obviously, a very strong first half that's coming from non-Class 1 customers. You mentioned in the opening remarks there will be some taper-off coming from Class 1 customers in the back half, but just curious about 2025, if you could provide any color about the demand from Class 1, but also non-Class 1. It seems that the outlook is still robust, so could we see, let's say, double-digit organic growth for railway ties in 2025, given the earlier comments you made about both sub-segments?
Benoit Poirier: Okay, and just on the rail we ties off, you see a very strong first half that's coming from non-class one customers. You mentioned in the opening remarks, there will be some paper off coming from a class one customers in the back half, but just to reduce on 20, 2025, if you could provide any color about the demand from class one, but also the non-class one, it seems that the outlook is still robust. So could we see, let's say, a double-digit organic growth for a railway ties in 2025, given the earlier comments you made about the both sub-signments?
Speaker Change: Okay, and just on the railway ties, obviously a very strong first half that's coming from non-Class 1 customers. You mentioned in the opening remarks there will be some taper-off coming from Class 1 customers in the back half.
Speaker Change: Just curious, on 2025, if you could provide any color about the demand from Class 1, but also the non-Class 1, it seems that the outlook is still robust. So could we see, let's say, a double-digit organic growth for railway ties in 2025, given the earlier comments you made about the boat subsegments?
Eric Bashon: Yeah, so, you know, we're holding our views of the low single-digit growth. Probably more on volume than the pricing, because I think we're sort of, we're seeing pricing gains this year compared to last year as we were adjusting pricing. I do see that stabilizing now, you know, going forward, and I do think the growth is coming from volume. So, to your point, there are some projects that are out there for a forbid, which we're obviously actively seeking to win. I believe our class one customers remain dedicated to maintaining their networks and that demand keeps flowing through.
Eric Vachon: So, you know, Benoit, we're holding our views of low single-digit growth, probably more on volume than pricing, because I think we're seeing pricing gains this year compared to last year as we were adjusting pricing. I do see that stabilizing now, you know, going forward, and I do think the growth is coming from volume.
Speaker Change: Yeah.
Speaker Change: So, you know, Benoit, we're holding our views of the low single-digit growth.
Speaker Change: Probably more on volume than pricing because I think we're seeing pricing gains this year compared to last year as we were adjusting pricing.
Speaker Change: I do see that stabilizing now, you know, going forward, and I do think the growth is coming from volume, so to your point, there are some projects that are out there for a bit, which we're obviously actively
Benoit Poirier: So to your point, there are some projects that are out there for a bit, which we're obviously actively seeking to win. I believe our Class 1 customers remain dedicated to maintaining their networks, and that demand keeps flowing through, and we do have a few conversations with some of our Class 1 customers on certain projects, which seem very appealing to us. So, you know, there is very healthy dynamics in the discussion, so I'd be very surprised to see demand taper off, in this case, as an overall industry comment. But I guess we still remain with our views of that low single-digit growth.
Speaker Change: I believe our Class 1 customers remain dedicated to maintaining their networks and that demand keeps flowing through.
Eric Bashon: And we do have a few conversations with some of our class one customers on our sort of projects, which seem very appealing to us. So, you know, there is very healthy dynamics in the discussions. I'd be very surprised to see you don't demand taper off. This gives it as an overall industry comment, but I guess we still remain with our views of that low single-digit growth.
Speaker Change: And we do have a few conversations with...
Speaker Change: Some of our classmates got some results on certain projects which seemed very appealing.
Speaker Change: So, you know, so there is very healthy dynamics in the discussion, so I'd be very surprised to see, you know, the men taper off, in this case, as an overall industry comment. But I guess we still remain with our views of that low single-digit growth.
Eric Bashon: Okay, and last one for me, you mentioned the 18% target in terms of the margin for 2024, but given what you've delivered in the first half and given the positive comments about pricing demand, the overall mix coming more on the utility side, less exposed to residential, and also favorable mix on the railway ties. Could we see even EBITDA margins to expand in the second half versus last year and finish upward to the 18% target that you mentioned earlier on the call? So typically, you know, H2 has a lower average of the margin than the first half, and Q4 is always a bit of an unknown.
Benoit Poirier: And the last one for me, you mentioned the 18% target in terms of EBITDA margin for 2024, but given what you've delivered in the first half and given the positive comments about pricing, demand, the overall mix coming more on the utility side, less exposed to residential and also favorable mix on the railway ties, could we see even EBITDA margins to expand in the second half versus last year and finish upward to the 18% target that you mentioned earlier on the call?
Speaker Change: And the last one for me, you mentioned the 18% target in terms of EBITDA margin for 2024, but given what you've delivered in the first half and given the positive comments about it, what's your take on that? Thank you. Thank you.
Speaker Change: Pricing, demand, the overall mix coming more on the utility side, less exposed to residential and also favorable mix on the railway ties.
Speaker Change: Could we see even EBITDA margins to expand in the second half versus last year and finish upward to the 18% target that you mentioned earlier on the call?
Eric Vachon: So typically, Benoit, H2 has a lower average of a DUB margin than, well, last year in the first half than the first half, and Q4 is always a bit of an unknown. It's always a softer quarter.
Alastair Halford: So, typically, Benoit, H2 has a lower average of a dumb margin than, well, last year, however, than the first half.
Eric Vachon: It's always hard to predict if, you know, Class 1s will pre-order, or certain Class 1s will pre-order for 2025. So obviously, lower volumes with the current network just increases that average cost, just on the fixed cost rate, if you want it. So, you know, I think we're very comfortable and happy to up our views on our margin this quarter. But, you know, I think it would be reasonable to achieve the number we put forward. Okay. Thank you.
Eric Bashon: If I was a software quarter, it's always hard to predict if you know, class ones will pre or certain class ones will pre order for 2025. So, I'd say lower volume with the current network just increases that average cost, just on the fixed cost rate if you want. So, you know, I think we're very comfortable and happy to, you know, up our views on our margin this quarter. But, you know, I think we'll be reasonable to achieve the number we put forward.
Benoit Poirier: Q4 is always a bit of an unknown, it's always a softer quarter.
Speaker Change: It's always hard to predict if, you know, Class 1s will pre-order or if certain Class 1s will pre-order for 2025.
Speaker Change: So, obviously, lower volume with the current network just increases that average cost just on the fixed cost rate, if you want.
Speaker Change: So, you know, I think we're very comfortable and happy to, you know, up our views on our margin this quarter. But you know, I think...
Speaker Change: It would be reasonable to achieve the number we put forward.
Benoit Poirier: Okay, thank you very much for the caller. My pleasure, Benoit. Thank you.
Unknown Executive: Okay, thank you very much for the callers. Thank you.
Speaker Change: Okay, thank you very much for the caller.
Michael Tupholme: Thank you. Our next question is from Michael Tupholme from TD Securities. Please go ahead.
Benoit: My pleasure, BenoƮt.
Michael Tupholme: Our next question is from Michael Tupholme, from TD Securities. Please go ahead. Thank you. Good morning. Good morning, Mike. Good morning. So just to clarify, Eric, for the second half of this year, as far as the mix of the driver's organic growth for utility poles, you're saying sort of 20 to 30 percent of the expected organic growth should come from pricing. Is that how you're not thinking about it? Yes, correct. Okay, and as we look out to 2025, you reiterated earlier on the call your expectation for utility poles or what you're thinking about for the second half of this year, where there's sort of a 20 to 30 percent price component, or is it something different as we think about 2025's mix?
Speaker Change: Thank you. Our next question is from Michael Tupholme from TD Securities. Please go ahead.
Michael Tupholme: Thank you. Good morning.
Michael Tupholme: Morning. So just to clarify, Eric, for the second half of this year, as far as the mix of the drivers of organic growth for utility pools is concerned, you're saying sort of 20 to 30 percent of the expected organic growth should come from pricing. Is that how you're now thinking about it? Yes, correct.
Mike: Morning, Mike.
Michael Tupholme: Morning. So just to clarify, Eric, for the second half of this year, as far as the mix of the drivers to organic growth for utility pools, you're saying sort of 20 to 30 percent of the expected organic growth should come from pricing. Is that how you're now thinking about it?
Eric Vachon: Okay, and as we look out to 2025, you reiterated earlier on the call your expectation for utility bulls' organic growth of 15% for both this year and 2025. Just in terms of that mix of volume versus price in 2025. Would it be similar to what you're thinking about for the second half of this year, where there's sort of a 20 to 30% price component, or is it something different as we think about 2025? with the price connection?
Speaker Change: Yes, correct.
Michael Tupholme: We think pricing could actually be a bit stronger, so it's probably half and half or at least 40% on pricing.
Eric Bashon: We think pricing could actually give it stronger, so it's probably half and half, or at least 40 percent on non-pricing. Okay. And then you've talked about and had been asked about the, you know, the previous risk of pricing pressure in the supply utility poles market. Is it fair to say then, I mean, I think the comments were mainly around not expecting really to see those pressures materialize in the second half of this year. But as we look out to 2025, is it fair to say you're not really, like that risk is sort of off the table at this point, you're not seeing that as a risk into next year for the spot market, because that is that fair to say?
Eric Vachon: And then you talked about and were asked about the previous risk of pricing pressure in the utility pool market. Is it fair to say then, I mean, I think the comments were mainly around not expecting really to see those pressures materialize in the second half of this year, but as we look out to 2025, is it fair to say you're not really saying that risk is sort of off the table at this point, you're not seeing that as a risk into next year? The spot market Is that fair to say?
Speaker Change: OK.
Eric Vachon: It's fair to say we're taking it off the table because the pricing is holding, and part of the driver is that those requests that are coming out are asking for specific sizes and lengths in pieces of wood, and it's a product that we...
Eric Bashon: It's fair to say. We're thinking about the table, because the pricing is holding, and part of the driver is, those requests that are coming out are asking for specific size and length and species of wood, and it's product that we, we maintain an inventory on an ongoing basis, and it seems that we are able to cater to those needs, I guess, more easily. So we are still commanding some healthy pricing there versus, you know, I guess some of these customers not finding exactly the whole profile of what they're looking for elsewhere in the market. Okay.
Speaker Change: And, you know, part of the driver is...
Speaker Change: and it's...
Eric Vachon: We maintain an inventory on an ongoing basis, and it seems that we are able to cater to those needs more easily, so we and we're still commanding some healthy pricing there versus, you know, I guess some of these customers not fighting exactly the whole profile of what they're looking for elsewhere in the market.
Eric Vachon: We maintain an inventory on them.
Speaker Change: I guess more easily, so we are still demanding some healthy pricing there versus, I guess, some of these customers not finding exactly the whole profile of what they're looking for elsewhere in the market.
Michael Tupholme: And then just as we think about next year, again, you reiterated the proposal, the 15% organic growth expectation. It sounds to me, maybe you can just confirm, like you haven't really started to see lower rates begin to drive additional volumes in polls, notwithstanding a couple of cuts by the Bank of Canada, and I guess bond yields moving down in the US, notwithstanding, if I can decide it's going to cut. But as you think about 2025, is that 15% organic growth guidance for polls in 2025? Is that assuming benefits from lower rates, or would, would lower rates be incremental if that drove some further volume?
Michael Tupholme: And then just as we think about next year, again, you've reiterated the proposed 15% organic growth expectation. It sounds to me, and maybe you can just confirm that you haven't really started to see lower rates begin to drive additional volumes in polls notwithstanding a couple of cuts by the Bank of Canada and I guess bond yields moving down in the U.S. notwithstanding if the Fed has yet to cut, but as you think about 2025, is that 15%? Organic growth guidance for the Poles in 2025. Is that assuming benefits from lower rates, or would lower rates be incremental if that drove some further volume?
Speaker Change: Just as we think about next year, you reiterated the proposed 15% organic growth expectation
Speaker Change: It sounds to me, maybe you can just confirm, like you haven't really started to see lower rates begin to
Speaker Change: drive additional volumes in polls notwithstanding a couple of cuts by the Bank of Canada and I guess bond yields moving down in the U.S. notwithstanding if I could put that as a cut but...
Speaker Change: As you think about 2025, is that 15%?
Speaker Change: Organic growth guidance for pools in 2025. Is that assuming benefits from lower rates or would lower rates be incremental if that drove some further volume?
Eric Bashon: So, you know, I don't like to speculate on economic dynamics. So, yeah, sort of next year's growth is not assuming significant change in interest rates. You know, to your earlier comments, you know, the rates are dropped in Canada, but the biggest driver before you'd only spend related to the rates. It is heavily weighted to the US, which we haven't seen drop yet. But I guess back to what I was saying is that our guidance does not take into account. I guess tailwinds from lower raise and seeing more activity. Okay, perfect.
Eric Vachon: So, I don't like to speculate on economic dynamics, so yes, next year's growth is not assuming a significant change in interest rates. To your earlier comment, rates have dropped in Canada, but the biggest driver for utility spend related to rates is Canada, heavily weighted to the U.S., which we haven't seen drop yet. You know, what I was saying is that our guidance does not take into account that.
Speaker Change: So, you know, I don't like to speculate on economic dynamics, so, yeah, so next year's growth is not assuming significant change in interest rates. You know, to your earlier comment, you know, the rates have dropped in Canada, but the biggest driver for utility spend related to the rates is...
Speaker Change: heavily weighted to the U.S., which we haven't seen drop yet. But, you know, I guess back to what I was saying is that our guidance does not take into account
Eric Vachon: I guess tailwinds from lower rays and see more activity.
Speaker Change: I guess tailwinds from lower rates and seeing more activity.
Michael Tupholme: And just lastly, I think you've sort of touched on it a little bit here in a couple of your comments, but can you just provide an update on any details on new client wins and how you're thinking about the potential growth that could come from that side of things beyond just the existing customers ramping up?
Eric Bashon: And just lastly, I mean, you've sort of touched on it a little bit here in a couple of comments, but can you just provide an update on any details on new comments? The client wins and how you're thinking about the potential growth that could come from that side of things beyond just the existing customers ramping up. Right. Well, if I specifically look at 2024, so we did sign on a few new customers, and it took a while for them to sort of start picking up inventory and building the relationships. So I think we saw some positive effects of that in Q2 and continue believing that we'll see even more positive effects of that with these same customers for the back half of the year.
Speaker Change: Okay, perfect. And just lastly, I mean, I think you've sort of touched on it a little bit here in a couple of your comments, but can you just provide an update on
Speaker Change: Any details on new client wins and how you're thinking about the potential growth that could come from that side of things beyond just the existing customers ramping up?
Eric Vachon: Right. Well, if I specifically look at 2024, we did sign on a few new customers, and it took a while for them to sort of start picking up inventory and building the relationship. So, I think we saw some positive effects of that in Q2, and I continue believing that we'll see even more positive effects of that with these same customers for the back half of the year. So, obviously, that sort of supports our views on volume.
Speaker Change: Right.
Speaker Change: Well, if I specifically look at 2024, so we did sign on a few new customers and it took a while for them to sort of
Speaker Change: And I think we saw some positive effects of that in Q2. And I continue believing that we'll see even more positive effects of that with these same customers for the back half of the year. So obviously that sort of supports our views on volume.
Unknown Executive: So that sort of supports our views on volume. And you know, going into next year or future years, we're always courting new customers and bidding on projects and looking for long-term agreements. As I said in my comments, more and more customers or potential customers are seeking a long-term relationship with a supplier that has the proper profile and the proper network in North America to support their needs. So we keep opening those doors if you want and looking for new business, but I'm not ready to comment yet for 2025. Okay. That's helpful.
Eric Vachon: And, you know, going into next year or future years, we're always courting new customers and bidding on projects and looking for long-term agreements. As I said in my comments, more and more customers or potential customers are seeking a long-term relationship with a supplier that has the proper profile and the proper network in North America to support their needs. So, you know, we keep opening those doors if you want and, you know, looking for new business, but I'm not ready to comment yet on 2025.
Speaker Change: As I said in my comments, more and more customers or potential customers are...
Speaker Change: are seeking a long-term relationship with a supplier that has the proper profile and the proper network in North America to support their needs. So we keep opening those doors if you want and looking for new business, but I'm not ready to comment yet for 2025.
Michael Tupholme: Okay, that's helpful. I'll leave it there. Thank you.
Unknown Executive: I'll leave it there. Thank you.
Michael Tupholme: Thank you, Mikey.
Mike: Thank you, Mike.
Martin Prattier: Thank you. Our next question is from Martin Prattier from Veritas Investments. Please go ahead.
Martin Pradier: Our next question is from Martin Prattier from Veritas Investments. We go ahead. Thank you. Thank you for taking my question. In terms of railroad ties, we've seen very, very strong volumes, and the guidance is like 3% for the year. So how are we going to see negative numbers in the second half? I know you said that there will be lower, but will they be negative or will have more than 3% for the year? No. So yes, it would be year-year negative. As one class, one reduced their program this year, they took most of their volume in the first half of the year.
Speaker Change: Thank you. Our next question is from Martin Prattier from Veritas Investments. Please go ahead.
Eric Vachon: Thank you for taking my question. In terms of railway ties, we've seen very, very strong volume, and the guidance is like three percent for the year. So are we going to see negative numbers in the second half? I know you said that they would be lower, but will they be negative, or will they be more than three percent for the year?
Martin Prattier: So, are we going to see negative numbers in the second half? I know you said that they would be lower, but will they be negative, or will have more than 3% for the year?
Eric Vachon: So, yes, it would be year-over-year negative. As Class 1 reduced their program this year, they took most of their volume in the first half of the year. You know, if I look at Class 1 demand, we know what their expectation is for, let's say, 2024. Then they'll use up, I guess, their requirements at different paces. Some of them will do it in the first six months of the year. A lot of them are usually done by the end of September, as far as buying tie-ins and finishing up the install in early Q4.
Speaker Change: No. So yes, it would be year over year negative. As Class 1 reduced their program this year, they took most of their volume in the first half of the year. If I look at Class 1 demand, we know what their expectation is for, let's say, 2024.
Eric Bashon: If I look at class one demand, we know where their expectation is for, let's say, 2024. Then they'll use up, I guess, their requirements at different pace. Some of them will do it in the first six months of the year. A lot of them are done usually by the end of September as far as buying ties and finishing up the install in early Q4. So, in this particular case, we have seen a bit of a switch or a front loaded for one or two class was earlier in the year, which doesn't mean that we'll have a bit lesser in the second half.
Speaker Change: Then they'll use up, I guess.
Speaker Change: their requirements at different paces. Some of them will do it in the first six months of the year. A lot of them are done usually by the end of September , as far as buying tyres and finishing up the install, you know, in early Q4. So in this particular case, yeah, we have seen a bit of a switch, or a front-loaded for one or two class 1s earlier in the year, which does mean that we'll have a bit lesser in the second half. So you really need to look at it on an annual basis, just because depending on the availability of cars, the availability of the crew, the class 1s will shift around their demand. And that's where, you know, we need to be on our game to service them well, have the product ready when they need them.
Eric Vachon: So in this particular case, yeah, we have seen a bit of a switch or a front load for one or two class ones earlier in the year, which does mean that we'll have a bit less in the second half. So you really need to look at it on an annual basis, just because, depending on the availability of cars, and the availability of the crew, the class ones will shift around their demand. And that's where we need to be on our game to service them well, have the product ready when they need it. That would be part of the features that we need to put forward in order to maintain relationships with our customers and hopefully get larger pieces of their maintenance programs going forward.
Eric Bashon: So you really need to look at it on an annual basis just because, depending on the availability of cars, the availability of the crew, the class ones will shift around their demand. And that's where we need to be on our game to service them well, have the product ready when they need them.
Unknown Executive: That would be part of the features that we need to put forward in order to maintain the relationship with our customers and hopefully get larger pieces of their maintenance programs going forward. Great.
Speaker Change: be a part of the features that we need to put forward in order to maintain the relationships with our customers and hopefully get larger pieces of their maintenance programs going forward.
Eric Vachon: And in terms of residential real estate, we've seen a decline that was perhaps a little bit stronger than I expected. Can you comment on how much volume versus price declined and how that looks going forward for the second half?
Eric Bashon: And in terms of residential real estate, we've seen a decline that was perhaps a little bit stronger than I expected. Can you comment on how much was volume versus price, and how does that look going forward for the second half? Yeah, it was like all volume. I would say like, you know, 90% volume. So pricing has been relatively stable. So we tracked the two by six on random length. It's been hovering between six hundred, six fifty thousand more foot. So it's been relatively stable to the market. So it's really all about volume discussions with our customers.
Speaker Change: Great. And in terms of residential real estate, we've seen a decline that was perhaps a little bit stronger than I expected. Can you comment on how much was volume versus price and how does that look going forward for the second half?
Eric Vachon: Yeah, it was like All volume, I would say like, you know, 90, 90% volume. So pricing has been relatively stable. If you look at lumber prices, so we tracked the 2 by 6 on random length, it's been, you know, hovering between 600, 650, 1000 feet. So our sort of sales price has been relatively stable with the market. So it's really all about volume.
Speaker Change: Yeah, it was like...
Speaker Change: All volume, I would say, like, you know.
Speaker Change: The Section on pointer Geometry 2 was on the 21st century, and here is a time-lapse of a state's leading long-range telescope, Caesar, using its high-powered compact nine- mutta. The macro-cam image can be seen from either camera to side-angle to the left. Crossing the trees pushes light through trees and mountains into the sky as is used to discover impossible impend sales.
Speaker Change: You know, hovering between 600, 650, 1000 more foot, so it's been relatively, our sort of sales price has been relatively stable to the market, so it's really all about volume.
Martin Prattier: In discussions with our customers, they believe that, you know, we can still catch up part of that in the second half of the year. In view of that, we've been a bit more conservative and said, look, we'll look at the lower end of our guidance for now. And, you know, if they do manage to wrap up some volume, it'll be a pleasant surprise for us going to the end of the year. But I think our guidance right now is really good. Great, thank you very much.
Unknown Executive: They believe that we can still catch up part of that in the second half of the year that our customers view. We've been a bit more conservative and said, "look at the lower end of our guidance for now." And you know, if they do manage to wrap up some volume, it'll be a pleasant surprise for us that we're going to the end of the year. But I think our guidance right now is reasonable. Great. Thank you very much.
Speaker Change: Discussions with our customers, they believe that...
Speaker Change: You know, we can still catch up part of that in the second half of the year, that our customers view. We've been a bit more conservative and said, look, we'll look at the lower end of our guidance for now. And, you know, if they do manage to wrap up some volume, it'll be a pleasant surprise for us going to the end of the year. But I think our guidance right now is reasonable.
Unknown Executive: My pleasure.
Speaker Change: Great. Thank you very much.
Unknown Executive: Thank you.
Operator: Before taking the next question, we'd just like to remind you that if you're on the phone and you wish to ask a question, please press star 1. Our next question is from Benoit Poirier from Desjardins Securities. Please go ahead.
Unknown Executive: Before taking the next question, we'd just like to remind you that if you're on the phone and you wish to ask a question, please press star one.
Speaker Change: Thank you. Before taking the next question, we'd just like to remind you that if you're on the phone and you wish to ask a question, please press star 1.
Benoit Poirier: Our next question is from Benoit Paulier from There's Other Securities, please go ahead. Thanks. There was some very unfortunate events that took place, obviously, in Florida, where we've seen Jasper not too long ago, California. So any thoughts about whether it has been an Edwin, a tailwind and the potential implication going forward for you. Well, you know, every year we have unfortunate fire events, windstorms, you know, different events that impact different regions in North America. You know, so we take a lot of pride in our emergency response and servicing our customers and making sure that we get the power back into communities and supporting, you know, obviously emergency services.
Speaker Change: Our next question is from Benoit Poirier from Desjardins Securities. Please go ahead.
Benoit Poirier: There were some very unfortunate events that took place, obviously, in Florida. We've seen JASPER not too long ago, California. So, any thoughts about whether it has been a headwind, a tailwind, and the potential implication going forward for you?
Benoit Poirier: There were some very unfortunate events that took place, obviously, in Florida. We've seen Jasper not too long ago, California. So, any thoughts about whether it has been a headwind, a tailwind, and the potential implication going forward for you?
Eric Vachon: Well, you know, Benoit, every year we have them. Unfortunate fire events, wind storms, and different events that impact different regions in North America. So we take a lot of pride in our emergency response and in servicing our customers and making sure that we get the power back into communities and supporting, obviously, emergency services. It's never been a big tailwind, you know; we've never seen a big uptick. You know? I think I've explained a few times in the past that, you know, when one region suffers, and more efforts are put into, you know, changing out some poles and putting in some infrastructure, a lot of nearby communities, their utilities will go out and help out.
Eric Vachon: So if there's an event in Texas, you'll see, you know, utilities from Louisiana, for example, go and help out. So when that happens, there's less work happening in Louisiana. So, you know, there could be small upticks, but it's never, significantly enough for us to call out, if at all. But I guess, again, the value that we bring is being able to service our customers because they don't have to worry about whether or not we are going to get polls; they know where they're going to get them.
Speaker Change: Well, you know, Benoit, every year we have.
Speaker Change: You know, different regions in North America, you know, so we take a lot of pride in our emergency response and servicing our customers and making sure that we get the power back into communities and supporting, you know, obviously emergency services.
Eric Bashon: It's never been a big tailwind. You know, we've never seen a big uptick. You know, I think I've explained a few times in the past that, you know, when one region suffers and, you know, more efforts are put into changing out some pole and putting some structure. A lot of nearby communities, their utilities will go out and help out. So if there's an event in Texas, you'll see, you know, utilities from Louisiana, for example, go and help out. So when that happens, there's less work happening in Louisiana. So, you know, there could be small upticks.
Speaker Change: It's never been a big tailwind, you know, we've never seen a big uptick, you know, I think I've explained a few times in the past that
Speaker Change: You know, when one region suffers and, you know, more efforts are put into, you know, changing out some poles and putting some infrastructure.
Speaker Change: A lot of nearby communities, their utilities will go out and help out, so if there's an event in Texas, you'll see utilities from Louisiana, for example, go and help out, so when that happens, there's less work happening in Louisiana.
Eric Bashon: It's never significant enough for us to call out if that all sometimes. But I guess, again, the value that we bring is being able to service our customers because they don't have to worry about, are we going to get poles? They know they're going to get them. We have the fleet of trucks, we have the employees, we have the service, we have the inventory, and we have 24-hour availability when storm response is concerned. So I think that's where we show the strength of our network and the strength of our inventory position to support.
Speaker Change: There could be small upticks, it's never significant enough for us to call out, if at all sometimes.
Speaker Change: But I guess, again, the...
Speaker Change: The value that we bring is being able to service our customers because they don't have to worry about, are we going to get polls? They know they're going to get them. We have...
Eric Vachon: We have the fleet of trucks, we have the employees, we have the service, we have the inventory, and we have 24-hour availability when storm response is concerned, so I think that's where we show the strength of our network and the strength of our inventory position to support. Okay.
Speaker Change: We have the fleet of trucks, we have the employees, we have the service, we have the inventory, and we have 24-hour availability when storm response is concerned. So I think that's where we show the strength of our network and the strength of our inventory position to support our customers.
Benoit Poirier: Okay, that's great. And maybe just a quick one for Silvana. Given all the comments made on the call-out, how should we be looking at the working capital movements in Q3 and Q4 and maybe for the full year?
Unknown Executive: Okay, that's great.
Silvana Travelini: And maybe just a quick one for Silvana. Given all the comments made on the call-out, how should we be looking at the working capital movements in Q3 and Q4 and maybe for the full year? Yeah, so we do expect, you know, in the second half of the year with the volumes baking up, as we mentioned for polls, we do expect, you know, a drawdown there. So, year over year, you know, we are, as we have said, still expecting the inventory levels to be flat. So, you know, a drawdown in the second half in order to end up with that flat year over year.
Speaker Change: Okay, that's great. And maybe just a quick one for Silvana. Given all the comments made on the call-out, how should we be looking at the working capital movements in Q3 and Q4 and maybe for the full year?
Silvana Travaglini: Yes, so we still, we do expect, you know, in the second half of the year with the volumes picking up, as we mentioned, for polls, we do expect, you know, a drawdown there. So year-over-year, we are, as we have said, still expecting the inventory levels to be flat. So, you know, a drawdown in the second half in order to end up with that flat year-over-year pick capital. So, you know, we are, as we have said, still expecting the inventory levels to be flat. So, you know, a drawdown in the second half in order to end up with that flat year-over-year growth. Okay, thank you very much.
Sylvain: Yes, so we're still, we do expect, you know, in the second half of the year with the volumes picking up, as we mentioned, for polls, we do expect, you know, a drawdown there, so year over year, you know, we are, as we have said, still expecting the inventory levels to be flat, so, you know, a drawdown in the second half in order to end up with that flat year over year working capital movement.
Unknown Executive: Okay, thank you very much.
Unknown Executive: Thank you, Benoit.
Speaker Change: Okay, thank you very much.
Unknown Executive: We have no further questions in the queue. Thank you.
Operator: We have no further questions in the queue. Thank you.
Benoit Poirier: Thank you, Benoit.
Eric Vachon: Thank you, Matthew, and thank you everyone for joining us today. We look forward to updating you on our third quarter call in November. Until then, have an enjoyable end to summer, and be safe. Thank you.
Unknown Executive: Thank you, Matthew. And thank you, everyone, for joining us today. We look forward to updating you on our third quarter call in November. Until then.
Speaker Change: We have no further questions in the queue. Thank you.
Speaker Change: Thank you, Matthew. And thank you everyone for joining us today. We look forward to updating you on our third quarter call in November . Until then, have an enjoyable end of summer and be safe. Thank you.
Unknown Executive: Have an enjoyable end of summer and be safe. Thank you.
Unknown Executive: Ladies and gentlemen, this concludes today's call. Thank you for participating. You may now disconnect your lines.
Operator: Ladies and gentlemen, this concludes today's call. Thank you for participating. You may now disconnect your lines.
Speaker Change: Ladies and gentlemen, this concludes today's call. Thank you for participating. You may now disconnect your lines.
Unknown Executive: Please stand by and enjoy this music. If you wish to queue to ask a question, dial star one.
Speaker Change #100: Please stand by and enjoy this music. If you wish to queue to ask a question, dial star 1.