Q4 2024 ATCO Ltd Earnings Call
All participants are in a listen only mode and the conference is being recorded after the presentation, there will be an opportunity to ask questions.
And the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing Star then zero.
Speaker Change: I would now like to turn the conference over to Mr. Colin Jackson Senior Vice President Financial operations. Please go ahead Mr. Jackson.
Colin Jackson: Thank you and good morning, everyone.
Colin Jackson: We are pleased you could join us for <unk> fourth quarter 2024 conference call.
Katie Patrick: On the line today, we have Katie Patrick Executive Vice President Chief Financial and investment Officer.
Thank you for standing by this is the conference operator, welcome to fourth quarter 2024 results conference call and webcast at co Ltd.
Speaker Change: And Adam Beatty President of Atco structures.
Speaker Change: Before we move into todays remarks, I would like to take a moment to acknowledge the numerous traditional territories and homelands of which our global facilities are located.
All participants are in a listen only mode and the conference is being recorded after the presentation, there will be an opportunity to ask questions.
Speaker Change: Today I am speaking to you from our Echo Park head office in Calgary, which is located in the Treaty seven region.
Speaker Change: And the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing star Zero I would now like to turn the conference over to Mr. Colin Jackson Senior Vice President of financial operations. Please go ahead Mr. Jackson.
This is the ancestral territory of the Blackfoot Confederacy comprised of the Zika the kind NIE in the economy nations.
Speaker Change: Tina Nation, and the Estonian Dakota Nations, which include the chimney key bearish Pas and good Stony first nations.
Colin Jackson: Thank you and good morning, everyone.
Colin Jackson: We are pleased you could join us for Arcos <unk> fourth quarter 2024 conference call.
Speaker Change: I also want to recognize that the city of Calgary is home to <unk> nation of Alberta districts, five and six.
Katie Patrick: On the line today, we have Katie Patrick Executive Vice President Chief Financial and investment Officer.
Speaker Change: We honor and respect the diverse history languages ceremonies and culture of indigenous peoples, who call these areas palm.
Katie Patrick: And Adam Beatty President of Atco structures.
Katie Patrick: Before we move into todays remarks, I would like to take a moment to acknowledge the numerous additional territories and homeland of which our global facilities are located.
Speaker Change: Today, we will hear from Katie who will deliver opening comments on our financial results and recent company developments, followed by an update from Adam on Echo structures.
Katie Patrick: Today I am speaking to you from our Echo Park head office in Calgary, which is located in the Treaty seven region.
Adam Beatty: Following today's remarks, the echo team, we'll take questions from the investment community.
Katie Patrick: This is the ancestral territory the Blackfoot Confederacy comprised of <unk> Sky.
Adam Beatty: Please note that a replay of the conference call a copy of the presentation and today's transcript will be available on our website at <unk> Dot com following the call.
Katie Patrick: And the economy nations.
Katie Patrick: Tina Nation, and the Estonian Dakota Nations, which include Nicky Bears Pas and good Stony first nations.
Adam Beatty: The materials can be found in the investors section under events and presentations.
I also want to recognize that the city of Calgary is homes that <unk> nation of Alberta.
Today's remarks will include forward looking statements that are subject to important risks and uncertainties.
Katie Patrick: Six five and six.
For more information on these risks and uncertainties. Please refer to our filings with the Canadian Securities regulators.
Katie Patrick: We honor and respect the diverse history languages ceremonies and culture of the indigenous peoples, who call these areas Paul.
During today's presentation, we may refer to certain non-GAAP and other financial measures, including adjusted earnings adjusted EBITDA and capital investment.
Katie Patrick: Today, we will hear from Katie who will deliver opening comments on our financial results and recent company developments, followed by an update from Adam on Atco structures.
Adam Beatty: These measures do not have any standardized meaning under <unk>.
Katie Patrick: Following today's remarks, the echo team, we'll take questions from the investment community.
And as a result, they may not be comparable to similar measures presented by other entities.
Katie Patrick: Please note that a replay of the conference call a copy of the presentation and today's transcript will be available on our website at <unk> Dot com following the call.
Katie Patrick: And now I'll turn the call over to Katy for opening remarks.
Adam Beatty: Yeah.
Adam Beatty: Thanks, Colin and good morning, everyone. Thank you all for joining us today.
Katie Patrick: The materials can be found in the investors section under events and presentations.
Adam Beatty: Reflecting on the past year, our strong performance in 2024 highlights our continued focus on our strategic growth objectives.
Katie Patrick: Today's remarks will include forward looking statements that are subject to important risks and uncertainties.
Adam Beatty: I am pleased to report that <unk> achieved adjusted earnings of $481 million is $49 million and.
Katie Patrick: For more information on these risks and uncertainties. Please refer to our filings with the Canadian Securities regulators.
Adam Beatty: And over 11% higher than the previous year.
Adam Beatty: This $49 million of growth demonstrates the strength of our strategy to invest in resilient assets within the essential services space with all of our segments delivering year over year growth in adjusted earnings compared to 2023.
Katie Patrick: During today's presentation, we may refer to certain non-GAAP and other financial measures, including adjusted earnings adjusted EBITDA and capital investment.
Katie Patrick: These measures do not have any standardized meaning under ifr S.
Adam Beatty: At Canadian utilities growth in 2024 was driven by a few factors including rate base growth across our utilities the increase in allowable ROA from eight 5% in 2023 to $9 two 8% in 2024 and the benefit of the efficiency carryover mechanism.
Katie Patrick: And as a result, they may not be comparable to similar measures presented by other entities.
Katie Patrick: And now I'll turn the call over to Katy for opening remarks.
Katie Patrick: Yeah.
Katy: Thanks, Colin and good morning, everyone. Thank you all for joining us today.
Katy: Reflecting on the past year, our strong performance in 'twenty 'twenty four highlights our continued focus on our strategic growth objectives.
Adam Beatty: As discussed on this mornings call, we will have a reset to Alberta, Alberta utilities allowable ROE from 9% to 8% to $8 nine 7% for 2025. Additionally.
Katy: I'm pleased to report that <unk> achieved adjusted earnings of $481 million is $49 million and over 11% higher than the previous year.
Adam Beatty: Additionally, the efficiency carryover mechanism, we were awarded in 2023 and 2024.
Katy: This $49 million of growth demonstrates the strength of our strategy to invest in resilient assets, but didn't essential services space with all of our segments delivering year over year growth in adjusted earnings compared to 2023.
Adam Beatty: We're achieving efficiencies during <unk> comes to an end.
Adam Beatty: With these two factors while these two factors will contribute to more moderated growth in 2025, we anticipate continued rate base growth and cost savings to partially offset this.
Katy: Canadian utilities growth in 2020 four was driven by a few factors including rate base growth across our utilities the increase in allowable ROA from eight 5% in 2023% to 9.28% in 2024 and the benefit of the efficiency carryover mechanism.
Adam Beatty: Over the long term, we continue to be bullish on the outlook of our energy businesses as.
Adam Beatty: As population and industrial needs to continue to grow we expect to see very strong fundamentals in our core Alberta markets and opportunities to deliver even higher rate base growth.
Adam Beatty: Moving to structures and logistics adjusted earnings in 2024 were $14 million higher compared to the prior year.
Katy: As discussed on this mornings call, we will have a reset to Alberta, Alberta utilities allowable ROE from 9.28% to 897% for 2025.
Adam Beatty: Our cost structures delivered growth throughout 2024, which was tied to their strong base business performance driven by increased global space rental activity. In addition to improved workforce housing trade sales performance across Australia, Canada and the U S.
Katy: Additionally, the efficiency carryover mechanism, we were awarded in 2023 and 2024.
Katy: We're achieving efficiencies during P. D. R. Two comes to an end.
Katy: But these two factors well. These two factors will contribute to more moderated growth in 2025, we anticipate continued rate base growth and cost savings to partially offset this.
Adam Beatty: Now to me imports continued to deliver consistent results as adjusted earnings were $2 million higher compared to the prior year.
Adam Beatty: Now to me remains focused on growth and the deployment of capital all while b, all while being a stable source of dividends bracco.
Katy: Over the long term, we continue to be bullish on the outlook of our energy businesses.
Katy: Population and industrial needs continue to grow we expect to see very strong fundamentals in our core Alberta markets and opportunities to deliver even higher rate base growth.
Adam Beatty: Moving to the very important cash generation when looking at a standalone app co businesses, which exclude Canadian utilities cash flow from operating activities was $280 million in 2024 up over 50% from the prior year.
Katy: Moving to structures and logistics adjusted earnings in 2024 were $14 million higher compared to the prior year.
Adam Beatty: This growth was driven by a strong focus on finding efficiencies within our business.
Katy: At the structures delivered growth throughout 'twenty, 'twenty, four which was tied to their strong base business performance driven by increased global space rental activity. In addition to improved workforce housing trade sales performance across Australia, Canada and the U S.
Adam Beatty: Along with actual energy being reported under our actual corporate segment in 2020 for.
Adam Beatty: This growth supported operations capital program and normal course financial commitments.
Looking ahead, we can that we continue to have significant growth aspirations across our existing investments at agco and shareowners can expect that new investments, we make will be tied to our proven strategy of investing within the essential services space.
Katy: Now to me imports continued to deliver consistent results as adjusted earnings were $2 million higher compared to the prior year.
Katy: Now to me remains focused on growth and the deployment of capital all I'd be all while being a stable source of dividends radical.
Adam Beatty: Further our capital investment plan over the medium term at the asset level is expected to be primarily funded by our internally generated cash flow.
Katy: Moving to the very important cash generation when looking at our Standalone app coal businesses, which exclude Canadian utilities cash flow from operating activities was $280 million in 2024 up over 50% from the prior year.
Speaker Change: Before I turn the call over to Adam to discuss our atco structures in more detail I want to speak to our actual investment portfolio briefly.
Katy: This growth was driven by a strong focus on finding efficiencies within our business along with agile energy being reported under our actual corporate segment in 2020 for.
Speaker Change: To maintain our exceptional dividend and resiliency our portfolio has been constructed to provide a balanced between yield and long term growth.
Speaker Change: This balanced ensures we are stable and reliable earnings and cash flows to support not only our dividends, but also the investments we expect to make within our existing businesses to drive long term growth.
Katy: This growth supported operations capital program and normal course financial commitments.
Katy: Looking ahead, we can that we continue to have significant growth aspirations across our existing investments at agco and shareowners can expect that new investments, we make will be tied to our proven strategy of investing within India Central services space.
Speaker Change: As a final point.
Speaker Change: We will continue to focus on demonstrating the value of that cost structures. As we believe the market is currently undervalued this investment.
Katy: Further our capital investment plan over the medium term at the asset level is expected to be primarily funded by internally generated cash flow.
Speaker Change: Despite aero structures down delivering an annual adjusted EBITDA of over $240 million, along with 10 quarters in a row of year over year adjusted earnings growth.
Speaker Change: Before I turn the call over to Adam to discuss Ah Atco structures in more detail I want to speak to our actual investment portfolio briefly.
Speaker Change: It continues to be valued at a significant discount compared to our north American peers, which trade at eight to 10 times EBITDA.
Katy: Yeah.
Speaker Change: We look forward to continuing our investor marketing efforts throughout 2025 and beyond to talk more about this.
Katy: To maintain our exceptional dividend and resiliency our portfolio has been constructed to provide a balance between yield and long term growth.
Speaker Change: And with that I will now pass it over to Adam to further discuss our aero structures business.
Katy: This balanced insurers, we have stable and reliable earnings and cash flows to support not only our dividends, but also the investments we expect to make within our existing businesses to drive long term growth.
Adam Beatty: Thank you Katie and good morning, everyone.
Adam Beatty: As Cody alluded to Atco structures delivered another strong year with adjusted earnings of $108 million.
Katy: As a final point.
Katy: We will continue to focus on demonstrating the value of atco structures as we believe the market is currently undervalued this investment.
Adam Beatty: Representing our 10th quarter in a row of delivering year over year adjusted earnings growth.
Adam Beatty: In 2024, we realized growth across all the markets. We operate in we expanded our global footprint by establishing new markets and surface capabilities through both organic and planned strategic initiatives.
Katy: Despite that the structures down delivering an annual adjusted EBITDA of over $240 million, along with 10 quarters in a row of year over year adjusted earnings growth.
Katy: It continues to be valued at a significant discount compared to our north American peers, which trade at eight to 10 times EBITDA.
Adam Beatty: During the year, we established five new operating locations across Canada, and the U S alone.
Adam Beatty: Increased demand combined with continuous supply optimizations allowed us to continue to sustain growth in our rental fleet and other business lines.
Katy: We look forward to continuing our investor marketing efforts throughout 2025 and beyond to talk more about this.
Katy: And with that I will now pass it over to Adam to further discuss our aero structures business.
Adam Beatty: Our strategically positioned international operations compliance combined with our expertise and global modular product manufacturing remains a key competitive differentiator to our module appears at.
Adam Beatty: Thank you Katie and good morning, everyone.
Cody: As Cody alluded to Atco structures delivered another strong year with adjusted earnings of $108 million, representing our 10th quarter in a row of delivering year over year adjusted earnings growth.
Adam Beatty: Our recent pace of growth across our footprint strengthens our position as a market leader in modular shelter solutions.
Cody: In 'twenty 'twenty four we realized growth across all the markets. We operate in we expanded our global footprint by establishing new markets and surface capabilities through both organic and planned strategic initiatives during.
Adam Beatty: Our growth continues to be underpinned by the expansion of our buy business, primarily in the U S, Canada, and Australia, and the optimization of our global fleet performance and distribution of single and multifamily modular housing products.
Cody: During the year, we established five new operating locations across Canada, and the U S alone.
For the last five years at global Spice rentals business has seen an increase in our total fleet size by 53% to over 25000 units that are well diversified geographically across the five countries, we operate and growth in our average rental rate of over 38%. This.
Cody: Increased demand combined with continuous supply optimizations allowed us to continue to sustain growth in our rental fleet and other business lines.
Cody: Our strategically positioned international operations compliance combined with our expertise and global modular product manufacturing remains a key competitive differentiator to our module appears at.
Adam Beatty: While maintaining an average utilization around that target of 75% demonstrating the continuous execution of our strategy, which is to increase our customer base and market share are effectively moving new fleet onto contracted rental terms, while still providing sufficient stock of <unk>.
Cody: Our recent pace of growth across our footprint strengthens our position as a market leader in modular shelter solutions.
Our growth continues to be underpinned by the expansion of Empire business, primarily in the U S, Canada, and Australia, and the optimization of the global fleet performance and distribution of single and multifamily modular housing products.
Adam Beatty: Global assets to quickly service at customers across multiple project sites.
Adam Beatty: Going forward strategic investment will be organic and inorganic organically and inorganically made to continue to grow our fleet and other sustaining base business initiatives aligning with our long term growth strategies.
Cody: For the last five years at global Spice rentals business has seen an increase in that total fleet size by 53% to over 25000 units that are well diversified geographically across the five countries, we operate and growth in our average rental rate of over 38%. This.
Adam Beatty: In 2024, we are pleased to announce the acquisition we were pleased to announce the acquisition of NR be modular solutions.
Adam Beatty: <unk> was a leader in manufactured module and multifamily residential industrial education and commercial buildings.
Cody: While maintaining an average utilization around that target of 75% demonstrating the continuous execution of our strategy, which is to increase our customer base and market share are effectively moving new fleet onto contracted rental times, while still providing sufficient stock up or buy.
Adam Beatty: Upon close the business was fully integrated into our Canadian modular operations.
Adam Beatty: The acquisition allowed us to more competitively and quickly support products.
Adam Beatty: <unk> products to our existing operations and customers in Ontario, and British Columbia.
Cody: Global assets to quickly service that customers across multiple projects thoughts.
Adam Beatty: Where we previously did not have manufacturing capabilities.
Cody: Going forward strategic investment will be organic and inorganic organically and inorganically made to continue to grow our fleet and other sustaining base business initiatives aligning with our long term growth strategies.
Adam Beatty: <unk>, playing a key role in our growth strategy, expanding our fleet and increasing our expertise and.
Adam Beatty: Capacity to provide world class modular products and services to more customers across Canada.
Cody: In 2020 full we are pleased to announce the acquisition. We were pleased to announce the acquisition of <unk> and I'll be modulus loosens.
Adam Beatty: With this acquisition Atco structures is now the only national module accompany that provides multiple forms of advanced new modular products fleet diverse manufacturing capability and world class site construction and project management capabilities across all of Canada.
Cody: And I'll be was a leader in manufactured module on multifamily residential industrial education and commercial buildings.
Cody: Upon close the business was fully integrated into our Canadian multiple operations.
Adam Beatty: As we move into 2025, we remained focused on delivering sustainable earnings growth and structures.
Cody: The acquisition allowed us to more competitively and quickly support products supply products to our existing operations and customers in Ontario, and British Columbia.
Adam Beatty: Driven by continued growth of our base business and the continued advancement of our skills and capabilities as an innovative world leader in modular solutions.
Cody: Where we previously did not have manufacturing capabilities.
Adam Beatty: Beyond this success with delivered within a spice rentals business or other business lines continue to provide a robust and balanced business model.
Cody: And I'll be he's playing a key role in our growth strategy, expanding our fleet and increasing our expertise in case capacity to provide world class modular products and services to more customers across Canada.
Adam Beatty: Our residential housing segment Triple M housing continues to deliver strong results and has proved to be a valuable strategic addition to our business capability and portfolio.
Cody: With this acquisition our cost structures is now the only national modular company that provides multiple forms of advanced modular products fleet diverse manufacturing capability and world class site construction and project management capabilities across all of Canada.
Adam Beatty: We expect the current backlog of opportunities in front of us to continue throughout 2025 as an imbalance between housing demand and supply persists I am pleased to say that modular housing is becoming a recognizable and popular solution to this national and international issue and <unk> has an array of.
Cody: As we move into 2025, we remained focused on delivering sustainable earnings growth and structures.
Adam Beatty: And skills to solution and support this night.
Cody: Driven by continued growth of our base business and the continued advancement of our skills and capabilities as the need of innovative world leader in modular solutions.
Adam Beatty: Overall, we remain confident that that continues to be a solid pipeline of project opportunities across Australia, Canada, and the United States and with improving business conditions in Latin America, We believe our cost structures is well positioned and equipped to secure and execute new opportunities in 2010.
Cody: Beyond this success with delivered within a spice rentals business or other business lines continue to provide a robust and balanced business model.
Cody: Residential housing segment Triple M housing continues to deliver strong results and has proved to be a valuable strategic addition to our business capability and portfolio.
Adam Beatty: Any thoughts.
Adam Beatty: I look forward to sharing these further these future updates as we progress throughout the year.
Katie Patrick: I'll now pass the call back to Katie.
Cody: We expect the current backlog of opportunities in front of us to continue throughout 2025 as an imbalance between housing demand and supply persists I'm pleased to say that modular housing is becoming a recognizable and populist solution to this national and international issue and Agco has an array of products.
Katie Patrick: Thank you Adam.
Katie Patrick: Since acquiring our 40% interest in alternate ports in 2018, our ports investment has been a stable contributor to earnings and dividends for agco.
Speaker Change: As we look to the future now to imports will continue to focus on growth and the deployment of capital.
Cody: And skills to solution and support this night.
Speaker Change: In the form of increased ownership in our existing ports and through the pursuit of new investments for a diversified portfolio.
Cody: Overall, we remain confident that there continues to be a solid pipeline of project opportunities across Australia, Canada, and the United States and with improving business conditions in Latin America, We believe our cost structures is well positioned and equipped to secure and execute new opportunities in 'twenty two.
Speaker Change: Part of this next phase of growth is tied to our Vancouver bulk terminal joint venture with Novelis.
Speaker Change: This opportunity will see us develop.
Speaker Change: Soda ash export bulk facility at terminal two within the Port of Vancouver, Washington.
Speaker Change: As we move into 2025 and beyond we expect to announce who may ports investment to generate earnings and growth through improved operational efficiencies at existing ports as well as deployment of capital into Greenfield brownfield and M&A opportunities.
Cody: Any thoughts.
Cody: I look forward to sharing these few further these future updates as we progress throughout the year.
Katie Patrick: I'll now pass the call back to Katie.
Katie Patrick: Thank you Adam.
Katie Patrick: Yeah.
Speaker Change: Since acquiring our 40% interest in alternate ports in 2018, our ports investment has been a stable contributor to earnings and dividends for Atco.
Speaker Change: Overall <unk> had a great 2024 as demonstrated by the performance of each of our business units.
As we look to the future now to imports will continue to focus on growth and the deployment of capital.
Speaker Change: Across our portfolio of investments, we continue to focus on executing on our growth plans.
Speaker Change: More than that we continue to believe that the unique combination of investments in our portfolio and the work we've done to expand the earnings from these investments creates the foundation to support our growth aspirations going forward.
Speaker Change: As a form of increased ownership in our existing ports and through the pursuit of new investments for a diversified portfolio.
Speaker Change: Part of this next phase of growth is tied to our Vancouver bulk terminal joint venture with novelists.
Speaker Change: Yeah.
Speaker Change: This opportunity will see us develop the soda ash export bulk facility at terminal two within the port of Vancouver, Washington.
Colin Jackson: That concludes our prepared remarks, I will now turn the call back to Colin.
Colin Jackson: Thank you Katy and the interest of time, we ask that you limit yourself to two questions. If you have additional questions you are welcome to rejoin the queue.
Speaker Change: As we move into 2020 five and beyond.
Speaker Change: We expect to announce who many ports investment to generate earnings and growth through improved operational efficiencies at existing ports as well as deployment of capital into Greenfield brownfield and M&A opportunities.
Colin Jackson: I will now turn it over to the conference coordinator for questions.
Speaker Change: Thank you to join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request.
Speaker Change: Overall, I still had a great 2024 as demonstrated by the performance of each of our business units.
Speaker Change: A speakerphone please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
Speaker Change: Across our portfolio of investments, we continue to focus on executing on our growth plans.
Our first question comes from Robert Hope with Scotiabank. Please go ahead.
Speaker Change: More than that we continue to believe that the unique combination of investments in our portfolio and the work we've done to expand the earnings from these investments creates the foundation to support our growth aspirations going forward.
Speaker Change: Afternoon or morning, everyone.
Speaker Change: Maybe to start off on the residential housing opportunity can you maybe dive a little bit deeper here like how much of structures is that right now and where you think it could be in a couple of years. It does seem like this is a.
Colin Jackson: That concludes our prepared remarks, I will now turn the call back to Colin.
Colin Jackson: Thank you Katy and the interest of time, we ask that you limit yourself to two questions. If you have additional questions you are welcome to rejoin the queue.
Speaker Change: Effort to increase the size of the business and we did see Viva housing being launched.
Speaker Change: Thanks, Robert and good morning.
Speaker Change: I will now turn it over to the conference coordinator for questions.
Speaker Change: Or good afternoon to you.
Speaker Change: Thank you to join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any keys to it.
Speaker Change: Look the residential market and our position Nova is simply I'll start with Triple aim.
Speaker Change: Triple aim is the largest or the largest module of single family housing provider in Western Canada. So from a market share basis, I think from that perspective, there are a significant supplier into western Canada, and some parts of the U S with a small portion of their supply.
Speaker Change: Your question. Please press Star then two.
Robert Hope: Our first question comes from Robert Hope Scotiabank. Please go ahead.
Robert Hope: Afternoon or morning, everyone, maybe to start off on the residential housing opportunity can you maybe dive a little bit deeper here like how much of structures is that right now and where you think it could be in a couple of years. It does seem like this is a an effort to increase the size of the business.
Speaker Change: <unk>.
Speaker Change: That opportunity expanse within a b when we get into different forms of housing requirements of residential requirements and they have quite a track record.
Speaker Change: <unk> delivering.
Speaker Change:
Speaker Change: A number of multifamily projects throughout eastern Canada, or central Canada, and the west as well so.
We did see a veeva housing are being launched.
Speaker Change: Thanks, Robert and good morning, or good afternoon to you.
Speaker Change: In terms of volume.
Speaker Change: Reasonable it's not the majority portion of our business, but it's a significant portion.
The residential market and our position now but is it simply I'll stop with Triple aim.
Speaker Change: In terms of our style trade activity that we produce in our company and then the market opportunities for it.
Speaker Change: Triple aim is the largest or the largest module of single family housing provider in Western Canada. So from a market share base I think from that perspective, there are a significant supplier into western Canada, and some parts of the U S with a small portion of their supply.
Speaker Change: Obviously.
Speaker Change: To build it out further in Canada.
Speaker Change: And then we also see the potential further opportunities into the future in other countries and where we may operates.
Speaker Change: That product is probably more minimal in terms of this point in time in Canada is the majority of where that activity occurs.
Speaker Change: That opportunity expands within a b when we get into different forms of housing requirement. So residential requirements and I have quite a track record of.
I appreciate that and then maybe just moving over to <unk>.
Speaker Change: <unk> delivering.
Negative earnings for the year, you've had a more negative quarter share then positive over the last couple of years.
Speaker Change: Hum.
Speaker Change: A number of multifamily projects throughout Eastern Canada will central Canada, and the west as well so.
Speaker Change: Is there any ability here to improve the profitability of that business and I guess, how much of that is actually tied to the structure as part of the business versus and business development versus we'll call. It some underperforming business lines.
Speaker Change: In terms of volume, it's a reasonable it's not the majority portion of that business, but it's a significant portion in terms of as filed tried activity that we produce in that company and then the market opportunities for it obviously to build it out further than <unk>.
Speaker Change: Yes, thanks, Robert it's been a it's been a difficult few quarters.
Speaker Change: <unk> for <unk> in terms of the overall results.
Canada.
Speaker Change: And there's been a few headwinds that have been facing it inflation certainly was one of the items that was causing some issues.
Speaker Change: And then we also see the potential further opportunities.
Speaker Change: Into the future in other countries and where we may offer right. So but that that that product is probably more minimal in terms of this point in time in Canada is the majority of where that activity occurs.
Speaker Change: This is a.
Speaker Change: This is a tight margin business so in any way that costs.
Speaker Change: Escalate quickly it will erode margins pretty quickly.
Speaker Change: That said there is a very strong link.
Speaker Change: I appreciate that and then maybe just moving over to <unk> Tec.
Speaker Change: Between our.
Speaker Change: Between our Aerostructures business and contact on the campus side of the business and the camera is one portion of the upfront tax business.
Speaker Change: Negative earnings for the year, you've had a more negative quarter share then positive over the last couple of years is there an ability here to improve the profitability of that business and I guess you know how much of that is actually tied to the structure as part of the business first and business development versus we'll call. It some underperforming business lines.
Speaker Change: So I think Adam can talk to that because I think that's that's been historically a very good add on and a very complimentary service offerings I might let Adam just talk about how that can play out in the future.
Adam Beatty: Yes, Thank you again Robert.
Speaker Change: Yeah. Thanks, Rob I know, it's been a it's been a difficult a few quarters here.
Speaker Change: I certainly think there is a strategic value to our customer base and offering a turnkey solution and when our cost structures and from tech unify and deliver these packages to our customers. It's always positive positively received in the markets.
Speaker Change: Here for Fab Tech in terms of the overall results and there's been a few headwinds that have been facing it inflation certainly was one of the items that was causing some issues. You know this is a this is a tight margin business. So in any way that costs.
Speaker Change: I think that will be continually be a positive attribute of our business model our delivery model.
Speaker Change: Escalate quickly it will erode margins pretty quickly and that said there is a very strong link.
Speaker Change: Thank you.
Speaker Change: Between our between our Aerostructures business and contact on the campus side of the business and the campus. It just is one portion of our phone text business.
Speaker Change: The next question comes from Mark Jarvi CIBC capital market. Please go ahead.
Mark Jarvi: Thanks, Good afternoon Ron.
Adam Beatty: So I think Adam can talk to that because I think that's that's been historically a very good add on and a very complimentary service offerings I might let Adam just talk about you know how that can play out in the future. Yes. Thank you Guy and Robert look I, certainly think there's a strategic value to our customer base and offering a turnkey solution.
Mark Jarvi: Im pretty positive comments around the outlook for structures I'm, just curious if anything around the uncertainty of tariffs has impact anything on the sales funnel and dynamics around securing new contracts, particularly thinking maybe mexico or any other markets, where you're seeing sort of a bit of sort of decision, making me put on pause.
Mark Jarvi: Yes look.
Adam Beatty: And when our cost structures and from tech unify and deliver these packages to our customers. It's always positive for positively received in the market. So I think that will be continually be a positive attribute of our business model our delivery model.
Mark Jarvi: There's a lot of.
Mark Jarvi: Theres still not a lot of clarity around tariffs in terms of how that being imposed what we do do and I think it's.
Mark Jarvi: A very good position that we're in is we have independent operations in each of those geographies and across North America. So there's not a lot of cross border tried that Microsoft back commercial model and delivering to our customers. So that gives some some positive.
Adam Beatty: Thank you.
Speaker Change: The next question comes from Mark Jarvi CIBC capital market. Please go ahead.
Mark Jarvi: <unk> around how that looks in terms of our business model.
Speaker Change: Thanks, Good afternoon, everyone.
Mark Jarvi: And I might forget that promote.
Speaker Change: I am pretty positive comments around the outlook for structures I'm, just curious if anything around the uncertainty of tariffs has impact anything on the sales funnel and dynamics around securing new contracts.
Mark Jarvi: What about on the sort of end demand in terms of customer needs and their decision, making in terms of moving forward on contracts.
Adam Beatty: I'll just jump in before Adam kind of alluded to sort of.
Speaker Change: Any thinking maybe Mexico or any other markets, where you're seeing sort of a bit of sort of decision, making me put on pause.
Adam Beatty: The uncertainty that we all face in the environment right now just say overall atco.
Speaker Change: Yeah look at it.
Speaker Change: I think this is important point, we don't have a lot of cross border trade either within structures or any of our other businesses.
Speaker Change: There's a lot of.
Speaker Change: There's still not a lot of clarity around tariffs in terms of how they're paying imposed what we do do and I think it's a very good position that we're in is we have independent operations in H in those geographies and across North America. So there's not a lot of cross border tried that Microsoft back.
Adam Beatty: Obviously.
Adam Beatty: You know as everybody know one in Canada. Once these tariffs to move forward and the detriment to the inflationary environment and costs.
Adam Beatty: We think is obviously going to be a headwind for everybody, but specifically in terms of first order of magnitude impact to Atkins businesses overall, it's relatively.
Speaker Change: Marshall model and delivering to our customers. So that that gives them some positive Rupert resilience around how that looks in terms of our business model.
Adam Beatty: Muted the second order impacts obviously are going to be affecting everyone. In terms of you know.
Speaker Change: I might forget that promote what about on the sort of end demand in terms of customer needs and and and their decision making in terms of moving forward on contracts.
Adam Beatty: Take.
Adam Beatty: Taking a look at what this means going forward for the economy.
Adam Beatty: Understood and then on there.
Adam Beatty: Can you until this call and in the press release this morning highlighting.
Speaker Change: I'll just jump in before Adam kind of alludes to sort of the the uncertainty that we all face in the environment right. Now just say you know overall atco I'm because I think this is important point you know we don't have a lot of cross border trade them, either with instructions or any of our other businesses. So obviously.
Collection and the rate base growth, particularly as you go into 227 with updated views in terms of how agco feels about.
Adam Beatty: Supporting the capital needs of cane utilities, if they do go down the path of common equity raises would you participate pro rata.
Adam Beatty: For updated you just in terms of how you see these two entities interacting going forward on capital needs.
Speaker Change: As everybody know one in Canada. Once these terrorists to move forward and the detriment to the inflationary environment and costs.
Adam Beatty: Yes, see you is and always will be an important investment for Apple and I think as we go forward and Cu contemplates its need for capital.
We think it's obviously going to be a headwind for everybody, but specifically in terms of first order magnitude inbox to Atkins businesses overall, it's relatively.
Adam Beatty: <unk>.
Adam Beatty: Way that in relation to the other investment opportunities and other opportunities.
Speaker Change: Muted the second daughter impacts obviously are going to be affecting everyone in terms of.
Adam Beatty: To deploy capital that <unk> has on a.
Adam Beatty: On a risk return basis so.
Adam Beatty: We will see you will see when you make that decision how agco chooses to.
Speaker Change: Taking a look at what this means going forward for the economy.
Adam Beatty: Participate.
Kenny: Understood and then Kenny.
Adam Beatty: At this point, though it doesn't seem like there's obvious need for material capital investments either at <unk> or structured business like maybe I'm wrong on that or maybe I don't see anything else that you guys are.
Speaker Change: Can you utilities call and in the press release this morning highlighting.
Speaker Change: Inflection in the rate base growth, particularly as you get into 'twenty 'twenty seven what's updated views in terms of how agco feels about supporting.
Adam Beatty: Hinting towards in terms of newer business verticals add to so as it stands today with the preference to continue to maintain your ownership level.
Speaker Change: Supporting the capital needs of keen utilities, if they do go down the path of common equity raises would you participate pro rata any sort.
Speaker Change: Set up to do just in terms of how you see these two entities interacting going forward on on capital needs.
Adam Beatty: I think as it stands right now.
Speaker Change: Yeah see you is and always will be an important investment for Apple and I think as we go forward and see you contemplates its need for capital at Ko will you know weigh that in relation to the other investment opportunities and other opportunities to.
Adam Beatty: The best returning part of our portfolio was in structures.
Adam Beatty: And I think they have you know in terms of our overall capital there is a need for <unk>.
Adam Beatty: The investment there.
Adam Beatty: And I think we would.
Adam Beatty: As I said as it stands today and I think we would consider what that looks like on a go forward basis and before we made an investment decision.
Speaker Change: To deploy capital that Apple has on a.
Speaker Change: On a risk return basis. So you know we will see you will see when see who makes that decision and how agco chooses to.
Adam Beatty: Okay. Thanks for your time today.
Speaker Change: The next question comes from Maurice Choy with RBC capital markets. Please go ahead.
Speaker Change: Participate.
Speaker Change: At this point, though it doesn't seem like there's obvious need for material capital investments either to me or restructured business like maybe I'm wrong on that or maybe I don't see anything else that you guys are.
Adam Beatty: Thanks, and good morning, everyone.
Speaker Change: <unk> in your prepared remarks, you mentioned that you believe the market is undervalued at cost structures and <unk>.
Speaker Change: I was hinting towards in terms of newer business verticals add to so as it stands today with the preference D to continue to maintain your ownership level.
Adam Beatty: Michelle.
Speaker Change: Peers are trading about eight to 10 times.
Speaker Change: How would you compare this 8% to 10 times range to what Youre seeing in the many market for similar assets or platforms.
Speaker Change: And I think as it stands right now you know that the best returning part of our portfolio as instructors and and I think you know they have you know in terms of our overall capital there is a need for <unk>.
Speaker Change: I couldn't quite hear the end of the Marines, but what was the how would it compare to what.
Speaker Change: Investment there and I think we would.
To the M&A market.
Speaker Change: Similar asset or similar platforms.
Speaker Change: As I said as it stands today I mean, I think we would consider what that looks like on a go forward basis, and therefore, we made an investment decision.
Speaker Change: Yes in general the M&A market in this in this space has been pretty frothy to be honest with you and the multiples that we're seeing in the in the trade there have been even higher than that eight to 10 times. So if you look at both the trading comps and the precedent transactions around it I think that both support a it was a higher valuation for structures.
Okay. Thanks for the time today.
Speaker Change: Our next question comes from Maurice Choy with RBC capital markets. Please go ahead.
Maurice Choy: Thanks, and good morning, everyone PD in your prepared remarks, you mentioned that you believe the market is undervalued at cost structures and you measure that that the peers are trading about eight to 10 times.
Speaker Change: And then what we believe that we're getting from the market.
Speaker Change: So I guess with that fully recognizing the legacy of this business within <unk>.
Speaker Change: Are there any tangible actions that you're considering to surface value.
Maurice Choy: How would you compare this eight to 10 times range to what Youre seeing in the many markets with similar assets or platforms.
Speaker Change: If that if that.
Speaker Change: That was headed towards whether we're considering any type of a sale.
Maurice Choy: I couldn't quite hear the end of the Marines, but what was the how would it compare to what.
Speaker Change: Quick answer is no.
Speaker Change: We really like that business and I think the way that we're going to surface value for that business is continuing to as we have demonstrate the growth and continuing to show the fundamentals of that business and how that can be sustainable over a long term.
Maurice Choy: To the M&A market.
Maurice Choy: Full of a similar asset or similar platforms.
Speaker Change: Yeah in general are the M&A market in this in this space has been pretty frothy to be honest with you and the multiples that we're seeing in the in the trade there have been even higher than that eight to 10 times. So if you look at both the trading comps and the precedent transactions around it I think they're both supportive of a higher valuation for structures than then.
Speaker Change: And maybe alongside that.
Speaker Change: On my calculations the structures business is probably about one times debt to EBITDA.
Speaker Change: And it seems to me that there's probably quite a bit of room there in terms of bounce.
Maurice Choy: We believe that we're getting from the market.
Speaker Change: Balance sheet capacity.
Speaker Change: How do you think about utilizing that.
So I guess with that food recognizing the legacy of this business with the NAPCO.
Speaker Change: Because I think in one of your slides you mentioned that strategic investments is important to long term growth of our cost structures.
Maurice Choy: Are there any tangible actions that you're considering to surface value.
Speaker Change: Yeah, and we do have capacity for additional leverage on structures. It obviously isn't like a utility businesses in terms of the ability to bear a significant amount of leverage, but we operate well below our peers and we still believe that there is capacity for us to be able to service additional debt there so that that definitely can.
Maurice Choy: If that that was headed towards whether we're considering any type of a sale.
Maurice Choy: The answer is no we really like that business and I think the way that we're going to surface value for that business is continuing to as we have demonstrate the growth and continuing to show the fundamentals of that business and how that can be sustainable over the long term.
Speaker Change: Contribute to additional growth for structures as well as.
Speaker Change: Some of the capital that we we continue to accrue at the anchor level in terms of excess cash flows that we have overall.
Maurice Choy: Yeah.
Maurice Choy: And maybe alongside that.
Maurice Choy: My calculations the structures business is probably about one times debt to EBITDA.
Maurice Choy: And it seems to me that there's probably quite a bit of room there in terms of bounce.
Speaker Change: And just to finish up you mentioned 10 consecutive quarters of year over year growth for this particular segment.
Maurice Choy: Balance sheet capacity.
Speaker Change: Look at 2025 do you believe you have sufficient contracts in place with the right returns to keep you.
Maurice Choy: How do you think about utilizing that.
Maurice Choy: Because I think in one of your slides you mentioned that strategic investments is important to long term growth the cost structures.
Speaker Change: Going on beyond 10 quarters.
Maurice Choy: Yeah, and we do have capacity for additional leverage on structures. It obviously isn't like a utility businesses in terms of the ability to bear a significant amount of leverage, but we operate well below our peers and we still believe that there's capacity for us to be able to service additional debt there so that that definitely can.
Mark Jarvi: I'll jump in there Mark.
Speaker Change: Morris and I think probably.
Speaker Change: What I can size, we're starting 2025 in a better position than we started 2024.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: That's it thank you.
The next question comes from Ben Pham with BMO. Please go ahead.
Maurice Choy: Contribute to additional growth for structures as well as some.
Maurice Choy: Some of the capital that we we continue to accrue at the anchor level in terms of excess cash flows that we have overall.
Speaker Change: Yeah.
Speaker Change: Hi, Thanks.
Speaker Change: I'm just going to see you call again, there's.
Speaker Change: Commentary and enthusiasm around the data center opportunity.
Maurice Choy: And just to finish up you mentioned 10 consecutive quarters of year over year growth for this particular segment.
Speaker Change: And our brighter.
Is there anything around related to that.
Maurice Choy: If you look at 2025 do you believe you have sufficient contracts in place with the right returns to keep you going on beyond 10 quarters.
Speaker Change: Only atco would.
Speaker Change: Look at.
Speaker Change: Instead as a separate business unit.
Speaker Change:
Speaker Change: I think we know we put up the value chain of the of the numerous ways that ACCO can contribute I mean, I think you could put datacenter in a box I mean, that's.
Speaker Change: I'll jump in there Mark Morris and I think probably.
What I can size was starting 'twenty 'twenty five in a better position than we started 2024.
Speaker Change: Theoretically something we could do and restructures.
Speaker Change: Okay.
Speaker Change: But I don't foresee that there's that there would be a need for agco to specifically.
Yeah.
Speaker Change: That's it thank you.
Speaker Change: Set up something different to participate in that data set and I think the majority of that opportunity lies within Canadian utilities.
Speaker Change: The next question comes from Ben Pham with BMO. Please go ahead.
Speaker Change: Yeah.
Speaker Change: I got you, so I'm not saying like being.
Ben Pham: Hi, Thanks Oh.
Speaker Change: A real estate developer in.
Ben Pham: I'm, just calling to see you call again, there's a commentary and enthusiasm around the data center opportunity.
Speaker Change: Getting our permits and power and everything set up maybe intercompany and whatnot.
Ben Pham: Britta.
Speaker Change: Can you kind of like our own our own data center provider.
Ben Pham: Is there anything around related to that debt.
Speaker Change: I don't think I think if someone we have a few parcels of land and if someone had an interest in developing and data center, we would certainly.
Ben Pham: Only alcohol would.
Ben Pham: Look at instead as a separate business unit.
Speaker Change: Consider that but I don't think that Thats a business line that we'd be looking to start right now.
Ben Pham: Yeah, I think we know we put up the value chain of the of the numerous ways that ACCO can contribute I mean, I think you could put datacenter in a box I mean that.
Speaker Change: Okay.
Speaker Change: Got it and a lot of questions on structures I appreciate that.
Ben Pham: Theoretically are something we could do a restructured them, but I don't foresee that there's that there would be a need for agco. Two specifically are you know set up something different to participate in that data set and I think the majority of that opportunity lies within Canadian utilities.
Speaker Change: Yeah on your slide on the big level.
Speaker Change: Our rental units you've been investing cut back $9 each year for extended period of time and bulking that up.
Speaker Change: How are you.
Speaker Change: I'm off at the path of finishing.
Speaker Change: That investment cycle and how are you.
I got you, so I'm, not saying like being a real estate developer in.
Speaker Change: Expecting more in the years ahead.
Ben Pham: Getting our permits and power and everything set up maybe intercompany and whatnot.
Speaker Change: I can start and then pass it over to Adam I think.
Adam Beatty: In terms of whether whether we are going to continue to invest in some of the space rentals fleet I think in particular, where they are not at all near saturation point in the U S market.
Ben Pham: Could you kind of like our own our own data center provider.
Ben Pham: I think I think if someone we have a few parcels of land and if someone had an interested in developing and data center, we would certainly.
Adam Beatty: So maybe Adam can talk a little bit about how we probably will continue to grow in that market.
Ben Pham: Consider that but I don't think that that's a business line that would be looking to start right now.
Speaker Change: Yes, I think thats that certainly we certainly see growth opportunities in all the markets. We operate particularly the three primary ones, Canada, Australia, and the U S. But to give you some context might help we are 1% of the U S market.
Ben Pham: Okay.
Ben Pham: Got it and a lot of questions on structures I appreciate that.
Ben Pham: Yeah on your slide on the big level.
Ben Pham: Rental units you've been investing in cut back nine doors at each year for extended period of time and bulking that up.
Speaker Change: In terms of our structures business. So there is a lot of runway.
Speaker Change: How are you.
Ben Pham: Oh I'm off at the path of finishing.
Speaker Change: In terms of potential for what we feel we can execute within that market and certainly we've seen a lot of positive response of our strategic execution over the last four years in that market.
Speaker Change: That investment cycle in our U S.
Ben Pham: I expect more in the years ahead.
Ben Pham: I can start and then pass it over to Adam I think.
Adam Beatty: You know in terms of whether you know whether we are going to continue to invest in some of the space rental fleet.
Speaker Change: So our entry in our products and know how.
Adam Beatty: <unk> in particular, where they're not at all near saturation point in the U S market.
Speaker Change: Our position there.
Speaker Change: That's.
Speaker Change: A good opportunity for us.
Speaker Change: Yeah.
Speaker Change: Okay understood. Okay. Thank you very much.
Adam Beatty: So maybe Adam can talk a little bit about how we probably will continue to grow in that market.
Speaker Change: This concludes the question and answer session I would like to turn the conference back over to Mr. Colin Jackson for any closing remarks. Please go ahead.
Adam Beatty: Yeah, I think that's that's certainly we certainly see growth opportunities in <unk>.
Speaker Change: All of the markets, we operate particularly the three primary ones, Canada, Australia, and the U S. But to give you some context might help we are 1% of the U S market.
Colin Jackson: Thank you. Thank you all for participating today, we appreciate your interest in Agco and we look forward to speaking with you again soon.
Speaker Change: Okay.
Speaker Change: This brings to a close today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
Speaker Change: In terms of our structures business. So there was a lot of runway.
Speaker Change: In terms of the potential for what we feel we can execute within that market and certainly we've seen a lot of positive response of our strategic execution over the last four years in that market.
Speaker Change: Two our entry in our products and now our position there.
Speaker Change: So it's a good opportunity for us.
Speaker Change: Okay understood. Okay. Thank you very much.
This concludes the question and answer session I would like to turn the conference back over to Mr. Colin Jackson for any closing remarks. Please go ahead.
Colin Jackson: Thank you. Thank you all for participating today, we appreciate your interest in Agco and we look forward to speaking with you again soon.
Speaker Change: This brings to a close today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
Speaker Change: [music].
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Speaker Change: [music].