Q1 2025 Stella-Jones Inc Earnings Call
Speaker Change: Good morning and thank you for standing by. Welcome to Stella-Jones first quarter of 2025
At this time, all participants are in lesson only mode.
Speaker Change: Following the presentation, we will hold a question in the answer session. To queue up for questions by phone, please press star 1 and a moderator will contact you.
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: I'll show results me differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant follow-ins on Twitter, plus.
Speaker Change: The documents are also available in the Investor Relations section of Stella-Jones website at www.stala-jones.com
Speaker Change: Additionally, during this conference call, the company may refer to non-GAAP measures , which have no standardized meaning undergap and are not likely to become parable to similar measures presented by other issuers.
Speaker Change: For more information, we prepare for the company's latest MDNA available on Stella-Jones website and on Cedar Plus.
Thank you, Ena.
Good morning everyone, and thank you for joining us today.
Speaker Change: With me on today's call is Silvana Travaglini, Senior Vice President and Chief Financial Officer of Stella Jones.
Speaker Change: Earlier this morning we issued our press release reporting our results for the first quarter of 2025.
Speaker Change: Along with our MPN8, it can be found in the Investor Relations section of our website at www.stella-jones.com as well as on Cedar Plus
Speaker Change: As a reminder, all figures expressed on today's call are in Canadian dollars unless otherwise stated.
Speaker Change: In Q1, we continue to deliver solid product margins and maintain a robust financial position.
Speaker Change: Either as ongoing macroeconomic headwinds, unfaithable weather conditions, and a shifting landscape for our railway type business weighed on volumes.
Speaker Change: We have a resilient business with strong core fundamentals, which enabled us to manage through the current dynamic environment while executing on our strategy to further capture and
Speaker Change: Our expansion into the steel transmission markets announced earlier today enhances our resiliency by enabling us to better serve the growing needs of our infrastructure customers.
Speaker Change: Turning to a performance review of our main product categories starting with utility
Q1 followed the same trajectory as the last two quarters.
Speaker Change: Are utility customers continue to affirm their critical needs for poll replacements?
Speaker Change: While utilities are committed to the timely maintenance and upgrade of the electrical grids, their capital deployment strategies and timing of investments remain influenced by the ongoing economic challenges that have persisted since the second half of 2024.
Speaker Change: We are, however, encouraged by the increase in quoting requests and we continue to anticipate stronger volume performance in the latter part of the year.
Speaker Change: In terms of spot pricing, pressures are expected to persist in certain regions pending increased demand.
Speaker Change: Our exposure to the spa market remains limited at 25% of our total utility poll business and is expected to be mitigated by favorable contract pricing.
Speaker Change: While this shift will result in lower sales going forward from this customer, we are executing on opportunities to strengthen our relationships with other class one customers and we anticipate to recover the volume shortfall.
Speaker Change: The Railway Thai Landscape is evolving with customers looking to Stella-Jones to deliver meaningful solutions to address their demand and optimize their business model. We will leverage the strategic shift to improve the profitability of this product category.
Railway Types remain as table source of revenue.
Speaker Change: GrandVential Lumber's performance this quarter was marked by the slower start to the exterior home improvement season.
Speaker Change: While volumes were down due to unfavorable weather conditions, the man for the remainder of the year is expected to trend favorably.
Speaker Change: Even amidst the dynamic economic environment, our customers have expressed confidence in the demand outlook as the home remodeling spending is anticipated to be solid.
Speaker Change: The company remains confident in the long-term prospect of each of its main product categories. And we are excited to further capitalize on the growing North American infrastructure demand with the acquisition of Lockwell.
Speaker Change: A leading designer and manufacturer of lattice transmission towers and steel transmission poles, Lockwell will provide Stella-Jones a presence in the high voltage transmission space where wood utility poles are not commonly used.
Speaker Change: is a step-changed acquisition that allows us to leverage our expansive sales and distribution network to offer a more comprehensive suite of products to customers.
Speaker Change: It also provides Stella-Jones with new growth opportunities in steel transmission structure markets.
Speaker Change: The addressable steel transmission market currently exceeds $5 billion in annual sales and its growth potential is supported by a robust pipeline confirmed and newly announced transmission
Speaker Change: With an expected backlog of transmission projects and nearly 45% of North America's transmission and distribution infrastructure nearing the end of its service life, the T&D market is deployed for sustained growth.
Speaker Change: We welcome Lockwell's approximately 220 employees, Stella-Jones, and look forward to a bright future of better serving North America's utilities together.
Speaker Change: With that, I will ask Silvana to provide a more detailed overview of our first quarter financial results.
Silvana: Thank you, Eric, and good morning, everyone. Fail for the first quarter were down 5% organically, but we continue to deliver a solid-abid margin of about 18%, excluding the 5% margin impact from the insurance settlement recorded in Q1.
Silvana: While utility poles and residential lumber sales were relatively unchanged on an organic basis, human sales were impacted by the decrease in the railway tie volumes when compared to the same period last year.
Silvana: For utility polls, we generated 419 million dollars in sales in the first quarter up from 402 million in the same period last year.
Silvana: Sales benefited from the contribution of newly secured business and stable contract
Silvana: But similar to the trend observed since Q3 last year, pace of purchases by utilities and the timing of projects were un favourably impacted by macroeconomic factors which influenced the capital deployment strategies of our customers.
Silvana: Lower quarter-over-quarter volumes for polls were more than offset by favorable price pricing and the positive impact of currency conversion compared to the same period last year.
Silvana: Class 1 volumes decreased due to a shift by rail world to the internal treating of the railway ties, while non-class 1 volumes were largely impacted by delays in projects which are expected to be recovered in the second quarter. Non-class 1 demands remain strong.
Silvana: Residential lumber sales were relatively stable at $88 million in 21 of 2025 compared to $87 million in the first quarter last year.
Silvana: Q1 sales benefited from the increase in the market price of lumber the volumes were down. Challenging weather conditions in the first quarter of 2025 contributed to lower volumes, especially when compared to unusually favorable weather during the same period last year.
Turning now to profitability.
Silvana: The increase was attributable to the settlement of an insurance claim of $38 million for a 2023 fire at one of our facilities, offset in part by a decrease in sales volume.
Silvana: Despite low level of volumes, the company continues to generate a strong, ever-done margin.
Silvana: Excluding the impact of the insurance settlement, the first quarter ever done margin of 18% was lower than the record 20% generated in the same period in 2024, but in line with the annual margin we have generated over the last two years.
Twenty-per-cashables [inaudible]
Silvana: We started the year with a higher level of inventory as a result of the net investment in inventory in Q1 with lower and limited to the seasonal build of residential lumber inventory.
Silvana: We continue to expect to end the year with lower levels of inventory.
We remain committed to a balanced approach to capital allocation.
Silvana: Over the last 12 months, we generated cash from operations of about $450 million, deploying about $145 million towards investing in our business, and a similar amount of about $150 million to shareholders return.
Silvana: The remaining capital of 155 million was used to bolster our liquidity.
Silvana: We ended the quarter with almost 700 million dollars in available liquidity and a net debt to ever-duration of 2.6 times unchanged from the ratio at the end of the year.
Silvana: A racial above-the-target range is typical in the first quarter due to the seasonal working capital requirement.
Silvana: With a continued focus on profitability and working capital management, the leverage racial is expected to be within the desired target range by the end of the year.
Silvana: After quarter-end, we entered into a definite agreement to acquire a law quell for an initial consideration of $58 million, this transaction is expected to close today.
Silvana: In summary, with the strength of our business, for a healthy financial position and strong cash-generating ability, Stella-Jones is well positioned for continued growth and success in 2025.
Eric: I will now turn the call back to Eric first calls in remarks.
Thank you, Silvana.
Eric: Q1 has unfolded largely as anticipated and at this stage we maintain our guidance and remain confident in meeting our financial objectives which will also benefit from the contribution of the local acquisition.
Eric: As a reminder, Stella-Jones exposure to tariff is limited, and while other macroeconomic conditions
Eric: Could continue to pose some challenges we remain vigilant and prepared to adapt our strategies as necessary.
Eric: Our continued focus on acquisitions remains a cornerstone of our growth strategy.
Eric: The acquisition of Lockwell exemplifies our commitment to expanding our offering and enhancing our market position.
Eric: We are dedicated to pursuing acquisitions that are accretive and complementary to our current infrastructure portfolio, further strengthening our overall business resilience.
Eric: We remain steadfast in our pursuit of growth. We look forward and sharing more information at our next Investor Day schedule for later this year.
Eric: Thank you for your continued support and trust in Stella-Jones' vision of connecting communities through stronger infrastructure
Eric: As a reminder, later this morning, we will be holding our annual meeting of shareholders.
Eric: I would like to take this opportunity to recognize two outgoing board members who will not be seeking re-election this year.
Eric: Mr. Jim Manzi in his decade-long tenure on our board help drive a global compensation philosophy that was anchored in performance and ownership.
Eric: and Mr. Rodry Harrys, member of our board since 2020, who has made invaluable contributions to the board's audit and environmental health and safety committees in his time with us.
Speaker Change: On behalf of management, I would like to thank both of them for their duties as guidance and their service to our board and its committees.
Eric: This concludes today's prepared remarks, and I will now open the lines to questions.
Eric: Thank you, Eric. As a reminder, to give up your questions by phone, please press star one on your telephone keypad. Then should you wish to cancel your request, please press star, followed by the two. If you're using your speaker phone, please lift your hand set before pressing any keys.
Eric: Your first question comes from the line of Hamir Patel from CAPC Capital Markets. Please go ahead.
Speaker Change: Hi, good morning. Eric, could you comment on how the margins of the Lockwell business would compare to your consolidated margins and also how they compare with wood poles?
Speaker Change: So, I would say very similar, Hamir, you know, and that was one of the factors that made this business appealing to us. So, very comparable.
Amir: Erick, sorry, it's comparable to the wood poles which I believe are higher margins than your consolidated margins, so that'd be fair.
Amir: Okay, and then just with the Plan 15 million capital investment that you have planned, you know, what sort of margin uplift and capacity increase would you expect from that?
Amir: From the capacity standpoint, we expect to double the capacity of the same footprint in the facility, Kandyak-Kovak, and obviously through it through, you know, the same footprint will definitely increase the margin by a couple of basis points.
Amir: Great, and I know the sales disclosure you gave for Lockwell, it was September 30th, 2024.
Amir: I trade impacts of affected, I think about the sales from that business this year and maybe the growth rate for steel pulse differs all that much from wood pulse.
Amir: Yes, no, certainly the, so the September figure is actually coincides with their fiscal year, so those were the results of the last fiscal year which was September .
Amir: Going forward, the backlog of your book is very healthy and I went for a bit 24 months going out so very optimistic about the outlook for that business and the demand in general.
It's a lag that we should think about.
Amir: So the way the contracts are structured, there are indexes for steel that are associated to the product. So all of the risk on fluctuation of the input material is actually...
Speaker Change: Has talked to the customers. It's incorporated. It's a very little exporter from that standpoint. Hamir, I apologize. You had another part to your previous question, which was regards to Tarris. And to date, in my last discussion with the team as of last Friday,
Speaker Change: Tyrus are passed on to the customers and orders are keep coming in and it's not a thing that you can issues. Most of the suppliers to the U.S. market are actually all outside of the U.S.
Speaker Change: So offshore and Canada. So everybody's on their level playing field from that perspective and Tires are being passed through because there's a pain for them.
Speaker Change: Great, thanks Erick, that's all I had, I'll turn it over.
My pleasure. Thank you, Amir.
Speaker Change: Thank you. Our following question is from James McGarragle from RBC. Please go ahead.
James Mcgarrigle: Hey, thanks for having me on and congrats on the detail units today.
James Mcgarrigle: Yes, I was just wondering if you can give us, you know, range of how you expect that even to evolve.
Speaker Change: in the year, I know coming into the quarter, you know, call it consensus as well as that, 640, you announce the acquisition, you have the insurance settlement gain, but, you know, you comfortable with that number and, you know, any color you can provide, you know, especially as it relates to the polls and the rally type business.
Speaker Change: Certainly. Obviously you mentioned the key topics, excluding the insurance proceeds. We maintain our objectives to being over 17% as we stated previously very comfortable with how our business is heading for the balance of the year.
Speaker Change: Okay, and then just on the time business, I know one of the class one customers is kind of further utilizing some internal capacity.
Speaker Change: It'll be the same though, what we announced today is essentially probably the biggest part of the impact going forward.
Speaker Change: So it's now sort of included in the way we view the balance of the year and as I mentioned you know in my remarks we're currently working on a few projects that will help us compensate the shortfall.
Alright, thank you all. I'll turn the line over.
Thank you, James.
Speaker Change: Thank you, and your next question comes from the line-up of Benoit Poirier. From the joy
Yes, thank you very much. Good morning, everyone.
Murray Question.
Speaker Change: In terms of organic growth, how do we be thinking it can still run up for utility pull and rail with eyes, obviously given the macro environment but also maybe given the tough comparison versus Q2 last year? I would be curious to have a little bit more color around those two segments for Q2.
Speaker Change: Well, you bring up a bit Twight Q2 last year with a very strong quarter, so I would...
Speaker Change: I would suggest probably a flatish performance with regards to that, did mention in our comments that, you know, we believe.
Speaker Change: Or we're foreseeing some volume growth in the second half of this year for utility balls so definitely you know comfortable a lot changing our views there to that you know.
Speaker Change: Mid single digit growth for the year, for railway ties, because of one customer bringing their production internally and us working to re-adjust and compensate the shortfall, it would most likely be flatish for the year, Benoit.
Speaker Change: Okay, that's perfect. And just with respect to the short line, what is the latest status in terms of funding with the Christy given the whole new administration?
Speaker Change: That's a good question. I mean, no real changes to the last time we spoke. I mean, there were
Speaker Change: Discussions earlier this year, earlier in the corner about the U.S. government, you know, thinking of
Speaker Change: Changing the structure of those Chrissy grads, ultimately they were not impacted or changed.
Obviously...
you know, our comments are a bit tinted with.
Speaker Change: There is some cautious, cautiousness there with some short lives, but definitely still a very healthy market, strong demand all in all, so everybody has to work with what they know today.
Speaker Change: We're in Q2, it's the peak season for maintenance for all our product categories at this point, and short lives have to see the opportunity to do some work, so we're still seeing some very healthy demand in the non-class one business.
Speaker Change: for Seymour and many opportunities with Steelpole and any talks about the leverage situation and the willingness to go higher than the three terms for the right one.
Speaker Change: Well, that's a great question, Benoit. So the lawful acquisition is definitely part of the enrol map of our projects to expand in this.
Field Transmission, a market.
to expand the current footprint.
to continue pursuing M&A in this space.
Speaker Change: and we're definitely not necessarily ruling out any potential expansion in the U.S. Obviously we need to do some homework here to probably understand what the market has to offer, but
Speaker Change: We understand currently that there's lots of projects that are being structured and more news to come on that front, but we're looking at all possibilities to keep growing, growing this business as I said, you know, lattice and steel poles is a five billion, you know.
5 billion sale that you will market, the very attractive one.
Speaker Change: It expands our transmission capabilities beyond what our wood poles can do because it's very limited in that space. So all I can say is that all options are there. We have a strong team to anchor this veteran into this new part of the business.
Speaker Change: Okay, and just curious, maybe Silvana from a capital deployment in terms of leverage given you are already at 2.65. I know you typically target 2.5. It's a stable business of just wondering where the willingness may be to go up a little bit more from the leverage standpoint.
Speaker Change: Well, we always set as part of our capital allocation, obviously, that the range of two.
2.5 that we would.
Speaker Change: You know, be willing to deviate above it for for growth opportunities or strategic acquisitions. But currently, you know, like we mentioned, we are expecting, you know, to focus on our working capital and our inventory management. So we are expecting, you know, a reduction in our inventory. So with that and with this acquisition, I don't see any issues for us to be good.
Speaker Change: still was in the 22.5 times range before the end of the year.
Excellent. Thank you very much for the time.
Thank you, Benoit.
Speaker Change: Thank you. Our following question is from Michael Tupholme, from TD Cohen, please go ahead.
Thank you. Good morning.
Speaker Change: So just on Lockweld, sorry if I missed this, but can you speak to historical growth there and also I think it came up in the last question but it wasn't really from you. So what is the sales mix split between Canada and the US for Lockweld?
Speaker Change: Yeah, so the sales mix is about 30% Canada, 70% US currently. It is project-based, so definitely it can shift over time, depending on, you know.
Would you tell these providing the project?
Speaker Change: What's interesting is Lockwell has been able to establish relationships with utilities across North America, so definitely a well-balanced.
Speaker Change: A customer list, which is very attractive, and a customer list that is common to Stella-Jones, which is also exciting for us, but currently the mix is 37.
Speaker Change: Okay, so then in terms of the historical sales growth, like you're coming about project-based, does that mean there's some volatility here and it's not...
Speaker Change: It's sort of differs from your wood poles business where we've seen kind of, you know, it did it.
Speaker Change: It's relatively steady growth over time. Like, is it different characteristics with this business?
Speaker Change: So, looking at historical sales, you know, they have a...
Speaker Change: a well balanced portfolio customer that has brought inconsistent business. So that's why I highlighted that in my previous answer. So they have not seen, like, down cycles. It's stable and it can actually fit. Thank you.
We keep hearing of transmission projects announced with across North America.
Speaker Change: including in Canada, in Quebec, in Ontario as well, a lot of activity going on there. So the logbook for the next several quarters is actually full so happy to say that there are a lot of the universities in Quebec.
Speaker Change: currently sold for the next year, so very excited about how that management team approaches the market, so they figured out a very good model that drives consistent revenue.
Okay, perfect, and then just-
Speaker Change: The capacity expansion you're undertaking. So is the plant near capacity at present and then this will double it or is there still room?
within the current footprint and but on top of that you're doubling in.
We can actually-
Speaker Change: Give it till the end of this year until we know we we we got a product going but I do feel that we'll have that the entire capacity including the expansions fully sold by the end of the year.
Speaker Change: Okay, great. And then, sorry, one more on on Lockwell. Just um...
Speaker Change: in response to some Benoit's questions you were talking about.
Speaker Change: The potential to continue growing in this steel structures market and potentially additional
Speaker Change: I just want to sort of get expectations set properly here. Is the idea to continue on with that sort of, you know, imminently and right away, or is the idea just, is that more of a comment over the medium to longer term once you sort of digest this acquisition and understand what you really bought here?
Yes.
Speaker Change: So, I mean, the first step obviously is to, you know, get our Capix project going.
Speaker Change: So we've already done all the engineering work with the Lockwell team, we've got, you know,
Speaker Change: Purchase orders ready to sign, we're just waiting to complete the acquisition so I'm hoping to start seeing some of the equipment roll into the facility, you know, let's say in Q4 and in early next year.
Speaker Change: So as that is on for they will be then looking at our our options so.
You know, we can...
Speaker Change: But there are some players here in Canada that would be a nice opportunity for us as well So we're definitely looking at our options I don't want to go light things speed into this but we definitely want to make sure that we keep a good cadence
Speaker Change: to keep building on the momentum we have and keep growing our offering to North America's utilities.
Speaker Change: Okay, perfect. And then just a couple about the existing business. So in utility polls, negative 1% organic growth in the first quarter, can you break that down in terms of the composition price versus volume in Q1?
Speaker Change: Yeah, so volume, I have to believe Silvana stated volume is about down 4% year-over-year and then it's
Speaker Change: And then if I got everything you said earlier, the expectation for Q2 is broadly flat, organic growth in polls, but you still feel comfortable with that mid-single digit organic growth for for the full year, suggesting.
Speaker Change: You're going to see most of this growth or all this growth coming in the back half.
Speaker Change: Yes, and is that because that's that's full your number then.
Speaker Change: You know that hasn't been the case in Q1 like it is the is the full year composition shifting a little bit and how does that look as you look a little further out to 2026 like do you still think it's going to be mainly volume or is there a pricing element here.
Speaker Change: Yes, at this point, it's all going to be volume. You know, we have different dynamics as, you know, we explain on the pricing, depending on contract or not contract. So at this point our growth is going to be anchored in volumes for the balance of this year as for 26.
Okay, all right, I will leave it there. Thank you
Thank you, Michael.
Speaker Change: Yes, hi. Thank you. Thank you for taking my question. Is my understanding correct that the real earnings is 40 million if I exclude insurance?
Speaker Change: You mean, you mean, Abedoa? No, you're not income, you're not income was 93 million, but I think it's 53 million the insurance.
Accessment
Speaker Change: So the insurance adjustments is $30 million on the FDF front, MLK, so basically once you tax effect it, if you want to look at it that way, you could probably reproduce our effect as tax rate, it's probably close to $30 million impact.
30 million Neringa Mutbi-Roso
Yes, because 38 was basically an ever-that impact.
Okay, perfect. And in terms of the...
Speaker Change: All the detrolling last 12 months sales for their fiscal year in the September was $55 million Canadian and we don't disclose margins or profit.
What's it making money?
Pardon me? What's it making money this company?
Margins are comparable to our e-gilly pool business.
Speaker Change: Yeah, but was it positive on the net income side? That's my question.
Of course, of course it's positive and then it goes [inaudible]
Okay, thank you very much.
Thank you sir.
Speaker Change: Thank you. Once again, should you have a question, please press star 4 by the one on your telephone keypad. Your next question comes from the line of Maxine Sitchev from National Bank Financial. Please go ahead.
Hi Ericsson, and good morning.
Speaker Change: impacted by the same sort of delays where I'm seeing a distribution, or it's just sort of the staggering of projects which is, you know, more driving kind of the visibility in the short term right now.
Benoit.
Divelius Estagering of Projects
and the needs for transmission, I guess.
Speaker Change: Tupholme, one there is some replacement happening there for older structures, but there's also all the pressure that's being put on our customers, you know, by data centers requiring more and more energy, and therefore as they're building capacity in different projects
Speaker Change: So it's all of this dynamic currently that is creating a very fairable trend for the transmission business.
Speaker Change: Yeah, no, 100 percent, I mean, it looks like a great transaction. And in terms of going back to kind of, you know, the quote, unquote, like the support operations, like between sort of the interest rate pressures, you know, permits.
Speaker Change: What are the pain points right now at the customer level? And I guess what gives the confidence that the back half of the year will relieve some of these pressures.
Yeah.
Speaker Change: Well, obviously there's ongoing discussions with our customers in the project that we're quoting that it is showing some healthy momentum going forward.
Speaker Change: Ben Time, listening to our customers that are public, have to say, if I look at, you know, in our...
our top
510 Utilities
Speaker Change: you know, have capex ambitions in the next four to five years.
Speaker Change: that are in the billions of dollars. So the all acknowledged that there is a need to, you know,
Speaker Change: Strangton in Harden, the distribution grid, the acknowledge that they also need to invest in degenerating assets and require the transmission assets of people to support.
No.
Industries, industrial business, but it is all communities.
Speaker Change: So, you know, all in all, I do agree that in our statement, there are some headwinds with uncertainties and
Speaker Change: Probably higher interest rates in the US than where customers would like or whether they style their initial capital. But nonetheless, every quarter, they reaffirmed their intentions to spend these billions of dollars, you know, over this four to five year period. And it sort of matches up when we have conversations with the men.
Speaker Change: I'm actually very excited now to be able to go meet them today and talk about the transmission needs that are going forward so that's the reading we have on the market right now.
Yeah, no, that's perfect. This is for me. Thank you. I appreciate your time.
Thank you, Maxion.
Speaker Change: Thank you, and your next question counts on the line of Jonathan Goldman from Scotia Bank. Please go ahead.
Hi, good morning team and thanks for taking my questions.
Jonathan Goldman: Maybe just a housekeeper want to start. How much did weather impact poll and railway tie volumes in Q1?
Oh, well...
Jonathan Goldman: It's very hard to quantify. There is some slowness there. We don't split it out. It's actually very difficult to exercise.
Good.
Jonathan Goldman: January was extremely cold and February had a significant snowfall, so it does slow down the activities for all three product categories for sure, but very hard to quad the fight compared to last year, which was mild and spring came in very early, but I apologize it's not something that we actually...
Carvout and very difficult to do so actually.
Speaker Change: No fair enough. And Eric, you reiterated the expectations for mid-single-digit growth and polls this year. I think the original guide you gave back in November was 6-7%.
Jonathan Goldman: And you did address this earlier, but that implies a piece in this can re-acceleration in the second half. I mean, you did talk about the customers and what they're putting out in terms of darkness, but what are you assuming for the macro environment to hit those numbers in the back half of the year?
Well, where-
Jonathan Goldman: Honestly, we're sort of saying a steady state from what we've seen so far, right? It's very, a lot of it is hard to predict. Obviously, you know, with decisions that are remaining with the US administration. So, you know, the only assumption we can take is the current state we know, with the context of tariffs that we know today.
Jonathan Goldman: and the current level of interest rates now are customers.
Jonathan Goldman: have, you know, are taking all of this into account and themselves are using similar assumptions. And you know, if...
Jonathan Goldman: If anything happens in a favorable sense, interest rates dropping, for example, well, definitely that would definitely create a more positive momentum.
Jonathan Goldman: Okay, definitely. And then on the breakdown of pricement volume and railway ties, I think the disclosure said it was predominantly volumes, but do you have the exact breakdown?
Lincoln, as soon as it's all volumes honestly. [inaudible]
Jonathan Goldman: Okay, and then one more for me on the Class I customer in sourcing. You speak some of the factors that may have influenced their decision and what gives you confidence this is an isolated case.
Jonathan Goldman: So, I want to be respectful and not disclose names because you know why.
All right.
Speaker Change: But, so there was one class one customer who owned its own treating plant.
for several decades actually.
Speaker Change: and a recent merger sort of brought it to life with the newly formed company and the newly formed company believes that the only one that leverages that asset and use it going forward, you know, we'll see how long they'll limit a strategic asset.
and you know, we...
Speaker Change: Historically, a lot of railroads did own training plans, and they were all divested to the industry, but I really did not see that as a possible scenario for the future.
Understood. Thanks for the time.
My pleasure.
Speaker Change: Thank you, I have a follow-up question, comes from the line of Michael Tupholme from
Michael Tofoni: Oh, thank you. Yeah, I just wanted to circle back on the outlook for Rewatized, thinking about part of the last question there. So, I think the prior guidance had been low single digit organic growth for the year, and then now it sounds like it's sort of flatish organic growth for the year, but given the...
Speaker Change: 14% organic decline in ties in Q1. Obviously you're still looking for a pickup tip. Did I understand that you you believe you're going to win some new business or is this just?
Speaker Change: Like just trying to bridge, I guess, what you didn't key one to getting this flat for the year organic growth, what needs to happen to make that possible.
Speaker Change: So, I mean, you know, every year all our customers, including half class ones, you know, have different projects that pop up and there are some opportunities that we can address. So, there are a few projects that we're working on right now that will, you know.
Speaker Change: Complete that shortfall if you want, so we feel confident that we will have that extra volume in the next three quarters.
Speaker Change: Okay, that's helpful. And then in terms of Q2 though, is that, is Q2 the expectation that that is also sort of flatish or where do you see Q2 in terms of organic growth for ties?
Speaker Change: She's a bit better pricing, honestly, in the second quarter. So could be flatish, perhaps both of them off-setting.
Okay, thank you [inaudible]
Thank you, Michael.
Speaker Change: Thank you. We have no further questions in the queue. Please proceed.
Speaker Change: Thank you, you know. And thank you very much for joining us today. We look forward to updating you on our second quarter call in August and we look forward to welcoming those who will be attending our annual meeting of shareholders later this morning until then have a good day and stay safe.
Speaker Change: Thank you, ladies and gentlemen. This concludes today's call. Thank you for participating. You may now disconnect your lines.