Q3 2025 Stella-Jones Inc Earnings Call
Speaker #2: Good morning and thank you for standing by . Welcome to Stella-Jones Inc third quarter of 2025 Earnings Call . At this time , all participants are in listen only mode .
Speaker #2: Following the presentation , we will hold a question and answer session . To queue up for questions by phone , please press star one and a moderator will contact you .
Speaker #2: If anyone experiences difficulty during the conference call , please press star zero for operator assistance at any time . I would like to remind everyone that this conference call is being recorded on Wednesday , November 5th , 2025 .
Speaker #2: I'll now turn it over to David Galison vice Investor Relations of Stella-Jones Inc . Please go ahead .
Speaker #3: Thank you . And good morning , everyone . Earlier this morning , we issued a press release reporting a results for the third quarter of 2025 , along with our MDA .
Speaker #3: It can be found in the Investor Relations section of our website at WW . As well as on
Speaker #3: today's call are in Canadian dollars , unless otherwise stated . Please note that our comments made on today's call may contain forward looking information , and this information , by its President , nature , is subject to risks and uncertainties .
Speaker #3: Actual results may differ materially from the views expressed today or further information on these risks and uncertainties . Please consult the company's relevant filings on Cd8+ .
Speaker #3: The documents are also available in the Investor Relations section of Stella website at . Additionally , during this call , the company may refer to non-GAAP measures , which have no standardized meaning under GAAP and are not likely to be comparable to similar measures presented by other issuers .
Speaker #3: For more information , please refer to the company's latest mDNA , available on Stella website and on kdr+ . Last week , we have prepared a corresponding presentation , which we encourage you to follow along with during this call .
Speaker #3: I'll now hand the call over to Eric Vachon President and Chief Executive Officer of Stella-Jones Inc for a strategic business update , followed by Silvana Travaglini Senior Vice President and Chief Financial Officer of Stella-Jones Inc , who will provide a more detailed financial overview of the quarter .
Speaker #3: Eric , over to you .
Speaker #4: Thank you . David . Good morning , everyone , and thank you for joining us today . First , as some of you who are joining us virtually may have noticed , Stella recently unveiled a new brand platform .
Speaker #4: This includes not only a refreshed look and feel , but also an updated brand positioning to make Stella-Jones Inc the backbone of solid infrastructures for stronger communities across the continent .
Speaker #4: We are thrilled with this new brand platform , which aligns seamlessly with our focus on building a strong , agile business and on being a partner of choice to our infrastructure , customers .
Speaker #4: Our results reported today , reflect another successful quarter supported by the continued strong execution across our businesses . Our Q3 results benefited from the organic sales growth of our pressure treated wood businesses , as well as the contribution of our steel structure division , formerly known as Laquelle .
Speaker #4: Particularly noteworthy is the continued improvement in volume momentum for utility poles . We remain encouraged that this positive trend will continue and be sustained .
Speaker #4: Going forward . Although railway tie sales did not increase as anticipated . The company generated more EBITDA and maintained strong EBITDA margins and cash flows .
Speaker #4: This allowed us to reduce our leverage to 2.2 times and further enhance our financial flexibility to support ongoing strategic initiatives . The integration of our steel structures , product category into our business and operational investments , into the production capacities are well underway .
Speaker #4: Having committed the majority of the planned $15 million capital , we remain on track to complete the expansion by mid 2026 . With production ramping up in the second half of the year .
Speaker #4: We remain well positioned , as quoting is very active for long term contracts to fill the expanded capacity for major North American transmission projects .
Speaker #4: Consistent with our focus on creating long term shareholder value , we were pleased to announce the closing of the Brooks acquisition , which further expands our product offering as we leverage our extensive sales and distribution network to better support the needs of our utility customers .
Speaker #4: This acquisition provides us with a presence in the wood distribution , cross arm and transmission framing component markets , aligning with our vision to make Stella-Jones Inc partner of choice to our infrastructure , customers .
Speaker #4: We look forward to welcoming into our team the group at the Brooks facility as we continue to focus on enhancing growth through acquisitions .
Speaker #4: As a cornerstone of our value creation strategy . I'm pleased to share that we published our latest ESG report in September , highlighting meaningful progress in our sustainability journey across the organization .
Speaker #4: Notably , we obtained limited assurance of our scope one and scope two greenhouse gas emissions . An important milestone in our commitment to transparency and accountability .
Speaker #4: We also advanced on our GHG reduction roadmap , launching several impactful projects aimed at lowering emissions throughout our network , such as the Integration of heat recovery events or real time energy monitoring at select facilities .
Speaker #4: I want to thank our team for their dedication and hard work in driving these initiatives forward and helping us build a more sustainable future .
Speaker #4: I will now turn to a performance overview of our main product categories , starting with utility poles . As you are aware , a large part of our business is contractual and our strong network and focus on quality have helped us secure additional contracts which we are now starting to benefit from .
Speaker #4: Our volume growth this quarter is coming from these new contracts . While we continue to see softness in the spot market , given the additional industry supply , the slower demand has continued to impact spot pricing , which have remained below levels realized in 2020 .
Speaker #4: For for the full year , our utility poles sales growth outlook is expected to be in the low single digit range versus 2024 .
Speaker #4: The pipeline of opportunities for volume growth in the utility pole business remains strong , and continues to be key for Stella-Jones Inc . While the pace of investments will continue to be influenced by our customers capital deployment strategies , we have positioned the business well to benefit from meaningful investments required by utilities to replace aging infrastructure and increasing grid resiliency for railway ties .
Speaker #4: Volumes in the third quarter continued to be impacted by a class one customer treating their railway ties internally , as well as lower than expected increase in commercial volumes .
Speaker #4: While commercial orders have been helping close the gap in volumes , delays in certain projects starts are pushing deliveries into next year . As a result , we now expect a larger volume shortfall to act as a headwind for the remainder of the year , and we are now forecasting a mid-single digit year over year decline in railway ties .
Speaker #4: Despite the lower volumes , our teams have worked diligently to improve margins and profitability . Once we reset this year with the lower external purchase from our class , one customer , we continue to expect our railway type business to achieve a low single digit sales growth .
Speaker #4: We remain confident that we can leverage our upcoming class one contract renewals , and our customer relationships to develop potential solutions . Addressing the evolving needs , allowing us to capture a larger share of the industry's volume .
Speaker #4: The residential lumber business performance was solid , with similar quarterly volumes as last year and better pricing in response to higher costs of inventory .
Speaker #4: In the fourth quarter . We will be focused on building inventory and working to support customers as we see good momentum going into 2026 .
Speaker #4: We continue to anticipate sales in this product category to trend in the 600 to 650 million target range over the long term . As we entered the last quarter of 2025 .
Speaker #4: We are maintaining our financial objective for the year and remain confident in the long term sales growth trajectory of our infrastructure , product categories .
Speaker #4: The disciplined execution of our strategy will serve us well as our team remains engaged and dedicated to delivering strong customer and shareholder value .
Speaker #4: With that , I will ask Sylvana to provide a more detailed overview of our third quarter financial results .
Speaker #5: Thank you Eric and good morning everyone . Sales for the third quarter were up 2% organically compared to the prior year quarter , driven by higher infrastructure volumes , primarily for utility poles , including the contribution from the local acquisition .
Speaker #5: Total sales were up 5% , or $43 million , compared to Q3 last year , led by higher volumes , EBITDA increased to $171 million , and we continued to deliver a solid EBITDA margin of 17.8% for utility poles .
Speaker #5: We generated $480 million in sales in the third quarter , up from $448 million in the same period in 2020 . For . The pace of purchases of some utilities improved , and we benefited from new contract secured last year .
Speaker #5: Volumes in the quarter were up 5% , partially offsetting these volume gains was a 3% decline in pricing , largely driven by ongoing pricing pressures in the spot market .
Speaker #5: Our utility pole sales also benefited from a full quarter contribution and better than expected sales volume from our steel structure business , whose results are reported in the utility poles .
Speaker #5: Product category . Sales of railway ties were up 6 million this quarter to $211 million , all attributable to better pricing . Commercial volumes were higher this quarter , but not enough to offset lower class one volumes , which continued to be negatively impacted by a class one customer now treating railway ties at their company owned facility .
Speaker #5: Despite relatively unchanged volume pricing for ties improved by 2% , supporting margins in the quarter . Residential lumber sales increased to $201 million in Q3 2025 , compared to $191 million in the third quarter last year .
Speaker #5: The increase reflects higher pricing, supported by elevated inventory costs from purchases made earlier in the year. Demand levels were largely unchanged from the same period last year.
Speaker #5: Turning now to profitability , the business continued to generate strong EBITDA and EBITDA margin , reflecting the resilience and strength of our business .
Speaker #5: EBITDA in Q3 rose by $9 million to $171 million , largely explained by higher sales volume , partially offset by lower pricing , particularly for utility poles .
Speaker #5: EBITDA margin came in at 17.8% for the quarter , and 18.5% year to date , excluding an insurance settlement gain during the quarter .
Speaker #5: Cash generated from operating activities was $198 million , compared to $186 million in Q3 last year . Strength in cash generation benefited from a reduction in inventory as we continued to focus on optimizing inventory levels .
Speaker #5: We expect to end the year with lower inventories. Our prudent and balanced approach to capital allocation provides us with the financial flexibility to pursue strategic growth opportunities as well as return capital to shareholders.
Speaker #5: Over the last 12 months , we generated cash from operations of over $500 million , allowing us to invest approximately $90 million in the business acquire Laquelle and return approximately $145 million to shareholders .
Speaker #5: With the remaining capital used to reduce our net funded debt, as of the end of September, we had returned $454 million to shareholders.
Speaker #5: Out of the $500 million committed for the 2023 to 2025 period . Through dividends and share buybacks . And yesterday , our board of directors approved a quarterly dividend of $0.31 per share .
Speaker #5: Our business is highly cash generative , and we continue to view share buybacks as a valuable capital allocation tool , which is why our board of directors had the confidence to authorize a new normal course issuer bid for share purchases for the upcoming year , which we announced in a dedicated press release earlier today .
Speaker #5: Stella-Jones Inc is authorized to repurchase up to 1.5 million common shares for the period starting November 14th , 2025 and ending November 13th , 2026 .
Speaker #5: Representing approximately 2.7% of the common shares outstanding . We ended the year with $780 million in available liquidity and a net debt to EBITDA ratio of 2.2 times , down from the 2.4 times at the end of last quarter .
Speaker #5: In summary , we are pleased with our results for the quarter , which highlight the breadth of our network as well as the strength of our business and of our teams .
Speaker #5: Our healthy financial position and strong cash generating ability allows us to continue moving our value creation strategy forward with both organic and inorganic investments .
Speaker #5: Stella-Jones Inc is well positioned for continued growth and success . I will now turn the call back to Eric for his concluding remarks .
Speaker #4: Thank you Sylvana . To put our results in perspective , we had a very good quarter as stronger utility pole volumes helped offset lower than expected railway tie volumes and margins remained strong overall , we generated good free cash flow and lowered our leverage while continuing to invest in our business as we move into the final quarter of the year , our guidance for the year remains intact and we are encouraged by the progression we are seeing in our business .
Speaker #4: Additionally , we look forward to sharing our updated views on the opportunities ahead at our upcoming Investor Day on November 20th , to be held in Toronto .
Speaker #4: Before I conclude , I would like to welcome our two new board members , Rene Laflamme and Shawn Donnelly , whose wealth of experience and perspective will strengthen our board and support the company's long term success .
Speaker #4: Rene brings over 25 years of experience in financial services and insurance with a strong track record of introducing change and innovation to create value , including digital transformation and artificial intelligence .
Speaker #4: Sean's tenure as president and CEO at Arcelor Mittal , de Fasco , his experience in metallurgical engineering , as well as his experience on the board of a utility company , will provide valuable insight .
Speaker #4: This concludes today's prepared remarks . I will now open the line for questions .
Speaker #2: Thank you . As a reminder , to queue up for questions by phone , please press star . Then the number one . And if you are using a speaker phone , please lift the handset before pressing any keys .
Speaker #2: One moment please . For your first question . Our first question comes from the line of Michael Tofunmi from TD count . Please go ahead .
Speaker #6: Thank you . Good morning . Good morning Michael . Eric or Sylvana , the . There were some minor changes in the language around 2025 .
Speaker #6: Outlook commentary for utility pools in the . You're saying ex laquelle you're now calling for marginal year over year growth in utility poles for the full year .
Speaker #6: I don't think the language was sort of quite framed like that last quarter . So I guess the question is , is there a change in your views around the full year expectation for growth in poles that that marginal year over year growth , is that consistent with last quarter , or has there been a bit of a change there ?
Speaker #6: Just just not clear to me .
Speaker #4: Well , thank you , Michael , for the question . So , you know , if I , if I look back , you know , last time we we reported results , our , our H1 views were that , you know , we were behind in the first half of the year on volumes for utility poles and that , you know , we would have some positive momentum back here to finish , you know , more or less flat now as we look at our results in the third quarter and looking at the pickup in momentum in volume demand , we think for the year would be slightly up .
Speaker #4: So obviously a low single digit in H2 that more than offsets the H1 lower volumes . If that's helpful for you .
Speaker #6: Yeah . No , that's helpful . So so it sounds like a little bit of an improvement . So would that then mean you're still on track and expecting to get back to that mid-single digit utility poles ?
Speaker #6: Organic growth by year end 2025 . As you had previously expected ?
Speaker #4: Yes , sir . Exactly .
Speaker #6: Okay . And then maybe just one more here on poles , I think in the in the commentary , Silvana just talked about the the pace of purchases of some utilities improve , but there's still you're still calling out in the MDA macroeconomic challenges .
Speaker #6: You did see some continued pricing pressure in the spot market . So it sounds like there's sort of different dynamics at play , some of which are a little more encouraging .
Speaker #6: And again , then , you know , still calling out some challenges . So I mean , notwithstanding your answer to the earlier questions about a slight uptick in your expectations for the year , can you try to frame up sort of what you're seeing in the market now ?
Speaker #6: And you know how you think about some of the things that we're holding utilities back . Previously in the spot market pricing pressure , like when we can kind of overcome some of that and start to see more of the positive side of what you're describing , really come through here .
Speaker #4: Right ? Okay . Thank you . Michael . So as a reminder for for everyone . You know , 75% of our total utility pole sales are under long term contracts .
Speaker #4: And the other 25% is in the spot market . And the dynamics that we're seeing currently in the market for pricing are in that 25% .
Speaker #4: Category , which is , again , the spot market business . You know , there is still some spotty demand in certain areas in in North America .
Speaker #4: There is healthy inventory levels . So we are seeing , you know , as a whole , some pressure on pricing in the market .
Speaker #4: So that's , you know , when we compare 2024 to 2025 . So far this year , you know , if we compare the trend quarter to quarter in 2025 , it has more or less stabilized .
Speaker #4: So happy to see that sort of leveling off . If you want . And then , you know , we'll see how that overall market demand trends into next year .
Speaker #4: We are very fortunate that , you know , we're seeing this volume increase that I was talking about into your previous question . Be within our long term contract customers .
Speaker #4: So obviously , you know , we have a very long list of , you know , great customers , you that are the North American utilities and those who have the long term contracts as far as we could observe , have been deploying capital strategically for the infrastructure upgrade or grid upgrade .
Speaker #4: If you want . But I can't say that it's moving that fast across the entire the , the , the entire industry . But I do believe that , you know , there is some positive momentum to to come here for the whole industry coming into 26 and 27 .
Speaker #6: Okay . That's very helpful . And maybe just one last one , just as it relates to the spot market pricing pressures based on the visibility you have , do you expect to see ongoing pricing pressure in that market for some , some period of time here ?
Speaker #6: Is there any is there any kind of light at the end of the tunnel as to when we could kind of whether it's the comps getting easier or some of the improvements , you know , in the industry , maybe excess inventory getting soaked up , etc.
Speaker #6: ? Is there any visibility on that or should we assuming continued spot market pricing pressure for for some time ?
Speaker #4: Well , you know , it's it's difficult to predict . You know I think what's encouraging , as I described , if I look at Q1 , Q2 and Q3 of this year , you know , we've seen that pressure subside and flatten .
Speaker #4: So hopefully that is the the lower level of of of where we stand today . And obviously , you know , it's , you know , we're normalizing , I guess , versus 2024 .
Speaker #4: Now we're we're now at I would say hopefully a healthy run rate . And you know any uptick in demand would just help that dynamic going forward .
Speaker #4: I guess something else to keep in mind without going into too much into the weeds , is what are the type of products our customers are looking for .
Speaker #4: So I have mentioned in previous calls , you know , as we , we , we , we , we look at the demand profile over time , our customers are demanding , you know , our ordering more and more larger size poles , which are harder to procure , harder to find .
Speaker #4: And then again , there's where , you know , our customers can find what they need at Stella versus , you know , a , an operation that has one facility and one procurement team , and that is , you know , in , in a given geographical area doesn't have the access or the network .
Speaker #4: We have as , as a company with the the breadth of our network . So I guess that is also , I guess , potentially something that would be good for us going forward , because we do have access to , you know , large quantities of , of inventories with , you know , profiles of poles that are what our customers are looking for .
Speaker #6: Perfect . I will turn it over . Thank you .
Speaker #4: Thank you . Michael .
Speaker #2: Thank you . And your next question comes from the line of James McGarrigle from RBC Capital Markets . Please go ahead .
Speaker #6: Hey , thanks for having me on . I had a question on the the railway tie segment . You kind of flagged some potential share gain into 2026 .
Speaker #6: Can you just talk about what's driving that and then just as a quick follow up there , can you just talk about where you're at in terms of renewing some of these railway tie contracts .
Speaker #6: And , you know , potentially passing on higher price ?
Speaker #4: Yeah . So obviously , I guess I guess one of the comment is , you know , if I understand your question , you know , with the pullback of a given class , one that's now treating , you know , at their own treating facilities , it's a reset this year .
Speaker #4: So you know going forward as we conclude 2025 I would expect 2026 to resume our low single digit . Sales increases . We are looking at the contract renewals right now with a few class one customers .
Speaker #4: So two things there . Obviously , each time we have an opportunity to renegotiate our long term contracts , you know , we're always , you know , shooting , shooting for the most volume we can get from them .
Speaker #4: And I think what we need to do is not , you know , it's the service that we do as a quality of the product , but it's also how we can help them solve certain of their , of their needs .
Speaker #4: Maybe logistically , you know , maybe with with new services . So we're definitely looking into opportunities from that perspective . And then with regards to price increases , you know , I think we've been clear in previous calls that we we are coming to the table and discussing with our customers to find mechanisms to adjust the pricing and ensure we preserve or improve margins over time .
Speaker #4: Obviously , as you can understand , customers never want to pay more for the product . So we need to come up with a value proposition .
Speaker #4: And , you know , our whole team is very much focused on on that aspect and seeing how we can be that , you know , go to supplier , I guess , for the rail infrastructure business .
Speaker #4: .
Speaker #6: And then I think there was for contracts that were coming up for renewal . Is that is that still the case or have any of those negotiated recently ?
Speaker #6: been
Speaker #4: Yes . Still , for that , our that are outstanding , one might get just renewed for one year period . Obviously I don't want to start , you know , calling out names , but but yes but still yes we're still discussing with with with with all for customers .
Speaker #4: Obviously some of them are later into next year . So some of them are well advanced and some of them are really preliminary as we're positioning ourselves .
Speaker #4: But I guess it will be an ongoing topic here through 2026 .
Speaker #6: Okay . Appreciate the color there . And then just one more on the railway tie segment . And I can turn the line over just on CNS lowered CapEx .
Speaker #6: You know , they meaningfully reduced their CapEx . You know , when they reported Q3 results , you know , it seemed to be that the the maintenance would be intact , which I assume is where the the ties , you know , would fall in that that would impact your business .
Speaker #6: But any risk there to your tie outlook into 26 on the back of that announcement for from Canadian National . And I'll turn the line over after that .
Speaker #6: Thank you .
Speaker #4: Okay .
Speaker #4: So we're not impacted by this I guess this CapEx reduction announcement . So we're definitely , you know , part of that that maintenance piece of it .
Speaker #2: your next question comes from the line of Manuel Pereira from Desjardins . Please go ahead .
Speaker #7: Yeah . Good morning . Good morning . Sylvana , just to come back on the railway ties . Questions obviously . Any thoughts about the the Non-class one customers these days ?
Speaker #7: And what do you foresee from from those segments ?
Speaker #4: You know , I think we had a reasonably good year for an industry as part of the demand goes . You know , we we have certain , you know , contracts , not contracts or POS or bids that , you know , we have in hand that we're seeing the delivery dates , you know , being pushed now into next year .
Speaker #4: I'd like to think that , you know , we're past the , the comments or review by the US federal government on different programs .
Speaker #4: If you in H1 , there were a lot of reviews on different subsidy programs and things of the like , created a bit of uncertainty as far as the funding for our , you know , the short lines in particular .
Speaker #4: I think that's behind us . So I'm actually feeling positive about what's coming in 2026 with regards to that , that having resumed .
Speaker #4: Yeah , that would be my my comment there .
Speaker #7: Okay . Looking at utility American Electric power and Quanta Services unveiled morning 72 billion partnership on a transmission extension . I was just wondering , given your obviously well connected well positioned with the utilities , is it something that we we we might see down the road from , from you guys ?
Speaker #4: Meaning as far as benefiting from the the that that announcement .
Speaker #7: Exactly . Is it something that will benefit the Stella-Jones Inc .
Speaker #4: So I believe that last quarter , you know , AEP in their public disclosures had put forward
Speaker #4: 77 zero , this $70 billion in CapEx in the next five years . So the announcement of quanta actually puts more actionable , you know , or meaningful actions towards executing on that CapEx .
Speaker #4: No , know , in the past , you know , eight , nine months , they've had , you know , given a good look at their capital structure to be able to deploy and invest in their networks .
Speaker #4: So we're very pleased with that . We're very well positioned with AEP . They're one of our key customers . And obviously from a distribution pole , a transmission pole business .
Speaker #4: And now with the lattice or lattice or steel structure division , you know , I think we we have opportunities here to to bid on upcoming projects that we would be putting forward .
Speaker #7: Okay . And looking at your NCIB , Silvana , it has been renewed , but the lower amount versus the previous two years .
Speaker #7: So just wondering , should we see that as a signal that the fact that you foresee more growth opportunities ahead , any color with respect to the share buyback envelope .
Speaker #5: Yeah . So I guess two comments on that , Benoit . The first is even though we had a bigger programs , as you probably saw over the last two years , we did repurchase probably more in the 1.21 million shares .
Speaker #5: So , you know , reducing it is almost , you know , being more consistent with the actual usage of the program over , over the last two years .
Speaker #5: And , you know , definitely we are definitely very mindful of of all the , you know , the . Potential investment activity going forward .
Speaker #5: Definitely . That is , is part of is part of the mix .
Speaker #7: Okay . And maybe last one quick one for me in terms of working capital , anything to call out going into Q4 and 2026 .
Speaker #5: Yeah , yeah . So into Q4 , as we typically see , we would expect our particularly for residential lumber , a build an inventory in that last quarter of the year .
Speaker #5: But , you know , more than offset by the by the decrease that we would expect in just because of the seasonal seasonally lower sales in the Q4 versus a Q3 .
Speaker #5: So I think , you know , we would expect , you know , either a neutral or a pickup in in the last quarter of the year in terms of our working capital .
Speaker #5: So adding already to the inflow that we have year to date and going into 2026 , I , you know , I guess the the , the color that I could give around that is that , you know , depending on the expected increase in , in , in sales that you put forward , you know , we always say that we probably , you know , 40% of that increase is needed in terms of build of of of of working capital for , for that additional sales growth .
Speaker #7: Okay . That's great color . Thank you very much for the time .
Speaker #4: Thank you , Benoit .
Speaker #2: Thank you . Once again . Should you have a question please press star . Then the number one on your telephone keypad and your next question comes from the line of Martin Pradier from Berita Investment Research .
Speaker #2: Please go ahead .
Speaker #8: Thank you . My first question is about building material . I thought that the prices were up during the quarter , but the wood price decline and you mentioned that there is a delay between when this gets into the sales .
Speaker #8: What what kind of delay are we looking at ? I mean , when are the lower prices of wood going to impact ? You know , your sales down the road ?
Speaker #4: Well , thank you , Martin , for for the question . So you know , so maybe as a reminder , you know , when we , we , we started a year , you know or as the the industry calls it a season .
Speaker #4: You know , we have a large build up of inventory . And you know , with our key customers , we set the price , you know , for to , for in this case for 2025 .
Speaker #4: So we have not adjusted and and you're completely right . The price of lumber has declined somewhat . You know , since January of this year .
Speaker #4: But we've also built a program for our customers . And , you know , when we negotiate a price , we need to hold it through .
Speaker #4: So we have not adjusted prices so far this year . Slightly a bit here or there in the third quarter , but nothing that , you know , you could probably notice through our financial results .
Speaker #4: I do expect expect these prices to hold until the end of the year . We'll negotiate them again . You know , revisit those prices when we when we start the new year here with with our customers .
Speaker #4: We're actually currently through November and December of this year is when we sort of set the programs for 2026 . So discussing pricing now .
Speaker #4: So there might be a slight decline . We're trying to see where the market is trending right now . Obviously there's a lot going on .
Speaker #4: And to consider with , you know , duties and tariffs and curtailment of of of capacity , I do believe that a lot of sawmills in in Canada are , you know , are having a tough time financially because of the lower , lower prices of lumber .
Speaker #4: And I do believe that their intention is to is to see that price go back up to make it worthwhile for them to , to operate .
Speaker #4: So , you know , if there would be an uptick here in lumber prices , you know , in the next , next three months , you know , I think it wouldn't be that much of a , a decline in pricing next year .
Speaker #4: So hard to predict, but something that we monitor daily.
Speaker #8: Okay . Thank you . And my my second question was , you know , I was quite impressed with railway ties sales in this quarter , which was positive .
Speaker #8: And you come from two years of two quarters of plus 10% negative , but my understanding is that the next quarter is is going to be negative again , because there were a lot of sales in Q4 last year .
Speaker #8: And you're saying that some of these programs are delayed , and I'm going to go to 2026 . Is that the right way of thinking about it ?
Speaker #4: Yes , I think you're you're you're thinking about it , right ? Q4 is typically a slower quarter . We you know , we see sometimes orders straggle Q4 of this year and Q1 of next year .
Speaker #4: But the way we're looking at it is , as you just expected , expressed it , it'll be slightly slightly lower . So we will conclude the year in that , you know , down in the mid single digits .
Speaker #4: If I think that's what you were expressing .
Speaker #8: Okay . Thank you very much . And but that's that's good for me . Thank you .
Speaker #4: Thank you . Appreciate it .
Speaker #2: Thank you . And your next question comes from the line of Michael Topham from TD Cohen . Please go ahead .
Speaker #6: Thank you . Eric , I just wanted to ask you if you could comment on the Brooks acquisition . I haven't talked about that much on this call , just in terms of , you know , what you see that acquisition adding in terms of expanded product offering and whether you can roll that out more broadly across the network or if further acquisitions would be required in order to to have that expanded product offering more broadly available .
Speaker #6: And then also , just maybe just if you could comment on the M&A pipeline in general .
Speaker #4: Certainly . So the the , the Brooks acquisition brings , you know , a few things . One , obviously , a as well a bit of a diversification of of our product offering , although mainly treated wood , but in the cross arm space .
Speaker #4: So, you know, I'm very happy now to have a larger catalog to have, you know, more in-depth discussions with our utility customers.
Speaker #4: We have acquired . Also , you know , a team with a skill set and knowledge about this industry . So cross arms are unique dimensions with very particular procurement dynamics because of those dynamics .
Speaker #4: So we've acquired , you know , a leader in this in this space with some some good knowledge . So you know , so the next steps to your question is obviously there are customers that Stella-Jones Inc have that , you know , Brooks was I don't know if the let's say they didn't have much exposure to or we can definitely .
Speaker #4: You know , make new introductions or reintroduce them . I do believe that there might be an opportunity for us to consider if there's if we can bring this into the Canadian market as well , because Brooks has no exposure to the Canadian market , I believe they would have enough capacity and slash we would also internally in Canada in particular , to be able to consider expanding that offering to , to , to , to our customer base .
Speaker #4: So , you know , we're obviously now that we have full access to , to , to , to to the team and the assets , we'll putting first integrating the group and secondly , thinking about that strategy going into 2026 with regards to the acquisition pipeline , Michael .
Speaker #4: So I'll go back to , you know , start with the basics . You know , there's still some targets in wood poles and railway ties that are of interest to Stella-Jones Inc .
Speaker #4: And , you know , we keep monitoring those , those , those opportunities . Definitely interested in expanding or growing our , our steel structure division .
Speaker #4: So obviously with Rockwell , or or the Candiac facility , you know , we will be doubling the capacity , as I said , for mid of next year .
Speaker #4: But I do think there's some other opportunities for us to to keep growing the growing that division . We've we've had a lot of positive feedback from , from our customer base interested in , you know , understanding to how we'll Stella-Jones Inc able to support these , these massive projects that are upcoming here .
Speaker #4: So one of the previous questions , for example , on AEP , when you think about $70 billion , obviously they're generating assets in there , but there's also a good part of the money going there for , for for transmission lines , which would in most part be steel and not not to forget the maintenance of of the entire network to which we're exposed .
Speaker #4: So definitely some , some , some thoughts . There . And , you know , as we keep exploring opportunities , you know , and as we make these acquisitions , you know , we , we , we get introduced to new relationships and , you know , discover new opportunities of businesses that service the utilities or the rail space that have , you know , attractive margin profiles and would be a good fit .
Speaker #4: And they're actually looking for , you know , a partner to come and help them grow the business . But when I say partner , it's really selling the business to us because with our access to capital , you know , as we did with lock , for example , we were able to invest and increase the capacity and get to that critical mass where certain customers are .
Speaker #4: Now , you know , taking notice . So I guess that would be how I need to think about the pipeline going forward .
Speaker #6: Great . That's very helpful . Thank you .
Speaker #4: Thank you Michael .
Speaker #2: Thank you . And your next question comes from the line of Hamir Patel from CIBC Capital Markets . Please go ahead .
Speaker #9: Hi . Good morning . Eric . Yeah , your poll business looks like the wood prices were were down close to maybe mid-single digits in the quarter .
Speaker #9: I know you mentioned the spot markets about a quarter of your mix . So that kind of suggests a spot pricing was down .
Speaker #9: Maybe mid-teens year over year in Q3. Is that a fair interpretation? And I'm just wondering how much of that is mix, and if you could comment on how much lower the spot market is versus your typical contract price?
Speaker #4: Yeah , I'll so I think you're not quite there , Amir , but I'll let Silvana sort of cover that for for us .
Speaker #5: Yeah . So , so in the quarter we said that our pricing , you know , accounted for a 3% decline in , in sales .
Speaker #5: And we said most of that was the spot pricing . But there was also , you know , some some mix in there for , for our contract .
Speaker #5: So you know like year to date , you know , our , our pricing slash mix kind of decrease , you know , is , is , is less than , than 1% .
Speaker #5: So you know , we're still , you know , expecting for the year that the spot pricing will remain below 2024 . And as Eric said you know there's some normalization there because the spot pricing last year was almost in line with our contract pricing .
Speaker #5: So you know , we do expect that decrease to to to to continue into the second into the last quarter when we compared to the same quarter last year .
Speaker #5: And at the contract pricing , as we always mentioned , is really we would have just expected as we as we have seen so far , just contractual kind of increases that we have about , you know , the most inflationary like 2 to 3% .
Speaker #5: But we have and I believe Eric must have mentioned , but we have seen sort of the average spot pricing pretty much be in line with what we saw in Q2 , in Q3 .
Speaker #5: So we have seen some stabilization , if you want , between Q2 and Q3 .
Speaker #9: Okay , great . Thanks . That's helpful . Savannah and any sense yet as to how we should think about CapEx for for 2026 and , you know , where you stand with potential greenfields on the steel side in the US .
Speaker #5: Yeah . So maybe I'll answer the CapEx piece and then I'll pass it over to Eric . So we continue to expect , you know , based on the on our current asset base , probably the higher end of our range , probably in the 85 to $90 million .
Speaker #5: And this does not include the expansion CapEx expected for Rockwell , which part of it is being done this year . But it will spill over into next year .
Speaker #5: It will only be ready probably mid to second half of next year . So you have to keep that in mind to add to our regular CapEx spend .
Speaker #5: .
Speaker #4: And I'll follow . Or conclude on that topic . Amir . So with regards to the expansion of the Or steel structure division , definitely focused right now on ensuring we properly execute on that expansion CapEx and roll it out .
Speaker #4: It's a big change because we're changing out the entire floor of of the facility . I think we're well on our way , as you know , had a few meetings in the last few weeks on , on , on the planning of that and how we're going to execute in , you know , in the first six months of next year .
Speaker #4: But that being said , you know , is there a potential for another greenfield facility in the US or Canada or in North America ?
Speaker #4: Definitely . Looking into this and having discussions with customers , obviously , do not want to build a facility that has no , no , no orders on the books .
Speaker #4: So we we're seeking for for commitments , but still working on the project and we'll be discussing more at the at the Investor Day .
Speaker #9: Okay . Fair enough . And just the last question I had , Eric , I know the RTA recently held their their annual conference .
Speaker #9: What were the sort of volume trend expectations that you were hearing out of the the various class ones ? And I know you already kind of commented that CN was was tracking flat , but but curious about the others .
Speaker #4: Yeah , pretty much flat for everyone . Amir . There's no big , you know , intention of increasing maintenance programs as far as we've heard .
Speaker #4: We obviously have , you know , the up and downs that are a bit prudent . As you know , there they're well , they can't talk to each other , but they up is expecting to close this , this , this , this transaction next year .
Speaker #4: So you know , I think out of that there could be some some different views . But that would probably spill into 27 at that point in time .
Speaker #4: So you know , I would say those most , most class ones that were there or all of them were , were indicating similar volumes year over year .
Speaker #9: Great . Thanks . Thanks , Eric . That's all I had . I'll turn it over .
Speaker #4: Thanks , Amir .
Speaker #2: Thank you . We have no further questions in the queue . Please proceed .
Speaker #4: Thank you . Ina . Thank you everyone for joining us today . And we look forward to updating you when we release our fourth quarter results .
Speaker #4: Make it a good day .