Stella-Jones ((TSE:SJ)) has held its Q4 earnings call. Read on for the main highlights of the call.
Stella-Jones’ recent earnings call painted a picture of robust growth and strategic resilience. The company showcased consistent sales and EBITDA increases, with strong performances in key segments like railway ties and residential lumber. Despite facing challenges such as a decline in utility pole volumes and a softer Q4 EBITDA, Stella-Jones’ strategic initiatives and financial flexibility position it well for future growth.
Consistent Sales and EBITDA Growth
Stella-Jones reported a 5% increase in sales, reaching $3.5 billion, and a 4% growth in EBITDA to $633 million for 2024. The company maintained an impressive EBITDA margin of over 18%, underscoring its operational efficiency and market strength.
Strong Performance in Railway Ties and Residential Lumber
The railway ties segment saw a remarkable 15% sales growth in Q4, achieving mid-single-digit sales growth for the third consecutive year. Residential lumber sales also performed well, with a 12% organic increase in Q4, keeping within the $600 million to $650 million target range.
Dividend Increase and Strong Capital Return
Stella-Jones demonstrated its commitment to returning capital to shareholders by increasing its dividend payout by 22% to $1.12 per share in 2024. Additionally, the company announced an 11% increase in the quarterly dividend to $0.31 per share, marking the 21st consecutive annual increase.
Successful Bond Offering
The company completed an inaugural bond offering of $400 million for seven years, enhancing its financial flexibility and supporting future growth initiatives.
Commitment to Sustainability
Stella-Jones made significant progress in sustainability, notably reducing greenhouse gas emissions and finalizing solar panel installations expected to cover 48% of a facility’s electrical consumption.
Utility Poles Volume Decline
Utility pole volumes declined by 4% in Q4 2024 compared to the previous year, primarily due to lower volumes in non-contract business, presenting a challenge for the company.
Softness in Q4 EBITDA
The company experienced a 4% decrease in Q4 EBITDA to $150 million, impacted by an unfavorable sales mix and non-recurring expenses, highlighting areas for potential improvement.
Higher Net Debt to EBITDA Ratio
Stella-Jones’ leverage ratio increased to 2.6 times, slightly above the target range, influenced by the appreciation of the U.S. dollar, which the company aims to manage effectively.
Forward-Looking Guidance
Looking ahead, Stella-Jones anticipates mid-single-digit growth in utility poles and low-single-digit growth for railway ties in 2025, while maintaining an EBITDA margin of at least 17%. The company continues to focus on disciplined capital allocation, with expectations of sustained financial performance and shareholder returns.
In conclusion, Stella-Jones’ earnings call reflected a strong overall sentiment, with significant growth and strategic initiatives positioning the company well for future success. Despite some challenges, the company’s robust performance in key segments and commitment to sustainability and shareholder returns are key takeaways for investors and market watchers.