ATCO Ltd.

Thank you for standing by. This is the conference operator. Welcome to the ADCO limited second quarter 2023 results conference call and webcast. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the questioning queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you need to signal an operator by pressing star and zero. I would now turn the conference over to Mr. Colin Jackson, Senior Vice President of Finance, Treasury and Sustainability. Please go ahead, Mr. Jackson.

Thank you. Good morning, everyone. We're pleased you could join us for ACCO's second quarter 2023 conference call. With me today is Executive Vice President and Chief Financial and Investment Officer, Katie Patrick. Before we move into our formal agenda, we'd like to take a moment to acknowledge the numerous traditional territories and homelands on which our global facilities are located. Today, we're speaking to you from our ACCO Park head office in Calgary, which is located in the Treaty 7 region. This is the ancestral territory of the Blackfoot Confederacy, comprised of the Siksika, Kainai, and Bagani Nations, the Tsitsinu Nation, and the Stony Nakota Nations that include the Tuniki, Bears Paw, and Good Stony First Nations. The city of Calgary is also home to the Métis Nation of Alberta, Region 3. We honor and respect the diverse history, languages, ceremonies, and culture of the Indigenous people who call these areas home. Katie will begin today with some opening comments on recent company developments and our financial results. Following these prepared remarks, we will take questions from the investment community. Please note that a replay of the conference call and the transcript will be available on our website at ATCO.com and can be found in the investors section under the heading events and presentations. I'd like to remind you all that our remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reports filed by ACCO with the Canadian securities regulators. And finally, I'd like to point out that during this presentation, we may refer to certain non-GAAP and other financial measures such as total of segment measures, adjusted earnings, adjusted earnings per share, and capital investment. These measures do not have any standardized meaning under IFRS, and as a result, they may not be comparable to similar measures presented in other entities. And now I'll turn the call over to Katie for her opening remarks.

Thanks, Colin, and good morning, everyone. Thank you all very much for joining us today for our second quarter 2023 conference call. ATCO achieved adjusted earnings of $87 million, or 77 cents per share, in the second quarter of this year. While this is slightly down on a year-over-year basis, these results really highlight the benefits of our diversified portfolio of investments. This diversification allowed us to partially offset the downwards earnings pressure associated with the Alberta Distribution Utilities rebasing, where the phenomenal outperformance in recent years is being shared with our customers. When we look more specifically at where these offsetting earnings came from, we see that our results were driven by exceptional growth from our structures and logistics business, combined with great performance across our broader portfolio of investments. Collectively, the performance of our investments outside of Canadian utilities serves to offset approximately $15 million of earnings pressure for the quarter. At ACCO Structures and Logistics, we delivered adjusted earnings of $26 million in the quarter, $7 million higher than the same period last year. Continuing the trend from previous quarters, a key driver of our earnings growth in the second quarter was the strong performance of our base businesses. Both our space rentals business and our newly acquired Triple M housing division delivered exceptional results in the period. Compared to the second quarter of 2022, we grew our space rentals fleet size by 13% and our average rental rate by 14%, all while achieving an average utilization rate of 75%. Moving on to Triple M, the business continued its strong positive earnings momentum from the first quarter into the second and is integrating well into our existing structures business. We continue to believe this integration will allow for opportunities to incorporate various manufacturing process efficiencies as well as unlocking potential customer synergies across our businesses. During the quarter, we also reached substantial completion of the Bechtel Pluto Train 2 project. This project was a significant driver of project-based earnings for us over the last year and highlights our continued ability to successfully execute large-scale, multifaceted workforce housing projects globally. I'm also very proud to say that this project was completed approximately four months ahead of schedule, an amazing feat given the current economic and supply chain environment. Our plan to grow our base business globally continues to take form and we have had success securing new contracts as well as supplemental additions to existing contracts. This included the previously announced 116-unit project in Texas with TIC, where we were recently awarded a contract for an additional 31 units by the company. The U.S. market represents a strong, repeatable growth platform, and we look forward to increasing our presence in this jurisdiction. As I've mentioned in the past, our base business typically accounts for two-thirds to three-quarters of our stake of our segment earnings. The strong performance from these base earnings at structures offset the project-based earnings pressure we experienced at Frontec in the quarter. The team at Frontec continues to be active in pursuing new contracts to support earnings moving forward. Particularly, we see opportunities in the defense and government spaces where deep Indigenous relationships can be leveraged alongside our core remote services expertise. At Neltune Ports, the business continued to deliver stable and dependable earnings. During the quarter, the business increased its ownership at Puerto Angamos and Terminal Guernel del Norte from 40 to 50%, helping to expand our earnings base moving forward. Favorable foreign exchange impacts also served to push second quarter adjusted earnings higher when compared to 2022. As expected, our Canadian utilities investment saw adjusted earnings decline by approximately $19 million when compared to the second quarter of 2022. This decline was primarily due to the impact of rebasing at our Alberta-based distribution utilities, which I previously have mentioned. This rebasing pressure was compounded by year-over-year earnings pressure in the Australia natural gas distribution business as inflation levels began to recede from 2022 highs. As Brian spoke about Canadian utilities in detail on this morning's CU earnings call, I won't go into those details again here. I would, however, highlight how the expected performance for CU will impact the remainder of 2023 for ATCO. Looking ahead to the second half of 2023, we still expect to see year-over-year earnings pressure at ATCO in the third quarter, driven by the same rebasing forces we are seeing this quarter. By the fourth quarter, however, we expect this pressure to ease for CU, Seasonal benefits and growth within our non-regulated businesses at CU, combined with growth at our remaining portfolio of investments, should provide opportunities for continued growth year over year. Overall, ASTHO delivered a second quarter that was in line with our expectations and highlighted the strength of our diversified portfolio. Our non-CU investments delivered strong results that helped soften the earnings impact of rebasing and a downward trending Australian inflation. Although these headwinds are expected to continue through the remainder of the year, we continue to be proactive across our portfolio to deliver long-term share owner value during this key transition year at our largest investment, Canadian Utilities. That concludes my prepared remarks. I will now turn the call back to Colin.