Stella-Jones Inc.

of premium lumber products, accessories, and composite products distribution. In the face of these trends, we've taken a proactive approach to both procurement and capacity. With our robust growth CapEx program for utility poles, we actively expanded our peeling, drying, and treating capabilities, making significant investments in six peeling and treating facilities in the US and Canada. Additionally, we bolstered these investments with targeted and accretive acquisitions. In 2023, we completed three acquisitions, which added two treating facilities and two pole-pilling operations to our network in the southeastern United States. These capital expenditure projects and acquisitions reinforced our procurement and production capabilities and enabled us to secure new customers and expand our customer base. Our strategic approach to augmenting capacity was upheld by our procurement capabilities and financial strength to secure ample wood supply. In 2023, we seized procurement opportunities benefiting from fiber availability and prioritizing mutually beneficial relationships with sawmills and loggers across North America to build a robust inventory position. As always, ESG is a significant company-wide focus. to our formalized ESG strategy titled Connecting Our Sustainable Future, we identified long-term and measurable near-term targets across six strategic topics, including climate change, greenhouse emissions, as well as health and safety. In 2024, we look forward to reporting on our progress and to move forward on key initiatives that will drive sustainable improvements across our value chain. All of these initiatives, coupled with the strong performance from each of our key product categories, enabled us to finish 2023 satisfied with our performance and with the progress we are making on our business objectives. Allow me now to elaborate on the performance of our key product categories. Our infrastructure products sales benefited from strong organic growth and the contribution of strategic investments. Utility pole sales grew organically by 18% in 2023, profiting from favorable pricing dynamics and the emergence of growth investments during the year. While the long-term market fundamentals and growth prospects for this product category remain unchanged, we experienced lower volumes year over year and noted a softer pace of purchase, mostly attributable to certain customers' capital budget constraints. During the year, we've shifted our focus to preserve existing and capture new business for the long term. As electrical and telecommunication utilities across North America remain dedicated to grid maintenance and upgrades, their request for sales contracts with a long-term horizon instills confidence in the upcoming demand for our products and in our investments to meet this demand. Turning to railway ties. Following 2022, when the industry was faced with fiber availability challenges, our focus in 2023 moved to replenishing and maintaining adequate inventory levels to meet demand. We were successful in that regards and are now well positioned to cater to the commercial side of the market. Railway tie sales grew above our expectations in 2023, driven largely by the pass-through of untreated tie cost increases from the previous year. Looking ahead into 2024, we expect the cost of untreated ties to remain relatively stable. While maintenance programs for Class 1 railroad customers should remain comparable to those in 2023, we anticipate additional sales volumes from our commercial business supported by a healthier inventory position. As we see railway tie customer agreements gain in maturity in the coming years, A key area of focus in contractual discussions will be to reset pricing and establish improved cost recovery by reviewing agreements to ensure costs are better incorporated in our pass-through clauses. Lastly, we remain pleased with the performance of our residential lumber product category in 2023. We continue to prove our ability to provide consistent supply to big box retailers, which comprise approximately 70% of our customer mix. Though the consumer base is contending with macroeconomic headwinds brought on namely by interest rates, our customers are noting good demand driven by persistent consumer trends such as homeowners expanding their living spaces outdoors. This bodes well for our business and will certainly support our premium treated products as well as our composite products we distribute. On the procurement front of residential lumber, Canadian sawmills have curtailed production in the last year, which has brought on challenges making it difficult to source specific components in Canada. In response, our resourceful procurement team has started turning to alternate geographical regions to secure required materials and help maintain a healthy mix of inventory, and I commend them for their creativity. With that, I will turn the call over to Sylvana.

Thank you, Eric, and good morning, everyone. As Eric stated at the top of the call, Stella Jones delivered another year of solid financial performance marked by increased sales and a record improvement in profitability. Sales for the year were $3.3 billion, up $254 million from last year. This increase was driven by the 13% organic sales growth of our infrastructure products. All of our infrastructure products benefited from favorable pricing dynamics, while residential lumber and logs and lumber sales pulled back due to the decrease in the market price of lumber. The acquisition of Texas Electric Cooperatives late in 2022 and more recently Baldwin, as well as the favorable currency conversion effect, also contributed to the higher sales in 2023. For the fourth quarter, sales amounted to $688 million compared to sales of $665 million for the same period in 2022. The increase continued to be driven by the sales growth in utility poles and railway ties, offset in part by lower residential lumber sales. For utility poles, we generated $383 million of sales in the fourth quarter, up 17% over the same period last year. Pricing gains and contribution from acquisitions were partly offset by lower volumes, mainly due to the slower pace of purchases of certain utilities. Volumes were down 5% versus Q4 of last year. For the fourth quarter, sales of railway ties were $165 million, up 2%, compared to $161 million in the fourth quarter of last year. Pricing was up 8%, but was largely offset by lower non-Class 1 volumes compared to Q4 last year. Similarly to previous quarters, sales of residential lumber decreased compared to last year. Sales were $82 million in the fourth quarter of 2023, down from $100 million in the fourth quarter of 2022. While pricing in 2023 pulled back, residential lumber sales benefited from higher sales volume due to solid consumer demand. We ended the year with sales of $645 million within our $600 to $650 million target range. Turning now to profitability. EBITDA for the year increased to $608 million, up by a record 36% compared to last year. The higher EBITDA was largely driven by the margin expansion of the company's infrastructure businesses. The utility pole acquisitions in late 2022 and in 2023 and the positive impact of currency conversion further contributed to the increase in EBITDA. We ended the year with an EBITDA margin of 18.3% up from 14.6% last year. As a percentage of sales, EBITDA also benefited from a better product mix led by the strong growth of utility pole sales and the lower relative proportion of residential lumber sales, now representing 19% of the company's total sales. For the quarter, EBITDA increased $120 million, an increase of 38% compared to the EBITDA generated in Q4 last year. And the margin grew from 13.1% in the fourth quarter last year to 17.4%. Compared to the third quarter, all product categories generated similar margins as a percentage of sales. The sequential decrease in EBITDA margin was a result of the lower volumes and operating leverage that is typical in Q4 versus Q3, when the margin percentage benefits from strong seasonal volumes. Consistent with the EBITDA growth in 2023, net income for the year increased 35% to $326 million. Earnings per share also continued to benefit from our share buybacks and grew by 43% to $5.62 per share. During the quarter, we initiated another normal course, if forbid, as part of our strategy to return capital to shareholders. During the year, we deployed the cash generated from operations of $107 million and available credit to maintain our network assets, make capacity-enhancing investments, which included the acquisition of three businesses, as well as return capital to shareholders. In line with our capital allocation policy, in 2023, we increased dividend by 15% to $0.92 per share, And yesterday, given the record increase in profitability, the Board of Directors announced a 22% increase in its quarterly dividend to $0.28 per common share. This marks the 20th consecutive year that we have increased our dividend, which speaks to our overall confidence in the long-term fundamentals of our business. We ended the year with a net debt to EBITDA ratio of 2.6 times, deviating slightly from our leverage target as we invested in strategic growth capex and acquisitions. These growth opportunities totaled over $150 million and are expected to contribute to future profitable growth. At year end, inventories stood at approximately $1.6 billion, an increase from $1.2 billion at the close of last year. In addition to the increase in inventories in the fourth quarter due to the slower pace of purchases of certain utilities, we also built inventory to support the anticipated infrastructure demand growth and to secure longer-term utility pole sales commitments. Further, following the limited availability of untreated ties in 2022, we seized procurement opportunities in 2023 to replenish our railway ties inventories. This higher investment in inventory places the company in a good position to service the anticipated increase in customer demand. Subsequent to year-end, we amended our syndicated credit agreement in order to increase the amount available under the revolver to $600 million U.S. and extend the maturity, demonstrating our lenders' confidence in our ability to execute our plan and grow the business. In summary, with a healthy financial and inventory position, as well as solid market fundamentals, we have confidence in the financial strength of our business and believe Stella Jones is well positioned for success in 2024. I will now turn the call back to Eric for his closing remarks.

Thank you, Silvana. By all measures, we had a strong year and a strong start to our three-year strategic plan. After the first year, sales reached $3.3 billion, but were $3.2 billion on an organic basis. Based on our progress in 2023, we remain confident in the sustained growth of the company and our ability to attain or exceed the $3.6 billion organic sales objective set out in our financial guidance. In 2023, our infrastructure product categories represented 77% of sales mix and residential lumber sales represented 20% in line with our expectations. Looking ahead, we expect continued profitability for the business. External factors like the continued higher cost of capital and increased supply from the utility pole industry bear undetermined effects which could impact our EBITDA margin. In light of this, we remain confident in attaining our 16% objective through 2025. We are also optimistic that the proactive planning and execution of our business strategy will enable us to continue returning capital to shareholders, having already returned almost 40% of the minimum $500 million objective outlined in our guidance. We are focused on maintaining our leadership position in North America. And that requires us to evolve with the needs of our customers. With our growth CapEx program largely complete, our attention in 2024 will remain on growing our business. Acquisition on the wood-treating side of the business, as well as investing organically in our network, remain key elements of our strategy. But we will also pursue growth through acquisitions in other infrastructure products and services where we can leverage our continental network, industry-leading customer relationships, and solid reputation. In closing, I want to mention that we have high standards for our business. And if I'm confident in our capabilities, it's because of our nearly 3,000 employees. Whether our products enable power to flow through the electrical grid, help move merchandise on the continent's rail network, or help retailers in North America supply lumber products and accessories, our employees are the ones who make it all happen. I want to thank everyone for their contributions in 2023 and beyond, and for their ongoing dedication to customer service and maintaining our leading reputation in the industry. Stella Jones is ready for the future, and this is in great part thanks to you. And with that, I will open the line for the questions.