Stella-Jones Inc.

Good morning and thank you for standing by. Welcome to Stella Jones' fourth quarter of 2024 earnings call. At this time, all participants are in listen-only mode. Following the presentation, we will hold a question and answer session. To queue up for questions by phone, please press star 1. If anyone experiences difficulties during the conference call, please press star 0 for operator assistance at any time. I would like to remind everyone that this conference call is being recorded on Thursday, February 27, 2025. 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. Actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on CDAR+. These documents are also available in the investor relations sections of Stella Jones' website at StellaJones-Jones.com. Additionally, during the conference 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. For more information, please refer to the company's latest MD&A, available on Stella.Jones' website and on CDAR Plus. Lastly, we have prepared a corresponding presentation, which we encourage you to follow along with during the call. I will now turn the call over to Eric Vachon, President and Chief Executive Officer of Stella Jones. Please go ahead.

Thank you, Sylvie. Good morning, everyone, and thank you for joining us today. With me on today's call is Silvana Travolini, our Senior Vice President and Chief Financial Officer at Stella Jones. Earlier this morning, we issued our press release reporting our results for the fourth quarter and year-end 2024. Along with our MD&A, it can be found in the investor relations section of our website at www.stella-jones.com as well as on CDAR+. As a reminder, all figures expressed on today's call are in Canadian dollars unless otherwise stated. Before we dive into our strategy and performance overview, I want to take a moment to acknowledge the communities our customers serve, which were impacted by a number of natural disasters in the last year. In times of need, we spare no efforts. Our focus is to help recovery efforts as quickly and efficiently as possible. Following the recent California wildfires, we engaged our emergency response program to swiftly support our customers. Our products play a vital role as the backbone of electrical infrastructure that delivers essential services across the continent. And we take pride in our role of helping connect communities.

Turning now to our business updates.

In 2024, we delivered a solid performance despite some top line headwinds. We grew sales for the 24th consecutive year, increased EBITDA and maintained an EBITDA margin of more than 18%. Additionally, we generated strong operating cash flows and maintained a disciplined capital allocation strategy, which allowed us to continue investing in growth while delivering on our commitment to return capital to our shareholders. This performance is a testament to the strength of our team and to our ability to leverage our robust market trends for infrastructure business. 2024 set the stage for continued profitable growth thanks to a number of significant achievements. Over the last year, we expanded our customer base and secured several new long-term contracts with utilities. Our promise to customers to deliver quality products on time is supported by our enhanced procurement and production capabilities and our extensive distribution network. With the addition of two new utility pole finish good yards to better service our customers, we are continuously investing in ways to meet and exceed our customers' expectations. These initiatives align with our business strategy to secure long-term commitment as we strive to be a partner of choice. To live up to our customer promise and deliver the highest level of service and quality, we are continually raising the bar to achieve operational excellence. During the year, we completed our extensive utility pole growth CAPEX program initiated in 2022. We now have a network footprint that is wider reaching and more flexible, allowing us to be more competitive and to increase output as needed. This expansion has presented opportunities to improve operational efficiency and future-proof our business for growth. On the railway tie side, we undertook meaningful actions to enhance our network. For instance, we invested in new treating assets and a drip pad at our facility in Winslow, Indiana, which will allow us to consolidate capacity and further optimize our network. Set to continue into this year, we will pursue asset upgrades targeted at servicing key customers to better support the railway industry. and our residential lumber product category continued to serve its customers with leading service it is known for, delivering above exceptional levels of order fulfillment rates in 2024, thanks in great part to investments in our distribution capabilities across Canada. Lastly, because of the value we deliver to customers and our operational efficiency gains, we have been able to maintain a solid EBITDA margin and generate strong operating cash flows. Our success as a company stems from a culture of growing and investing in all facets of our business. This past year, we made significant strides towards the reduction of greenhouse gas emissions through a number of initiatives. For instance, we finalized our second solar panel installation at our utility pole manufacturing facility in Cameron, Wisconsin, which is expected to cover 48% of the facility's electrical consumption. Additionally, our initiative to cover nearly all of our scope 2 GHG emissions through an investment in renewable energy credits will allow us to get closer to our 2030 emissions reduction objective of 32%. These accomplishments, amongst others, demonstrate Stella-Jones' ongoing commitment to act responsibly as we progress towards our sustainability objective and work to ensure the long-term viability of our business. Turning now to a performance overview of our main product categories. Starting with utility poles, the favorable industry outlook for poles remains unchanged. Strong demand drivers like aging infrastructure, grid resiliency requirements, and energy transition continue to accelerate the need to upgrade existing infrastructure. In the current economic environment, Utilities need to allocate capital to numerous CAPEX needs and find balance between service reliability and revenue-generating projects. Our utility customers have reiterated the critical need for pole replacement and confirm their continued commitment to timely grid maintenance and upgrades. Recent indications from contractors also suggest an uptake in project requests, considering that projects can take a few quarters to materialize. As we turn to 2025, our volume growth expectation is unchanged at a mid-single digit rate. We are encouraged by recent indications of more quoting activity, understanding that purchases can continue to be impacted by the uncertainty related to the current evolving economic landscape. In terms of pricing, there are indications that industry inventory levels continue to be high. We expect this to lead to softer spot market pricing which should be mitigated by contractual price adjustments. Railway tie sales grew above our expectations in 2024, marking the third consecutive year of achieving mid-single-digit sales growth. The category's strong performance in 2024 was a reflection of our unwavering focus on servicing Class I customers and robust commercial market demand. In 2024, our overall Class 1 volume increased despite the reduction in maintenance spent of some railroads, and we serviced the strong commercial demand by leveraging our robust inventory position. Looking ahead, we will execute on opportunities to further grow our customer relationships as Class 1 customers look to Stella Jones for innovative solutions to help optimize their business model. We will also look to reset contract pricing and establish improved cost recovery in customer agreements to ensure costs are better incorporated in pass-through clauses. With these initiatives and the stable maintenance-driven demand for railway ties, we remain assured in this product category's ability to consistently deliver at least a low single-digit sales growth. Residential lumber delivered a solid performance in 2024 reflecting the value-driven dynamics of our customer base, which provides relative steadiness and positive prospects for this business. With the resourcefulness of our procurement team offering a consistent supply to big box retailers, we continue to achieve sales within the projected target range, despite some macroeconomic headwinds. Lumber prices have shown an uptick in the second half of 2024, and expected demand is trending favorably. Our forecast for residential lumber sales remain in the $600 million to $650 million target range as outlined in our financial objectives. With that, I will now ask Sylvana to provide a more detailed overview of our fourth quarter financial results.

Thank you, Eric, and good morning, everyone. As Eric stated at the top of the call, Stella Jones delivered another year of sales and EBITDA growth. Sales for the year were up 5% to $3.5 billion, driven by a 6% organic sales growth for both utility poles and railway ties. EBITDA increased to $633 million compared to $608 million in 2023, and we maintained an EBITDA margin of over 18%. For the fourth quarter, sales were $730 million, an increase of 6% versus Q4 of 2023. While utility pole sales were unchanged compared with the same period last year, Q4 sales benefited from the strong performance of railway ties and residential lumber. For utility poles, we generated $385 million in sales in the fourth quarter compared to $383 million in the same period last year. Favorable price adjustments were more than offset by lower volumes for non-contract business. Similar to Q3, volumes from contract business were stable as we benefited from the contribution of newly secured business. But the non-contract volumes were impacted by the continued softness in maintenance demand and the deferral of projects by utilities. Compared to Q4 last year, utility poll volumes were down 4%. Sales of railway ties were up 15% organically this quarter to $193 million compared to $165 million in the fourth quarter of last year. The increase was all attributed to more Class I volumes. For the year, the 6% organic sales growth for railway ties mainly stemmed from the strong non-Class I market demand and our capacity to service this market given the replenished level of our ties inventory. Class I volumes were up slightly year over year, even as certain railroads reduced or internalized their annual tie replacement program. Residential lumber sales were also up 12% organically in the fourth quarter to $93 million. Q4 sales benefited from the increase in the market price of lumber as well as stronger consumer demand when compared to Q4 last year. We ended the year with sales of $614 million within the $600 to $650 million target range for this product category. Turning now to profitability. Q4 EBITDA decreased 4% to $115 million, or 15.8% of sales, following a record 38% increase in EBITDA in Q4 last year. The decrease was explained by an unfavorable sales mix versus the same period in 2023, attributable to the lower relative proportion of utility pole sales. EBITDA was also impacted by non-recurring expenses recorded in other losses. For the year, EBITDA improved by 4%, largely explained by the organic sales growth of the company's infrastructure product categories. Turning to cash flows. Q4 cash flows contributed to the strong full year of cash generated from operations of $408 million and free cash flow of $275 million. In 2024, we deployed cash generated to invest in our network, complete our growth CapEx program, as well as return $153 million to shareholders. Returning capital to shareholders is a core foundation of our capital allocation strategy. In 2024, we increased the dividend payout by 22% to $1.12 per share. And yesterday, the Board of Directors announced an 11% increase in the company's quarterly dividend to $0.31 per share. This marks our 21st consecutive annual dividend increase, which speaks to our overall confidence in the long-term fundamentals of our business. During the quarter, we initiated another normal course issuer bid as part of our strategy to return capital to shareholders. So far, as of December 31, including dividends, we returned $348 million to shareholders out of the $500 million committed for the 2023-2025 period. In October, we bolstered our strong financial position and flexibility with an inaugural bond offering of $400 million for seven years, using the proceeds to repay the amounts outstanding on our revolving credit facilities. We ended the year with over $800 million in available liquidity and a net debt-to-EBITDA ratio of 2.6 times. The leverage ratio deviated slightly above our target range as the appreciation of the closing US dollar relative to the Canadian dollar resulted in a higher value of the company's net debt denominated in US dollars. With a focus on profitability and working capital management, we expect to reduce the leverage ratio within the desired target range in 2025. In summary, with the strength of our business our healthy financial position and strong cash generating ability, Stella Jones is well positioned for continued growth and success in 2025. I will now turn the call back to Eric for his closing remarks.

Thank you, Silvana.

I am enthusiastic about where we stand today. We continue to invest strategically, raise the bar on operational excellence, enhance our presence in the markets we serve invest in securing new business, and allocate capital prudently, all as part of our strategy to remain a leading actor in our space. In sum, the actions we undertook in 2024 have set us up for improved performance in 2025 and beyond. We are excited about the long-term growth prospect of the infrastructure markets we serve. Utilities capex spending is expected to remain elevated for many years to come, and our utility pole business is well positioned to benefit from this multi-year secular growth. Standing at the end of three years of capital investments focused on growing utility pole capacity and upgrading our network assets, we continue to optimize operations and welcome new business in 2025. For railway ties, our strong competitive advantages and customer-centric innovation are expected to help us execute on opportunities that will drive increased profitability. We're open to considering capital projects that would offer value for our customers, helping further our position as a supplier of choice. Acquisitions have always been a keystone of Stella Jones's growth strategy. and it will continue to be a priority. In our efforts to continue to position ourselves as a partner of choice, we'll be looking to build even stronger customer relationships by expanding our infrastructure product offering. We will be highly discerning on our selection, prioritizing opportunities that enhance our market and product reach, contribute to earnings growth, and ensure a healthy return on invested capital. As mentioned at our last call, we are confident that in 2025 we can realize accretive acquisitions that will drive higher sales and profitability. As we enter the final year of our three year financial plan, we are assured in our ability to deliver on our financial objectives. We remain dedicated to maintaining our investment grade leverage ratio and discipline capital allocation strategy. In 2025, we will continue to lead our business with discipline to deliver value to our shareholders, and we look forward to providing a new three-year plan in the second half of the year. Before concluding, I want to note that the potential exposure to tariffs is limited. Given our North American presence, the majority of Stella Jones' products manufactured are sold domestically with minimal cross-border transactions. We are nevertheless staying informed on developments and will be proactive in mitigating any potential impact. As always, Stella Jones' enduring resilience and success lie in the strength and dedication of her more than 3,000 employees across North America, who I wish to thank once again for ensuring Stella Jones is and remains the backbone of solid infrastructures for stronger communities. This concludes today's prepared remarks. I will now open the line for questions.

Thank you. As a reminder, to queue up for questions by phone, please press star one. To be removed from the queue, please press star two. And our first question will be from Hamir Patel at CIBC Capital Markets. Please go ahead.

Hi, good morning. Eric, Last quarter, you indicated you expected pull growth going forward in the 6% to 7% range. The wording today seemed to reference mid-single digit growth. Does that suggest some further moderation in your demand expectations?

No, Hamir. Essentially, mid-single digit can be in that range of the numbers you just quoted, the 6%, let's say.

Okay, perfect. And then, you know, Eric, you referenced looking at expanding the offering for infrastructure customers. Can you sort of elaborate more on, you know, what potential products that could include and, you know, perhaps a sort of potential sales stream some of these markets could represent?

Right. Well, not ready to disclose to that level of detail, Hamir, but, you know, There's been several quarters now that we've been referring to expanding our product offering. There's been several quarters that we have been working with our board and exploring different markets and what would be potentially good addressable markets for Stella Jones. We continue to focus on supporting the utility and rail industry. As I mentioned, we're at the point now that we're actually in discussion with potential targets. Obviously, when you look at where our customers spend, if you think about utilities, obviously, I've always referred to the three buckets, the generating assets, the transmission, and the distribution. Far from me that I want you to think that we'd be getting in generating assets. transmission or hardware that supports our customers' needs would definitely be a good place for us to go. When I think about the rail industry, our customers keep referring to us expanding our capabilities, either it be with end-of-life solutions or composite type product to be able to properly respond to the requirements of the engineering departments. So I guess that's a bit more color.

Okay, great. Thanks, Eric. And just the last question I had, tariff-related. You know, on the red lumber side, if we did see the SPF lumber price in the U.S. go up, you know, call it 25% if tariffs come into effect, do you think the untreated lumber price in Canada remains unaffected, or would you expect it to move kind of dollar for dollar with the U.S. price?

That's a big question, right? I've heard I've heard arguments to support Canadian lumber prices trending with the US. I've also heard the opposite where could we see Canadian manufacturers prefer to sell within Canada instead of trying to export to the US. My view at this point is our lumber prices today are higher than In the first part of last year, we're building our program now for 2025. So we have a lot of commitments at certain given prices. So at this point, with the pricing up, I would think that we should or will yield some better pricing on the sales. So even if the market spikes up or down, it would probably take several months for us to see that impact either way.

Yeah, fair enough. Thanks, Eric. That's all I had. I'll turn it over.

My pleasure.

Next question will be from James McGarigal at RBC Capital Markets. Please go ahead.

Hey, thanks for having me on and good morning. Good morning, James. Yeah, I was just wondering if you can provide a little bit more, you know, specific EBITDA range for 2025. I know you reiterated your longer term target. They kind of give us a floor. But consensus is kind of trending quite a bit ahead of that. So anything more specific you can provide there? And I guess consensus is at 630 million for 2025. Is that a number you're comfortable with?

Well, I'll answer in terms of percentages, and then I'll let you forecast where you think our sales can land. So you're right. We are very confident with our floor at 17%. We're now two years achieving the 18% level. It would be in the range of what is achievable this year. Obviously, there's lots of uncertainty in the markets right now, so I guess I'm leaving that door open to work through a couple of quarters to see how this year goes and how the different, how the economic environment will adjust. Yeah, I guess that would be my thought. We were maintaining our confidence at, you know, supporting at least the 17%. And, you know, as I referred to in my script, we were working on operational efficiencies. We were working on opportunities to make sure that we can hold the highest margin possible that our business can.

I appreciate the call there. And then, you know, a question on the Thai business. You know, a few potential moving parts here. You mentioned the timing of our railway tie shipments kind of helped Q4. You know, we have potential some headwinds from CP further utilizing their KCS facility. And then, you know, on the other side, potential, you know, some pricing increases as you negotiate, you know, some contracts with the class one rails. So within all that going on, how should we think about, you know, your sales growth on the tie side? for 2025. And after that, I can turn the line over. Thank you.

Yeah, thanks, James. You know, so thinking about our rail business, if we, you know, go back to our discussions at our Q3 conference call, you know, we came out of the first nine months of the year with strong organic growth, and we were guiding a softer fourth quarter, you know, understanding that it was timing within the year. We did finish the year with a 6% organic growth, and we did have the opportunities to sell more products. There were unplanned demand from our customers. Need to acknowledge that our customers have options to purchase ties when they're out of contract or out of sequence, so very pleased that they came to Stella Jones for the quality and the service of the products. Our team executed perfectly to be able to turn around very tight deadlines just to support our customer needs. So that being said, we finished the year, as I commented, over our expectation with 6% organic growth. Nonetheless, we still believe that going into 2025, we would be at that low single digit or could be slightly better as I worded it.

Thank you. My pleasure, James.

Next question will be from Benoit Poirier at Desjardins Capital Markets.

Please go ahead.

Yeah, good morning everyone. Just to come back on the utility poll, with respect to the mid single digit growth, you mentioned that it's mostly volume, but when I look at the second half performance in 2024, it was still very decent. So I'm just wondering what makes you confident that the volume can be in the mid single digit in 2025, and just wondering about the cadence, whether it should be more skewed toward the second half of 2025, given the tough compare for the first half.

That's a good point. Thank you, Benoit. So maybe just for the general audience, We did readjust our guidance last year, so we did have software volumes in Q3 and slightly softer volumes again in Q4. We readjusted our guidance and was shooting for that mid-single digits going forward. So we're confirming and reiterating our views this morning with regards to that. When I look at the demand for our customers for the coming year, I know there are some strong demand for the maintenance and replacement programs. We do have some new customers, as I mentioned, in my note for 2025, which will contribute to that. To date, we've seen some healthy activity in certain markets. Texas, for example, where an oil field seems to be, or projects in the oil field seems to be going strong, and we're seeing increased quoting activity. So all of that put together, we still feel that it's a good target for us to achieve and to strive for. Could it be skewed a bit more to the back later half of the year? I want to say yes. We've had a harsher winter so far this year. It has slowed down to some extent in the northern part of North America. But as spring kicks in, I would expect things to resolve itself and hopefully also Economic uncertainty or unknowns would be appeased in the next few months and we'd have a better understanding of the landscape for the balance of the year.

Okay, that's great, Collar. And just moving on the railway ties, you made great comment about the demand for Class 1 going into 2025 and obviously the moving parts. But when we look at the short lines, there are some uncertainties with respect to the funding. So I was curious to know your view about what we should expect from the short lines going into 2025, especially given the more favorable pricing.

Well, today we haven't seen. So we've seen some continued active quoting for the short lines. or for the commercial business as an entire space. We haven't seen anybody pull back purchase orders, so there's still some confidence out there that those projects will come through. Also a reminder, our capacity is a mix of, we'll call it 70-30%, so as soon as we hit that 30% of our capacity, The balance of all of our capacity is also dedicated to service class one customers that have the bigger volume in the industry. So there's always a balanced effort there. So when we typically get the volume we need out of the commercial business, that's the margins that we're looking for. So I'm not as concerned. We've also done, as I mentioned a few minutes ago, some investments in certain of our plans, and we'll continue to do so in the coming year. If there's more opportunity in that commercial space, we'd be able to execute on that as well. So I feel quite confident actually with our network at this point and our capability to address the market.

Okay, that's great. And maybe last one for me in terms of capital allocation. You've been disciplined. You are increasing the dividend by 11%. So it implies that there's about 85 million of buyback in order to achieve the 500 million target for shareholders, which would be below 2022, 2023. We are mindful of the leverage ratio that went up because of the FX, but you also talk about M&A opportunities. So I would be curious to get more color about the size of the M&A opportunities that you're looking at right now. And given that on the utility side, you've been talking about the transmission and hardware. I'm just mindful about the tariff, whether it's something you should be taking into account. and maybe waiting to see more clarity before going into those verticals. Thank you.

Thank you for that. A lot to unpack there in your question, and I'm going to try to hit the major points. So with regard to the size of M&A, we're not going outside our traditional range. So it's always been between the, I don't know, the 40 to 140, 150 million US dollars. So there's a wide range of targets that we have opportunities to consider. So I think for now that's what it looks like. You're right in asking the question. There could be some more sizable into the future, but I think what we're looking for today is a good investment with good return on capital, solid management team and strong knowledge of the business to help us continue to grow it. With regards to your question on tariffs, obviously it is top of mind as we do due diligence. Where are the raw materials sourced? Where are they shipped to? What is the distribution landscape and what is that elasticity of or sensitivity to pricing for customers. Are there pass-through clauses, and what is the perception of the market if there is some pricing adjustments for these products? So my assumption, looking at these M&As, is that whatever tariffs may do, there will be a pass-through, and the cost will be borne by the end customer.

Okay. Thank you very much for the time, David.

My pleasure, Benoit. Thank you.

Once again, ladies and gentlemen, if you do have any questions, please press star followed by one on your touchstone phone.

Next question will be from Michael Topholm at TD Cowan. Please go ahead.

Thank you. Good morning. Good morning, Mike.

Good morning, Eric and Silvana. First off, just want to You had a bit of a clarification on some of the details you provided around the composition of the organic growth in the utility pools business in the fourth quarter. You suggested that contract volumes were stable year over year. I think it was Sylvana that referenced a volume decline of 4%. Was that, on an overall basis, volumes across both contracted and non-contracted business, or was that a comment specifically about the non-contracted piece and how much that was down?

So the comment was for the overall utility pole volume.

Okay, perfect. And then as we look forward, again, from an outlook perspective on poles for organic growth, talking about mid-single digits sounds like it's mainly volume, but can we sort of unpack that and can you talk a little bit about what your expectations are, both contract market versus non-contract, and then both from a volume and pricing perspective, like how you're thinking about how it all gets you to this sort of mid-single-digit type level?

So I want, well, let's let that chime in. I do think we would expect some volume gains from the contract customers, you know, in better part, actually, since, you know, we have the long-term relationship with them and we have ongoing discussions. The spot market piece, you know, There's always demand. It just depends on how tight the pricing is going to get and how much do we want to chase those projects if we feel they're going to come in at a lower margin fee. So that's why we're trying to balance it out. So my preference is to work with our ongoing customers. We work very hard to build a very extensive list of customers with very longer-term contracts. We definitely need to make sure we service them. They're very generous in sharing information with us. And then obviously the spot market, which we also have great relationships, could be a bit softer now. Last but not least, I also want to remind you that we do have a couple of new customers this year that transitioned to long-term agreements. Well, they were not supplied by Stella Zones last year, and there will be 25. So it's a few years in a row now that we've actually had the opportunity to increase our customer list. So the demand is obviously, if you think about our results, fluctuating, but the good news is that we keep securing customers and winning the confidence of the industry as our ability to service them. So for me, it's all a very positive sentiment.

Okay, that's helpful. In the past, you've talked about the spot market for utility pools being roughly 30% of the business, I think, and the balance contracted. It sounds like that. you know, can move around depending on what's happening within the market, but is that still sort of the right, roughly the right range to think about between the, in terms of the mix between the two?

I would say a bit lower. It's probably closer to 25 at this point, Michael, as I mentioned. We've been increasing our, you know, our engagements or our promise to customers with long-term agreements, so the proportion is shifting slightly.

Okay. And then earlier in the call, you talked a little bit briefly about inventory levels and suggested that within polls again, and that may be one of the reasons why there could be some pricing pressure within the spot market in particular. Can you just maybe elaborate on industry-wide inventory levels where they sit now versus say six months ago? And if you've seen, although they may still be elevated, like are you seeing any trends that would suggest there's some declines in inventory levels, just a bit more detail there to help us understand what's going on would be helpful.

So you're right to comment with about the general industry, and it's more a sentiment than actual facts. So the industry does not have an association. Like, you know, if you look at the railway tie association, you see that, you know, the ties maintained in last year were actually slightly up. so that I can see how well we track versus that. When I think about the utility pole business, we don't necessarily see that, but we do know that there's obviously some new capacity available in the market, so there's at least one more. One new treating facility that our competitor built last year that is online, and my understanding is they do have a healthy level of inventory. It is also the case for ourselves, we will be looking to to rationalize our inventories in the course of the year. So that's where my sentiment is coming from. I think it's pretty well-based, but I can't provide any strong or solid facts to that effect.

Okay, that's helpful. And then just sort of two more housekeeping items, I guess. First off, 2025 CapEx expectations, what would those be?

So anywhere between $75 and $85 million is what we noted for our regular CapEx spend.

Okay. And then the other losses line that I think you referred to, I think it was a commenter at the fourth quarter, but it was a little higher in the fourth quarter versus last year's fourth quarter, and then also on a full year basis, $15 million. I know you don't normalize or adjust for these things, but can you just explain what exactly is running through that line, why it was a bit higher, and is that likely to be coming back down in 2025?

So they're mostly all what I call one-time or non-recurring events, Michael. Part of that is we have some waste disposals at one of our facilities in in Nevada that had a fire last year. And as we are cleaning up debris and putting them aside since the debris was in contact with preservative products, it needs to be disposed in a particular way. So now that we've sort of readjusted the facility and sort of finished the renovation or fixing up the repairing the damage, now we end up with product

The only other big items in there are basically write-offs of some fixed assets. As Eric said, we continue to optimize our facility. Some of the older assets that we're no longer wanting to use are being written off. That's the other part of the other losses, which adds to the amount. About $5 million of that was in the total $15 million.

Okay, that's helpful. I mean, I guess hard to predict, but is it reasonable to think that it's not any higher than it was in 2024 next year or into 2025?

We don't decide that. The overall should definitely be lower.

I think it was kind of exceptional this year, as Eric mentioned, because of the waste disposal, removal costs, and some of the... It's been a while since we've seen a bigger number in the others, but every year we do the exercise of looking at our assets or different one-time events. We rationalize and we optimize how we do things, and it's just to move better forward, I guess. But yeah, I mean, hard to predict the future, but I would think it would be higher in 2025.

Okay. All right. I'll leave it there. Thank you. Thank you.

Next is a follow-up from Humair Patel at CIBC Capital Markets.

Please go ahead.

Hi, Eric. I just want to come back to you on the tithe segment. You referenced renegotiating prices as kind of contract renewals play out to better reflect some of the top inflation. What percent of the class one business typically comes up for renewal in any given year? And then as part of this sort of margin improvement, are you considering perhaps transitioning some of those relationships back to maybe a treated service model?

That's a great question. Well, the first part of your question, in the next 24 months, we got four class one contract renewals that are coming up. Two actually got pushed out, were actually to be renewed last year, got pushed out this year, and then, you know, I got 24 months, we got four contract renewals to negotiate. And after that, the second part of your question, a lot of things are on the table, yes. moving part of the volume to treating services is definitely an option. As I said, there are some customers that are looking for optimizing their own activities and there might be a role for us to play there. So we're definitely looking at how we could invest capital and what kind of return we can get to that. And obviously always in the intent of better servicing our customers but also getting a greater share of their annual maintenance. So a lot of A lot of work ahead of us in the next 24 months, but very exciting times, I think, where we have opportunities to leverage the good work that we've done. And maybe Q4 was a small indication of the confidence of certain Class 1 customers and Stella Jo is with that additional volume. But that's how I'm viewing the situation.

Okay, fair enough. And Eric, on the pole business, how much maybe near-term demand lift would you expect out of California, just given the wildfires there?

Well, yeah. So we've already shipped some products to the California region, but I guess we also need to realize that certain parts and neighborhoods were completely decimated. So obviously... houses and apartment buildings need to be rebuilt before we think about, you know, what the volume we're going to sell. So I think in this particular case, it might get stretched out over a longer period of time, simply because I think we need to understand how certain neighborhoods are going to get rebuilt.

Okay, fair enough. And just a last question, again, kind of tariff related. I know in the past, you've been able to bring up Southern Alpine, logs and treat them and sell them into the poll market in Canada. Is that something that you would sort of expect to put on pause if tariffs come into play or does the sort of margin profile still make sense to do that sort of limited cross-border flows that you do?

Yeah, so we always have the opportunity to do substitutions within species. So, you know, if there is some headwind, we can definitely, you know, transfer back to some Canadian native species, then we would also need to take a look at a closer look at the list that the Canadian government is going to put forward. So my understanding is the US government is just going to do a blanket tariff. Canada anyways, what we saw back in early February, Canada had issued a list of products and our whole products were not subject to those tariffs. We'll have to see what's going to come up in the next few weeks. But we have options, as I mentioned. We're going to mitigate any potential situation. But we're also taking opportunities now in the last several weeks to move products in the proper geographic regions just to help us support probably the next several months. So even if tariffs comes into effect in a month or when they come into effect, we will have a few more months to readjust and think through our strategy to supply our customers. So we have many options to mitigate those tariffs. And again, it's not a significant part of the business that gets moved across borders. So it wouldn't be material to any extent.

Okay, great. That's all I have. Thanks. Thank you, Amir.

Next, we have a follow-up from Michael Topholm at TD Cowan. Please go ahead.

Thank you. Yeah, this is a little bit specific, but just thinking about your utility polls guidance mid-single digit for 2025, I think there was a question earlier about cadence and you did say it could be a little more back halfway, but I guess just given all the focus from the market on that segment, if we look specifically at Q1, is there any commentary you can provide on how to think about the first quarter specifically, just so there's no situation here where you know, there's a misalignment between what you're trying to communicate and what the street is looking for.

Right. Well, so obviously I don't, I will not comment on Q1 results this morning, Michael, but, you know, winter is a good indication of a bit of a slower base, especially a much harsher winter than we've seen in Canada in previous years. So I would expect Let's say Q1 to be either in line or maybe slightly softer than last year.

Perfect, thank you. My pleasure, Mike.

We have no further questions in the queue.

Thank you.

Well, thank you, Sylvie. And thank you everyone for joining us today. We look forward to updating you on our first quarter call in May. Until then, have a good day and stay safe.

Thank you, sir. Ladies and gentlemen, this does conclude today's conference call. Thank you for participating. You may now disconnect your lines.