Stella-Jones Announces Second Quarter Results

Executive Summary

• Stella-Jones Inc. reported second-quarter 2025 financial results, showing a slight decline in sales and operating income compared to the prior year, driven by lower volumes and pricing in utility poles and railway ties.
• The company completed the acquisition of Locweld Inc., a steel transmission structure manufacturer, for $58 million, expanding its infrastructure product offering.
• Management updated its full-year 2025 sales guidance downward to approximately $3.5 billion (from $3.6 billion) due to macroeconomic challenges and lower-than-expected organic growth, while maintaining EBITDA margin and leverage targets.

Key Details

• Q2 2025 Financials:
  • Sales: $1,034 million (down 1% from $1,049 million in Q2 2024).
  • Operating Income: $155 million (down from $168 million in Q2 2024).
  • EBITDA: $189 million (down from $200 million in Q2 2024), with an EBITDA margin of 18.3%.
  • Net Income: $106 million ($1.91 per share basic and diluted), compared to $110 million ($1.94 per share) in Q2 2024.
• Six-Month 2025 Financials:
  • Sales: $1,807 million (down from $1,824 million in H1 2024).
  • Operating Income: $298 million (up from $292 million in H1 2024).
  • EBITDA: $368 million (up from $356 million in H1 2024), with an EBITDA margin of 20.4%.
  • Net Income: $199 million ($3.58 per share), compared to $187 million ($3.30 per share) in H1 2024.
  • Note: H1 2025 EBITDA included a $28 million gain from an insurance settlement.
• Product Segment Performance (Q2 2025):
  • Utility Poles (46% of sales): Sales increased to $476 million (from $470 million), but organic sales decreased by 4% due to lower pricing and volumes.
  • Railway Ties (23% of sales): Sales decreased by $25 million to $240 million (from $265 million), driven by a Class 1 railroad shifting to in-house treatment and project delays.
  • Residential Lumber (24% of sales): Sales remained stable at $246 million (from $243 million), with higher market prices offsetting softer demand.
  • Industrial Products (4% of sales): Stable at $46 million.
  • Logs and Lumber (3% of sales): Sales were $26 million (from $25 million).
• Acquisition of Locweld Inc.:
  • Completed on May 7, 2025.
  • Target: Designer and manufacturer of steel lattice transmission towers and steel poles.
  • Consideration: $58 million purchase price on a debt-free basis, plus working capital adjustment and performance-based contingent consideration.
  • Location: Facility in Candiac, Quebec.
• Liquidity and Capital Resources:
  • Available liquidity: $693 million as of June 30, 2025.
  • Net debt-to-EBITDA ratio: 2.4x (down from 2.6x at year-end 2024).
  • Cash flow from operations: $224 million in Q2 2025.
  • Capital return: $54 million returned to shareholders via dividends and share repurchases in Q2 2025.
  • Debt repayment: $118 million repaid in Q2 2025.
• Guidance Update:
  • Full-year 2025 sales expectation revised to approximately $3.5 billion (previously $3.6 billion).
  • Drivers for revision: Lower-than-expected organic sales growth in utility poles and railway ties.
  • EBITDA margin target for 2025 remains above 17%.
  • Cumulative capital return target of $500 million (2023-2025) remains intact; $417 million returned to date.
• Dividend:
  • Declared quarterly dividend of $0.31 per common share.
  • Payable on September 25, 2025, to shareholders of record on September 2, 2025.

Notable Quotes

• Eric Vachon, President and CEO: “Our second quarter results reflect the resilience of our business and the disciplined execution of our strategy for value creation as we continued to deliver a robust EBITDA margin and solid cashflows during a quarter of softer volumes.”
• Eric Vachon, President and CEO: “We anticipate maintaining healthy profitability levels, despite a revised revenue outlook for the year, and are encouraged by the progressive improvement in utility poles volumes.”
• Eric Vachon, President and CEO: “We are also pleased to have completed the Locweld acquisition during the quarter, which establishes our presence in the steel transmission structure market, providing a platform to further expand our reach as we continue to execute on our strategy to broaden Stella-Jones’ infrastructure offering.”