Stella-Jones Aktie

Good morning and thank you for standing by. Welcome to Stella-Jones Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded on Thursday, August 6, 2026.

I will now turn the call over to David Galison, Vice-President of Investor Relations of Stella-Jones.

Thank you, John, and good morning, everyone. Earlier this morning, we issued our press release reporting our results for the second quarter of 2026. 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 SEDAR+.

As a reminder, all figures expressed on today's call are in Canadian dollars unless otherwise stated. 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 SEDAR+. These documents are also available in the Investor Relations section of Stella-Jones website at www.stella-jones.com.

Additionally, during this 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 SEDAR+.

Lastly, we have prepared a corresponding presentation, which we encourage you to follow along with during this call.

I'll now hand the call over to Eric Vachon, President and Chief Executive Officer of Stella-Jones, for a strategic business update, followed by Silvana Travaglini, Senior Vice-President and Chief Financial Officer of Stella-Jones, who will provide a more detailed financial overview of the quarter.

Eric, over to you.

Thank you, David, and good morning, everyone. Today, we reported second quarter results that reflect continued strength in utility products, supported by positive volume momentum in wood utility poles and a solid contribution from our recently acquired crossarms business.

In railway ties, stronger commercial activity provided a significant offset to lower Class 1 volumes, while our network optimization plan continued to advance and remains on track to support profitability improvement. In residential lumber, pricing and volumes remained below prior year levels, although trends improved towards the end of the quarter and into Q3.

While underlying business conditions remain supportive, profitability in the quarter was affected by several near-term cost headwinds, including higher site-specific environmental and maintenance costs, temporary inefficiencies from our steel structure capacity expansion project and increased fuel costs. These pressures were amplified by the lag in recurring certain cost increases through pricing.

Excluding items that are not expected to repeat, margin performance in the quarter would have been closer to 17.5%. Margin improvement is also expected to be driven by a greater contribution from higher-margin businesses such as crossarms and steel structures, along with a better railway tie sales profile, including more TSO volumes and higher-value rail products. Together, these factors support our expectation that EBITDA margin should improve in the second half of 2026, while remaining below our 3-year target range for the full year.

In parallel, we continue to advance our continuous improvement and footprint optimization initiatives, which we expect will drive efficiencies, strengthen margins and enhance profitability over time. Combined with a more supportive business mix and favorable end market fundamentals, these actions reinforce our view that the current level of margin performance does not represent a structural change in the earnings power of the business.

Accordingly, we remain confident in our ability to achieve our stated 3-year average adjusted EBITDA margin objective of 17.5% to 18.5%.

Turning to the performance and overview of our main product categories and starting with utility products. We remain encouraged by the strength of the business, which continues to be a key growth driver.

In wood utility poles, momentum remained positive in the second quarter, although the volume growth moderated from the strong pace seen in the first quarter. Importantly, on a year-to-date basis, volume growth remained in line with our mid-single-digit outlook, supported by the continued strength in our contract-based business.

Spot pricing has also stabilized broadly on a sequential basis, and we expect the additional capacity coming online later this year, which we mentioned in our Q1 call, to have only a negligible impact on overall spot pricing. When fully operational, we believe the new capacity will represent less than 1% of the total North American treating capacity.

Turning to our continuous improvement initiatives. We are now planning the next phase of our network optimization, focusing on our wood utility pole facilities. The objective is to consolidate some capacity so we can fully realize the benefits of investments already made as well as increasing plant specialization. Most of the network is already operating on a single-product basis with only a few facilities left to transition.

Another important consideration as we develop our optimization plan is the current preservative availability in Canada, where approval of DCOI, the main oil-based alternative to Penta, remains outstanding. We expect these optimization efforts to improve utilization, enhance profitability and free up capacity to support growth in the wood utility poles.

Beyond the operating and financial benefits of these optimization initiatives, they will also contribute to the broader sustainability strategy. By streamlining our production footprint across both railway ties and utility poles, we are actively improving the GHG emission profile of our network, keeping us on track to meet our long-term sustainability targets.

Turning to our latest acquisitions. The integration of our crossarms business continues to go well and the business performed in line with our expectations, providing a solid contribution to the results. We are also seeing strong interest from our existing customer base as the product offers a natural value-added extension to our utility pole offering. To this end, we began recording Canadian sales in the quarter, demonstrating the progress we are making in leveraging our established network and deep customer relationships to broaden our share of customer spend.

For steel structures, sales in the quarter were lower than compared to the prior year, primarily due to temporary lost production time and lower throughput during the equipment changeover related to our capacity expansion program. We continue to make solid progress in the steel structure capacity expansion.

In Candiac, the plant modernization remains on track to double capacity to 20,000 tons by Q3 of 2026 with full ramp-up by year-end. Demand for lattice towers remains strong and the capacity is already substantially allocated through the end of 2027. Our team has also secured one customer contract for approximately 1/3 of the production capacity in Candiac for the next 10 years.

In the U.S., we continue to advance the development of our Fayetteville, Tennessee facility. Our focus to date has been on finalizing key vendor agreements, advancing permit work and preparing the site and equipment plans needed to move into execution. As a reminder, the site includes an existing newly constructed building that is suitable for operations, which helps mitigate execution risk.

The project remains on track, and we continue to expect this investment of approximately USD 50 million to add another 20,000 tons to our steel structure production capacity. Commissioning is expected in late 2027 with full production by the end of 2028.

We also have received strong initial support from existing U.S. customers that are currently served from Candiac to place order in 2027 with the new facility as part of its ISO and customer certifications and ramp-up. These early volumes should help support commissioning and a smoother startup.

We are also seeing increased interest from Canadian customers for steel transmission structures, which over time should give us greater flexibility to shift U.S. demand to Fayetteville while backfilling capacity in Candiac with Canadian demand.

Turning to railway ties. Second quarter results reflected similar market conditions to Q1 this year. As expected, Class 1 volumes remained lower in the quarter. However, we continued to see growth in our commercial business, which was able to offset a meaningful portion of the decline in Class 1 volumes.

During the quarter, we began executing on the network optimization plan outlined in Q1, continuing to consolidate our footprint and reallocating volumes to most efficient facilities to better align business with the current demand. While these actions resulted in some onetime costs in the quarter, we expect these initiatives to improve returns over time.

At the same time, we remain focused on growth. During the quarter, we finalized one Class 1 contract renewal that includes volume growth, and we are seeing interest from that customer in bridge timbers, which could provide incremental upside.

Looking ahead, we are actively negotiating another Class 1 contract renewal, and we are encouraged by additional volumes that were added to our forecasting starting in 2027, which stem from capital investments expected to conclude this year. We expect to finalize this contract negotiation in Q4. This pipeline of renewals remains an important part of our strategy to strengthen our position and expand our product offering.

We also continue to see a constructive funding backdrop in the commercial market. Although CRISI grants are scheduled to expire in 2026, previously awarded funding should continue to support project activity through 2028. Beyond that, proposed enhancements to the 45G tax credit could provide an additional source of support for short line investments.

Turning to residential lumber. Results were softer in the quarter, but recent trends in both pricing and volumes have been encouraging, and we continue to expect full year sales to remain within our $600 million to $650 million target range.

Beyond our operational focus, we remain equally committed to sustainable development of our business. During the quarter, we published our 2025 Sustainability Report. The report reflects meaningful progress against our priorities, including a reduction in our injury rate frequency, which declined year-over-year, and that reflects our continued focus on the safety of our people.

We achieved a 23% reduction in Scope 1 and 2 greenhouse gas emissions against our 2022 baseline, driven by operational improvements, including waste heat recovery and expanded solar energy use. We also advanced our commitment to indigenous people with 96% of our Canadian salaried employees completing indigenous cultural awareness training.

Ultimately, this report is a reflection of the dedication and effort of our people across the organization, and we are proud of what we've accomplished together in 2025.

With this, I will turn the call over to Silvana Travaglini, who will provide an update on our financial performance in Q2. Silvana?

Thank you, Eric, and good morning, everyone. Today, we reported second quarter sales of $1.042 billion, an $8 million increase compared to the same period last year. This growth was led by utility products, where we saw positive volume momentum in wood utility poles and a solid contribution from our crossarm acquisition. These gains were largely offset by softer performance in residential lumber and a decline in activity within our logs and lumber business.

On a year-to-date basis, sales were $1.833 billion compared to $1.807 billion in the prior year period. This $26 million increase was driven primarily by contributions from acquisitions and a 4% organic sales growth in wood utility poles. These helped mitigate a $30 million foreign exchange headwind as well as softer year-to-date sales performance in our railway ties and residential lumber businesses.

Utility product sales were $510 million in the second quarter, up 7% from $476 million in the same period last year. The increase was driven by a $29 million contribution from crossarm and a modest organic growth in wood utility poles, partly offset by a decline in steel structure sales, which reflected the temporary operational factors mentioned earlier.

For wood utility poles, sales increased 1% organically in the quarter with volumes up 2% entirely from contract business. Underlying demand and customer activity remained healthy. However, unusually wet spring weather in Texas, one of our most active markets, delayed project execution and had a more meaningful impact on performance in the quarter.

On a year-to-date basis, utility product sales were $979 million, up 9% from $895 million in the prior year period. Excluding the contribution of acquisitions and the impact of foreign exchange, wood utility pole sales were up 4% in the first half of the year. This growth was volume led, contributing about 7% to the increase.

Offsetting in part the volume increase was lower pricing, primarily due to product mix, particularly the unusually favorable transaction recognized in the first quarter of 2025, which involved high-margin wrap poles. When we normalize for that specific prior year item, pricing remained relatively stable.

From a financial standpoint, the poles network actions Eric outlined are intended to improve network efficiency and better position certain facilities to focus on higher-margin products. We estimate that these initiatives could contribute approximately $10 million to $12 million of incremental annual profitability. As we continue to assess and advance these actions, we may incur onetime charges, most of which would be noncash in nature and primarily related to potential asset write-downs.

Turning to railway ties. The second quarter sales were $235 million compared with $240 million in the prior year period. The decline was primarily due to lower Class 1 volumes with much of that pressure offset by continued strength in the non-Class 1 market. Overall, volumes were down 1% in the quarter, while pricing was slightly lower due to a higher proportion of lower-priced TSO volumes.

Year-to-date, railway tie sales totaled $433 million, down 2%, excluding foreign exchange. This result reflects the same trend observed in the second quarter with both volumes and pricing contributing modestly to the decline.

We continue to advance our railway tie optimization actions in the second quarter. As part of these efforts, we recorded $32 million of onetime charges, including $24 million of noncash asset write-down. EBITDA was adjusted for these items.

We continue to expect annual cost savings from these initiatives of approximately $10 million to $15 million beginning in 2027. Residential lumber sales were $234 million in the second quarter, down 5% from $246 million in the prior year period. The decrease primarily reflected lower pricing, which was down 4%, while volumes were modestly lower, down 1% due to softer demand and adverse weather conditions.

On a year-to-date basis, residential lumber sales were $310 million, down 7% from $334 million in the first half of 2025. The decline reflected both lower volumes, which were down 2% and a softer pricing environment.

Turning to profitability. Adjusted EBITDA for the quarter was $167 million or 16% compared to $189 million or 18% in the second quarter of last year. As Eric mentioned, the decrease primarily reflected near-term cost pressures. The main drivers were site-specific environmental and maintenance costs, most of which are not expected to recur, higher fuel costs, temporary inefficiencies associated with the Candiac steel structure expansion and a lag in recovering certain cost increases through pricing. We expect margin performance in the second half of the year to improve as some of these pressures ease.

Moving on to cash flows. During the quarter, we generated $192 million of cash from operations, down from $224 million generated in the second quarter of last year, primarily reflecting lower profitability. That said, cash generation remains strong, supported by favorable working capital performance.

As is typical at this point in the year, inventory levels declined seasonally with railway ties inventory seeing a more significant reduction. This reflects a shift in sales mix towards a higher proportion of TSO volumes consistent with the trend we expect through the balance of the year.

During the first 6 months of the year, we reduced our net debt by more than $100 million, excluding the FX impact. We ended the quarter with $759 million of available liquidity and a leverage ratio of 2.5x. While lower profitability and unfavorable foreign exchange impact kept the leverage at the upper end of our target range, it remains aligned with our capital allocation strategy.

In summary, our second quarter results underscore the resilience of our cash generation and the strength of our balance sheet. We remain focused on continuous improvement and efficiency initiatives to strengthen the long-term performance of our infrastructure-focused businesses.

Despite near-term margin pressure, solid cash flow, stable leverage and strong liquidity continue to provide flexibility to invest in growth from a position of strength.

With that, I will turn the call back to Eric.

Thank you, Silvana. To conclude, the key messages from the quarter are clear. Demand across our infrastructure markets remain healthy, and we continue to advance several growth avenues, including M&A opportunities in support of our long-term strategy.

While quarterly profitability was affected by near-term cost pressures, the margin shortfall was largely driven by site-specific nonrecurring items and temporary inefficiencies in steel structures. Excluding those factors, margin performance would have been closer to 17.5%. This gives us confidence that margin performance should improve as early as the second half of this year.

Looking beyond 2026, we are also advancing optimization initiatives across the business. As these actions progress, together with pricing pass-through mechanism and a stronger contribution from higher-value products, we expect margin performance to further improve over time. Overall, this reinforces our confidence in our guidance, in the long-term fundamentals of the business and in our ability to deliver against our stated objectives.

With that, we will now open the line for questions.

[Operator Instructions] Our first question comes from the line of James McGarragle from RBC Capital Markets.

I just wanted to ask about some of the cost pressures. You mentioned they're near term. So can you just provide the specific -- the visibility and the timeline for each of the major drivers like the environmental and the maintenance cost, fuel, steel structure inefficiencies and how you expect those to potentially improve through the back half of the year?

Yes, certainly. Thank you, James, for highlighting that. So really, you mentioned 4 key items in your question. I'll start with the, I guess, inefficiencies in the steel structure business. As you know, we are revamping the entire shop floor at the Canadian -- our Candiac facility. And I guess, in the second quarter, the change out created more pressure on our production capacity, therefore creating a quarterly slowdown, if you want.

This is pretty much behind us. We're pretty much done with the renovation. We still have some things to finish up here in the month of August. But I would say after the July shutdown that we had at the plant, we're very well advanced on the project. So definitely, that is behind us, and we should be ramping up here towards higher volumes than last year. Last year, we had maybe 10,000 tons available. We should definitely see, let's say, somewhere around 14,000 tons availability annualized on the back half of the year. So that's going extremely well and behind us.

The fuel costs, like everybody has observed, fuel costs are up across North America. That impacts our freight and distribution activities. It also impacts to some extent our oil-borne preservatives, which are obviously oil-based and are seeing the impact. And the lag there is that we will need to wait for the anniversary of the contracts to be able to adjust pricing.

So it's a lag because we do have mechanisms to adjust for that. It's just not -- it just didn't happen in the same quarter that we saw the cost increase. It will come over time. And I guess I want to say mostly starting next year. We might see some adjustments this year, but a lot of our anniversaries of our contracts are in the first 6 months of a given year.

Lastly, we had, I want to say, in the bucket I described as onetime expenses, and you mentioned them, which is like environmental management activities and I want to say, unplanned maintenance. So the environmental management activities are really associated to permitting renewals and activities where we know or expecting changes in our permits, which we're getting ahead of by hiring consultants, renting some equipment in anticipation of certain CapEx that we need to do throughout the year to make sure that we will be compliant when those permits are given to us with stricter requirements.

And unplanned maintenance, I have to say, we did have unusual activities with boiler maintenance, kilns and tank repairs. All to say, those impacted our quarterly results. If we look at our forecast for the balance of the year, we feel pretty comfortable that those were onetime and they were well needed. And obviously, we want to keep our assets well maintained and functional. So those explain those 2 line items.

Appreciate the color there. And I wanted to ask on the pricing as well. You kind of alluded to that in your answer, but can you just walk through the mechanics of how these pricing recoveries are going to flow through? So you kind of said that these are mostly going to be on the contractual resets in the first half of the year. But would that include the bulk of the pricing? Is there anything else that you need to pass through on pricing? And would that be in the -- primarily in the poles or in the railway tie business?

I want to say heavily weighted to the poles. But definitely, we do have some in the railway ties. So there were -- on the rail side, on the railway side, like, we do have some trucking activity. So obviously, that has an impact. But I want to say a bit more heavily weighted on utility poles simply because we have the oil-borne preservatives. That being said, residential lumber would also have some headwinds.

So if I look at those 3 buckets, we are adjusting pricing in the third quarter to our customers for fuel costs and residential lumber. So that is going to be taken care of here in the next few weeks if it's, in some cases, already done. For the utility pole business, it's really driven by the annual contracts. We don't have that leverage unless a customer wants to attenuate the onetime impact when we have the price increases. So we do have some customers that are saying, "Hey, could we do something now because I want to avoid a significant impact when the anniversary comes." So that is a possibility. And obviously, on the railway tie side, those are pass-throughs that happen through just annual adjustments for inflation and things of the like.

Your next question comes from the line of Hamir Patel from CIBC Capital Markets.

Eric, I think on the last call, you were pointing to tie sales being flat this year. It looks like you're tracking down 2% in the first half. Are you still aiming to be flat this year in ties? And if you could maybe just clarify in terms of the Class 1 contracts that were being renewed in 2026. I believe you mentioned one was just renewed, but just the status of the remaining ones?

Certainly. So with regards to the Class 1 -- I'll start with the Class 1 contract. So, yes, so as I stated, one was renewed starting in '27. We have secured volume increases there, and we're currently negotiating on bridge timber. So that should definitely be some upside there.

Second contract, well underway. We have secured extra volume for next year. We have mentioned this in certain investor meetings. Pending some CapEx investments, some customers are inclined to support us and give us extra business. So for the second contract I'm referring to, that's already in play. And then we're also, as the general renewal, looking at future -- potentially future increases, but that contract would probably conclude that negotiations mid-Q4 or in October.

There's a third one that is sort of one that is maturing at the end of the year in December. So we're in early stages of discussions. So again, discussions on additional volumes. As I mentioned, our strategy is to ensure that we have business growth. So definitely looking into that.

And the fourth one is pretty much done. It's relatively stable, maybe a slight decline. And we referred to that back in the quarter -- earlier last quarter, where we were talking about some pricing considerations.

With regards to your question on total volumes for the year, so you are correct. We had stated a flat approach for the year. We're trending minus 2%. I think we'll probably be somewhere between the flat to the minus 2%. One thing I want to highlight is we're seeing a heavier volume or more activity from the treating services piece. So obviously, that has a lower price, if you want, because it's just the treating services. The wood component is not in there. I'll remind you from a margin percentage, it's actually an improvement versus our black tie business and also we're not carrying the working capital.

So 0 to that minus 2%, let's say, but definitely a heavier proportion of TSO in the back half compared to the first half.

Okay. And Eric, given you've got some of these contracts renewing, is it fair to assume that we might see a greater transition to TSO? And then what does that suggest for perhaps that revenue comp in '27 for ties because I think historically, it had been sort of low single-digit positive growth. I'm just wondering if maybe there's a one-year adjustment there with the TSO.

Right. So TSO is attractive to us because we don't have to carry the working capital. There's obviously lesser investment, returns are better and the profitability is similar. I want to say this is a bigger percentage. So some customers are really open to the conversation and others have shut the door. So we'll be looking going into next year to a greater proportion of that.

Silvana, do you want to give any color on the H1 versus H2 proportions of TSO?

Yes. So in the first half of the year, probably we would say probably half of that sort of 2% decrease was related to the TSO volume. The expectation in the second half of the year is that we could be seeing those TSO volumes increase and maybe represent probably anywhere between 5% and 10% of our total tie sales. And that probably is what we would be expecting going forward beyond 2026.

So in terms of impact on the overall sales, I guess, not giving a specific number, but just maybe highlighting to you that it could be representing up to 10% of our total volumes going forward.

Great. And just last question I had. I know the focus now is on growing the steel structures business. But, Eric, do you still see potential opportunities over the coming year to augment your position in either wood and utility poles or ties through M&A?

Answer is yes. So definitely there is potentially some targets on the railway tie side that are still of interest to us. As I looked at the landscape of Class 1s, potential mergers on the horizon and how that could influence the market, I'm mindful of how our footprint looks today and how it needs to adjust. So definitely some of these competitors today, I guess, are definitely in sight and I would appreciate the conversations with these targets.

On the utility pole side, there's still a couple of businesses, I want to say, in the Southeast U.S. that have some interest, businesses owned by families that we've gotten to know over the years. Then it's really a question of timing and their transition or their exit strategy. But I think there's some potential there.

Then obviously -- so that's on the M&A front, but I have to mention for utility poles, there's also the -- not the potential, but our expectation of continued organic growth. We've adjusted our footprint for that. We're actually taking initiatives right now to ensure that we're ready for that future growth. So our M&A is definitely part of the strategy for the wood ties and wood poles. And on the wood poles, we're definitely expecting continued growth, and we're adjusting our network, and we're ready for it.

Your next question comes from the line of Benoit Poirier for Desjardins.

Just to come back on the utility pole, I was curious if you could break down the 1% organic growth between volume and pricing?

Silvana, do you want to tackle that, please?

Yes. We mentioned it, I believe, in the earnings script, but basically for the wood utility pole, it's a 2% increase in volume and a 1% decline in pricing.

Benoit, I want to add is just we had a call out in the script about the Texas market. It's typically not in our style to find excuses, but there was some heavy rains in the northern part of Texas through the spring, which slowed down several projects. And I do think we will catch up some of that later in the year, maybe not all, but -- so I think we were a bit depressed on the volume in relation to those events.

Okay. And in terms of spot pricing, my understanding, it's been pretty stable in the last 3 to 4 quarters. And how is July shaping up on the utility pole side on the volume side, organic growth? Have you been able to ramp up following the heavy rain event?

Thank you, Benoit. I think I led you into that question a bit, but thank you for asking it. Yes -- no, definitely, we're seeing some adjustments in our customer forecasting. I don't know if they'll have enough time in the Texas area to catch up all the work because of the lost time, but we're definitely seeing some momentum there. So that -- so far this year, I don't like to comment on Q3 because obviously we're not -- we're reporting Q2 today, but we are seeing some positive activity.

And you'll have to excuse me, Benoit. I forgot the first part of your question.

Just about the expectation in terms of volume growth for...

Sorry. It was the pricing again, Q3, Q4. Yes. It was for the spot pricing, I'm sorry. And yes, you're completely right. We've seen like 4 quarters of pretty stable pricing on the spot side. So pleased with that. We will be lapping ourselves here with the pricing pressures. And hopefully, that is behind us.

[Operator Instructions] Our next question comes from the line of Michael Tupholme from TD Securities.

Just, Eric, back on the headwinds in the Southeast and the U.S. in the quarter, had you had a more normal sort of typical weather in that area and seeing more typical demand, like what would wood utility poles organic growth look like -- have looked like in the quarter?

Yes. I did a lot of discussions and questions with our sales team. Silvana, if you want to?

Yes. So the estimate is that the expectation would have been that we would have been at closer to sort of that mid-single-digit growth or probably the lower end, probably like between 4% and 5% is where the expectation would have been if the activity would have been as expected in that area.

Okay. And it sounds like that headwind has now been overcome and maybe you get some of the volumes that you lost out on back, maybe not fully, but some of those recovered in the second half plus that you would ordinarily do. So is the idea that in the second half, we're back on to that sort of mid-single-digit organic growth for poles where you had been targeting for the year, notwithstanding the Q2 issues?

Yes. The plan is -- and I believe I mentioned it in my script that we were still guiding to that mid-single digit. I think it's a good assumption.

Sorry, for the second half, right? Or still guiding to that?

For full year. I'm sorry, I'm sorry, Michael. Yes, for the full year, would be mid-single digit.

Okay. So this Q2 dynamic doesn't materially change where you wind up for the year.

Agree to that.

And then just on the operational efficiency initiatives in the Poles business, I think, Silvana, you said $10 million to $12 million of targeted annual cost savings or profitability improvements, pardon me. When would we expect to see those start to come through? And when would you get that full benefit? I'm thinking about the initiatives on the tie side. I think you said the full benefit there isn't till next year. So how does it look for poles?

Yes, the expectation would be the same. It would be difficult just to expect any of them. Most of the work will be undertaken in Q3 into Q4. So the expectation isn't as of 2027.

Okay. But you could get them on, like, the full benefit is coming through for '27?

In the first quarter. Yes.

Yes. I agree with that.

Okay. And then, Eric, on the steel structures sort of headwinds that you saw in the quarter just due to the equipment transition and given the facility expansion that's undergoing, you're seeing at Candiac, does that impact you again in Q3? It sounded like maybe there's still some impact in the early part of the quarter, but I'm just trying to understand the impact there. And if -- and again, I'm not totally clear, the mid-single-digit organic growth you talked about for poles is still being -- looking at that for the year. Is that just wood utility poles? Or is that inclusive of the steel structures' dynamics?

No, that's only for wood utility poles. The -- I guess, the changeover that we're -- of the equipment we're seeing has created longer delays of moving equipment and installing the new equipment. That's pretty much behind us. So July was -- so in Quebec, we got a construction holiday, which is usually a good time for plant shutdown. So -- but we did have the whole maintenance crews in the facility. 2 weeks of no operations just helps just move things along.

So we've progressed very well here. So what's left here in August is just tidying things up. So that slowdown is, I want to say, entirely behind us, and we'd be resuming our -- the regular activity with enhanced capacity.

And actually, I want to add the good news -- well, the good news is -- there's a good news is that everything we've learned in the last 4 months in this equipment change out is going to be beneficial for our Tennessee facility because we're doing a copy-paste of the shop floor, same equipment, same supplier. So everything we had to do with the programming, some software interfaces for CNC equipment programming and things like, everything is just going to be used for a second time. So this investment is definitely going to be beneficial for a smoother start-up in Tennessee.

Okay. And then just lastly on the margins. So obviously, some factors that weighed on margins this quarter. It sounds like you see improvement in the back half. And then you haven't changed your 3-year outlook. So I assume that means by next year, you're back in your range. Do these operational improvement initiatives you're undertaking, were those already factored into the 17.5% to 18.5% range? Or was that where you'd expect to be without those and then these initiatives could kind of push you up either to the top end or maybe even through that? Just trying to understand how those specific initiatives in ties and poles on the operational improvement side play into the margin.

Yes. It's a good observation. So it was not included in our initial guidance. So as we had the question several times in previous quarters of like, well, what happens for you to be at the low end and what needs to happen for you at the top end? Well, these initiatives, those would be actions that we're taking to be at the higher end of our guidance.

There are no further questions at this time. I will now turn the call over to Eric Vachon for closing comments.

Thank you, John, and thank you, everyone, for joining us today. We look forward to updating you when we release our third quarter results in the fall. Until then, have a safe and enjoyable summer.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning. My name is David Galison, Vice President of Investor Relations for Stella-Jones. I'm happy to welcome you to our 2026 Annual Meeting of Shareholders. Before we begin, please note that the comments made in today's presentation 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. Additionally, during this presentation, the company may refer to non-GAAP measures, which have no standardized meaning under GAAP and are not likely comparable to similar measures presented by other issuers. For further information on these risks and uncertainties, please consult the relevant filings on SEDAR+. With this, I would like to invite Katherine Lehman, Chair of the Board of Directors of Stella-Jones, to begin the meeting.

Have a good day.

David...

Thank you, and good morning to everyone. On behalf of the members of our Board and our more than 3,200 employees across Canada and the United States, I would like to welcome you to our Annual Meeting of Shareholders, and thank you for being with us today, whether you're joining us virtually or in person. I'll begin by introducing the members of the Stella-Jones senior management team who are sharing the stage with me today. You will have the opportunity to hear from them during the meeting, and there will be a question-and-answer period following their prepared remarks. First, I'd like to introduce Eric Vachon, President and Chief Executive Officer of Stella-Jones. Mr. Vachon also serves as Executive Director of the Board. Joining Eric are Silvana Travaglini, Senior Vice President and Chief Financial Officer; and James Kenner, Senior Vice President, Chief Legal Officer and Corporate Secretary. I also wish to welcome the nonexecutive members of the Board of Directors who will be presented for election today. I would like to invite them to please stand when I call their name. Michelle Banik, Robert Coallier, Sean Donnelly, Anne E. Giardini, Karen Laflamme, Renee Laflamme, Douglas Muzyka and Simon Pelletier. I would also like to recognize, of course, Stella-Jones' leadership team and its outstanding employees, a number of whom who are also here today in the audience.

Before proceeding with the formal portion of today's meeting, please allow me to share a few words about our performance and our Board's continued focus on governance over the past year. 2025 was a pivotal year for Stella-Jones, one defined by strong execution, thoughtful actions and meaningful growth progress. As the company concluded its 3-year strategic guidance period and stepped into an exciting next phase of growth, the Board continued to work in lockstep with management to build on Stella-Jones' robust foundations by providing ongoing guidance and oversight.

Our collective commitment to excellence and our shared vision enabled Stella-Jones to execute its strategy with discipline, agility and ambition. In 2025, the company celebrated its 25th consecutive year of sales growth and its 21st consecutive year of dividend growth. These are a testament to the enduring strength of this business to the quality and dedication of the team that runs it and to the clarity and consistency of our strategic direction. Our disciplined approach to capital allocation, encompassing strategic investments, consistent returns to shareholders and a strong balance sheet has fortified our financial position and empowered us to pursue growth with well-founded confidence. Our expanded utility product offering exemplifies Stella-Jones' ability to execute in new areas, realize value and expand our addressable market. Additionally, our strategic focus on operational efficiency ensures that we remain at the forefront of our industry and continue to fulfill our customers' needs. Throughout the past year, the Board of Directors remain dedicated to enhancing its corporate governance framework. This commitment to continuous improvement has demonstrated -- was demonstrated through the successful implementation of several key initiatives.

First, I want to acknowledge a meaningful milestone in our sustainability journey. In 2025, we released our inaugural climate report while advancing towards our 2030 target of reducing Scope 1 and 2 greenhouse gas emissions by 32%. The Board takes this responsibility for sustainability oversight seriously, and we are proud of the progress our teams have made in this area as well as in our community engagement efforts. Good governance ensures that our company is positioned to capture today's opportunity while meeting the broader responsibilities of tomorrow, standards our team continues to uphold. Governance does not happen in isolation. It is through -- it is strengthened through consistent, open and proactive dialogue with our shareholders. Over the past year, management and the Board continued to invest in building and deepening relationships with the investor community. These efforts included both structured outreach and ongoing dialogue with existing and prospective shareholders. They reflect our firm belief that maintaining strong, transparent and ongoing communication with our investor base is fundamental to our shared success. This brings me to our November 2025 Investor Day, where the company unveiled its infrastructure-focused growth initiative strategy and its financial objectives for 2026 through 2028. For the first time, earnings per share was added as a core performance metric in our guidance.

This change underscores the Board's confidence in the company's strategic path and the management team's ability to execute. By formalizing this metric, we are ensuring that every strategic move is directly aligned with creating long-term shareholder value. On the compensation front, we focused on ensuring that the interest of our leadership team remain closely aligned with those of our shareholders. Share ownership guidelines introduced in 2025 reinforce a culture of accountability and long-term thinking at the senior management level. These guidelines, along with our broader compensation framework, reflect the Board's commitment to responsible and performance-oriented governance. These initiatives taken together are a reflection of what has always set Stella-Jones apart, a dedication to continuous improvement, a forward-looking mindset and a shared commitment to building long-term value for shareholders. The Board remains fully engaged, fully committed and deeply proud of what this company and its people have achieved. Turning back to the Board itself. In 2025, we are pleased to welcome 2 new members to our Board, Renee Laflamme and Sean Donnelly. Renee brings deep expertise in digital transformation and artificial intelligence, capabilities of growing importance as our business embraces technology and innovation to drive enhanced performance and efficiency. Sean contributes experience in steel manufacturing, utilities and environmental health and safety, areas which are vital as we scale our operations.

Their combined perspectives have already enriched our governance and sharpened our strategic oversight. I'm pleased to have them both on this Board, and I look forward to their continued contributions in the years ahead. These appointments complement the Board's ongoing site visits and targeted training to ensure our Board remains agile and well equipped to navigate the complexities ahead. As we look at the nominees before you today, I'm proud of the strength and diversity of this Board. Excluding our President and CEO, our nominees represent an independent group, reflecting a wide range of complementary skills, backgrounds and meaningful gender diversity. This is a Board built to guide the company's growth with both confidence and clarity. On behalf of our Board, I would like to extend my heartfelt congratulations to the entire Stella-Jones team for their remarkable accomplishments in 2025. And of course, to you, our shareholders, thank you for your enduring trust. Thank you for your continued engagement and your ongoing support of Stella-Jones.[indiscernible] I will now move to the formal portion of today's agenda. Pursuant to the general bylaws of the corporation, I will be acting as Chair of today's meeting, and Mr. James Kenner will act as Secretary of the meeting. Mr. Steve Gilbert and Mr. Vlad Talvesa of Computershare Investor Services, Inc., the transfer agent and registrar of the company, will be acting as scrutineers.

While management holds proxies representing over 91% of votes in favor of all matters, which would normally allow us to conduct the votes by a show of hands, the virtual participation requires us to conduct the votes by ballot. We will announce the preliminary results of voting on each resolution prior to the close of the meeting, with final results for each of these matters to be filed on SEDAR+ as soon as they are available. Please pay attention to the following voting instructions as they'll be used for every item requiring a vote at today's meeting. For those attending the meeting virtually who are registered shareholders or duly appointed proxy holders and who have not already voted by proxy, voting will be conducted via the online platform following the steps displayed on your screen. You can now vote on each resolution until the closing of the vote after the last resolution. You will be notified when the voting period is over. For those attending the meeting in person, who are registered shareholders or duly appointed proxy holders and who have not already voted by proxy, if you registered with Computershare upon your arrival, you will have been provided with a voting tablet. If you're not registered with the scrutineers and/or you have not received a tablet, please go to the scrutineers' table for assistance.

If you've already voted by proxy prior to this meeting in any manner, there's no need to enter a vote. You should only enter a vote by poll or voting tablet today if you wish to change your vote, given that if you choose to vote again, only your vote cast during the meeting will be counted, and the vote that you previously submitted by proxy will be revoked. Once discussion on all items of business has concluded, I'll take a brief pause to allow you to record your vote on the online platform or on the voting tablet as applicable in case you have not already done so. And then I'll declare the voting closed on all resolutions. I'd like to remind you that registered shareholders and duly appointed proxy holders are the only persons entitled to vote or ask questions during the meeting. Shareholders and duly appointed proxy holders attending the meeting in person may address the meeting when there is a request to discuss a motion before the meeting.

For those joining virtually, you'll be able to do so by selecting the messaging tab on the online platform. To avoid delays, please provide your suggestions to us as soon as you've logged in, and we'll address each of them at the appropriate time during the meeting. I'll pause for 5 seconds after asking if there are any questions on a particular motion to take into account any delays we may experience. Ms. Stephanie Corrente, Director of Corporate Communications for Stella-Jones, will monitor all questions submitted through the platform virtually, and Mr. James Kenner will read them out loud for the benefit of both the in-person and the virtual audience. Each question will then be answered by the appropriate individual. A general question-and-answer period with respect to questions submitted that do not relate to an item on the agenda will take place after we have addressed all matters to be submitted to a vote today. The Secretary has informed me that the notice of this meeting, the management information circular and the forms of proxy have been sent by Computershare Investor Services, Inc. to all the shareholders of record as of March 12, 2026. Copies of such documents are also available at the scrutineers' table as well as electronically on Stella-Jones' profile on SEDAR+ on Stella-Jones website and through notice and access at www.envisionreports.com/SJI 2026. I've been informed that we have a quorum at the meeting today, and I invite Mr. Steve Gilbert to please read his report regarding the attendance.

Good morning, Madam Chair.

We, the undersigned scrutineers from Computershare Investor Services Inc., hereby report that there are at least 6 shareholders and/or proxy holders present at this meeting, representing in person or by proxy, 46,157,068 shares being 84.5% of the total 54,583,771 outstanding shares of Stella-Jones Inc., and we will hand a report signed by myself, Steve Gilbert and Vlad Talvesa, scrutineers. Thank you.

Thank you very much. Since we have a quorum, I hereby confirm that this meeting has been duly constituted and that we may proceed with the holding of the present meeting. The scrutineers' report will be given to the Secretary of the meeting and attached to the minutes of this meeting. Please also note that you can obtain the minutes of the last annual meeting upon request to the Secretary of the corporation. We will now open the polls for the resolutions pertaining to the appointment of auditors, the election of directors and the advisory vote on the corporation's approach to executive compensation. I refer you to the consolidated financial statements of the corporation and the independent auditor's report for the year ended December 31, 2025. These were included in the corporation's annual report mailed to each shareholder who requested it, and they're also available on Stella-Jones' SEDAR+ profile, its website and through the dedicated notice and access site. We understand that you've reviewed these documents, and we will therefore not ask the Secretary of the meeting to read them. Are there any questions from our in-person shareholders on the financial statements and independent auditor's report? Mr. Secretary, have any questions been submitted online regarding the financial statements and independent auditor's report?

Madam Chair, no questions were asked electronically.

Thank you. There being no further questions, I hereby declare that the corporation's annual consolidated financial statements for the financial year ended December 31, 2025, as well as the independent auditor's report thereto annexed have been received by the shareholders of the corporation. Next item of business is the election of the directors. The number of directors to be elected at this meeting have been fixed at 10. Additional information regarding each nominee has been set forth in the management information circular for this meeting and we will be nominating and approving individual directors. May I have a motion to nominate the Board of Directors of Stella-Jones?

[Foreign Language]

Sean Donnelly, Anne Giardini, Karen Laflamme, Renee Laflamme, Katherine A. Lehman, Douglas W. Muzyka ,[Foreign Language]

Madam Chair my name is David Galison, and I second the motion.

Thank you. Mr. Secretary, are there any questions? Are there any further nominations?

Madam Chair, no questions were submitted and no Board members were proposed for nomination electronically.

Thank you. I declare that the nomination period is closed, and we will now vote. If you are a registered shareholder or duly appointed proxy holder attending virtually, you may vote using the platform. If you're a registered shareholder or duly appointed proxy holder attending in person, please use your tablet to vote. We will announce the preliminary voting results of the selection later in the meeting. The next item of business is the appointment of auditors for the following financial year. On recommendation of the Audit Committee, the Board of Directors recommends that PricewaterhouseCoopers LLP be appointed as the auditors of the corporation. I will now entertain a motion regarding the appointment of the auditors.[Foreign Language]

Mr. Secretary, are there any questions on this matter?

Madam Chair, no questions were submitted electronically.

Thank you. We will now vote. If you're a registered shareholder or duly appointed proxy holder attending virtually, you may vote using the platform. If you're a registered shareholder or duly appointed proxy holder attending in person, please use your tablet to vote. We'll now consider the next item on our agenda. I will now entertain a motion regarding the advisory vote on the corporation's approach to executive compensation.

[Voting]

Madam Chair, my name is Mathieu , and I move that the resolution in favor of the corporation's approach to executive compensation as set out in the corporation's management proxy circular be accepted.

Madam Chair, my name is Eichenbaum, and I second the motion.

Thank you. Mr. Secretary, are there any questions on this motion?

Madam Chair, no questions were submitted.

Thank you very much. We will now vote. If you're a registered shareholder or duly appointed proxy holder attending virtually, you may vote using the platform. If you're a registered shareholder or duly appointed proxy holder attending in person, please use your tablet to vote. Since we've covered all of the topics on today's meeting agenda, we will now take a short break in order to allow registered shareholders and proxy holders to vote if they have not already done so. I remind you that if you've already voted by proxy, it's not necessary to vote again. As the voting platform is now closed and all electronic ballots have been submitted and tabulated, I will now call upon our scrutineer, Steve Gilbert, to please present the preliminary results of the vote.

[Foreign Language]

Thank you. I therefore declare that those nominated to be duly elected as directors of the corporation until the next annual election of directors or until their successors are elected or appointed. Detailed voting results will be published by press release subsequent to this meeting.

Madam Chair, we report that 99% of all common shares represented at this meeting were voted in favor of the appointment of PricewaterhouseCoopers LLP as the auditors of the corporation and in favor of the determination of their remuneration by the Board of Directors.

Thank you.

Since the resolution has been duly passed, I hereby declare that PricewaterhouseCoopers LLP be appointed the auditors of the corporation to hold office until the close of its next Annual General Meeting of Shareholders and that their remuneration to that effect be determined by the Board of Directors.

[Foreign Language]

Thank you. Since the resolution has been passed by a majority of the votes cast by the holders of common shares entitled to vote on this resolution, I hereby declare that the motion in favor of the corporation's approach to executive compensation be carried. The final voting results for each of these matters will be filed on SEDAR+ as soon as they are available. We've now completed the business of the meeting, and I declare the formal portion of the Annual Meeting of Shareholders terminated. At this time, Mr. Eric Vachon will present an overview of the corporation's activities in 2025, and Ms. Silvana Travaglini will follow with a financial overview.

Thank you, Kate. Good morning, everyone, and welcome.

[Foreign Language]

In 2025, we delivered approximately $3.5 billion in sales, maintained an EBITDA margin close to 18% and generated more than $550 million in operating cash flow. Over the 2023 to 2025 period, we also returned $506 million to shareholders, exceeding the commitment we made at the start of that period. All these achievements reflect the talent, the discipline and dedication of our more than 3,200 employees across Canada and the United States. In 2025, we sharpened Stella-Jones' strategic vision to be the partner of choice for North America's utilities and railroad industries. That vision is grounded in a clear objective to deepen our role in essential infrastructure markets, broaden our capabilities and allocate capital in a disciplined way to support long-term value creation. Our acquisition of Rockwell and Brooks were important milestones in that strategy. Lockwell gave us an immediate platform in steel transmission structures, while Brooks strengthened our position in treated wood crossarms and transmission framing components. Together, these businesses expand our reach in transmission and distribution and moves us further along our path to becoming a more comprehensive infrastructure partner.

At Rockwell, the expansion project is progressing well and is expected to double capacity in the coming months. And following year-end, we approved the development of a new steel lattice tower manufacturing facility in Fayetteville, Tennessee. These investments reflects our confidence in the long-term growth potential in transmission infrastructure for North America. Let me now turn to the performance of our core businesses. Utility products remain the primary growth driver for Stella-Jones in 2025 and continues to lead our momentum into 2026. After a period of softer demand for wood utility poles, customer purchasing activity accelerated in the second half of 2025, and that momentum carried into the first quarter of this year. We are benefiting from our contract-based business model, strong customer relationships and end markets supported by aging infrastructure, grid hardening, electrification and resilience investments. We believe Utility Products remains exceptionally well positioned for long-term growth. Railway ties operated in a more challenging environment, marked by an evolving industry landscape and a more competitive pressure scenario. But these headwinds have not changed the underlying strength of our railway tie business, including our operational footprint, long-standing customer relationships and strong reputation for quality and service.

As part of our continuous improvement strategy, we are taking practical steps to make our railway tie business more efficient and better positioned for the future. By consolidating production into our most efficient facilities, we are aligning capacity more closely with demand and improving long-term returns -- the long-term return profile of the business. At the same time, we remain focused on growth. We see opportunities to strengthen our position with Class 1 customers, expand higher-value offerings and increase our participation in the commercial market. We will also continue to evaluate both organic and M&A opportunities that can enhance returns, strengthen our network and reinforce our role as a trusted partner to the North American rail industry. Overall, our priority is to build a stronger, more efficient and more resilient railway tie business for the long term. Residential lumber also demonstrated resilience through a softer market backdrop. Its value-added model, national distribution network and strong service level allowed it to remain a meaningful contributor to profitability. We continue to manage this business with discipline and remain confident in its contribution to Stella-Jones. We also made meaningful progress in strengthening the capabilities that support our business. In 2025, we successfully completed our enterprise-wide ERP deployment, an important milestone that improves visibility, efficiency and decision-making across our business. We also began laying the foundations for broader use of AI tools to support continuous improvement. At the same time, we reduced safety incidents for the third consecutive year and continue to strengthen partnerships that supports long-term fiber access for our utility pole business, including our early 2026 investment in Lizzy Bay Logging. [Foreign Language]

At our Investor Day last November, we introduced rolling 3-year financial objectives that reflect both the quality of the platform we have built and the opportunities we see ahead. Based on our current base assets, we expect sales to grow at a compound annual rate of approximately 4% to 5% through 2028, reaching approximately $4 billion. We are targeting EBITDA margins in the range of 17.5% to 18.5% and an EPS annual growth of more than 10%. These objectives support -- are supported by the momentum in utility products, the actions underway in the railway tie business and the growth platform we are building in transmission infrastructure. We enter this next phase with confidence in our team, our strategy and our ability to continue creating long-term value. I would like to thank our employees for their dedication and hard work and our shareholders for their continued trust and support. With that, I am pleased to invite Silvana Travaglini, our Senior Vice President and Chief Financial Officer, to provide a more detailed financial overview.

Thank you, Eric, and good morning, everyone.

[Foreign Language]

Despite those headwinds, we delivered EBITDA of $623 million and an EBITDA margin of close to 18%, excluding the insurance settlement. This is consistent with the strong margin profile we have maintained over the last 2 years. We also generated $557 million in cash from operations and more than $400 million in free cash flow, reflecting the resilience of our business model and our disciplined management of working capital. That strong cash generation allowed us to take a balanced approach to capital allocation. In 2025, we deployed approximately $260 million to complete the acquisitions of Lockwell and Brooks while continuing to invest in the safety, reliability and long-term efficiency of our operations. At the same time, we completed our 3-year commitment to return over $500 million to shareholders. Since 2023, we have reduced our share count by more than 4 million shares and delivered a 13% EPS annual growth rate, outpacing the growth of both sales and EBITDA. We also continued our long track record of dividend growth with the Board recently approving a 10% increase in the quarterly dividend to $0.34 per share, marking our 22nd consecutive annual increase. We carried this positive momentum into the first quarter of 2026, with sales increasing by $18 million to $791 million. Utility products continued to lead growth, benefiting from higher volumes and the contribution from our recent acquisitions. In railway ties, organic sales remained relatively stable, while residential lumber sales reflected softer demand and lower pricing. Overall, our first quarter performance demonstrated the resilience of our business. As Eric mentioned, in railway ties, we have initiated targeted optimization actions to better align our footprint with the current market conditions. These initiatives are expected to generate approximately $10 million to $15 million in annualized cost savings starting in 2027. To implement these actions, we do expect to incur onetime restructuring charges, the majority of which are expected to be noncash. These actions will lower our cost base, improve our network efficiency and support a more disciplined return-focused operating model. Starting in the first quarter, we have introduced adjusted EBITDA and adjusted EPS as part of our financial disclosures. This will give investors a clearer view of our underlying performance and improve comparability with the prior year period, which was impacted by an insurance settlement. For the first quarter, adjusted EBITDA was $136 million, representing a margin of 17.2% compared with $141 million and a margin of 18.2% in Q1 of last year. The year-over-year decline was primarily due to a less favorable mix in utility products and a $5 million mark-to-market adjustment on our stock-based compensation expense resulting from the appreciation of the company's share price. Despite these factors, our margin profile was within our expected range for the first quarter. Cash from operations in the first quarter was $47 million, a significant improvement over the $16 million used in the same period last year. We ended the quarter with $646 million in available liquidity and a net debt to adjusted EBITDA ratio of 2.6x, which remains consistent with our capital allocation strategy, which provides flexibility to fund seasonal working capital needs and strategic investments. Overall, our financial position remains strong. We are combining resilient earnings, robust cash generation and disciplined capital allocation with the flexibility to support our strategic priorities and pursue attractive growth opportunities from a position of strength. With that, I will turn it back to Eric.

Thank you, Silvana. Overall, we are encouraged by our performance and by the progress we are making across our strategic priorities. Utility products continue to build momentum. And in railway ties, we are taking focused actions as part of our continuous improvement strategy to optimize our network, strengthen the business and improve long-term returns. With a strong balance sheet, a clear growth strategy and disciplined execution across the organization, we believe Stella-Jones is well positioned to continue creating long-term value for our shareholders. And thank you again for your trust and your support. I will now hand the meeting back over to Kate.

Thank you very much, Silvana and Eric. I'll now invite shareholders or duly appointed proxy holders in the audience wishing to ask a question to please step up to the microphone, state your name and whether you're a shareholder or proxy holder. I'll also invite those asking questions virtually through the portal to select the question or messaging tab that now appears on your screen. Type your question in the text box provided and click the send button. Confirmation will appear on your screen that your message has been received. For those asking questions through the portal, Mr. James Kenner will be reading them out loud as well as the name of the individual who has asked the question if it's aided. Questions that have already been asked or answered will not be addressed. We will now begin receiving questions.

My name is William. I'm a shareholder.

So I have 2 questions. The first question is and maybe they're naive, but I don't know the answers. There's a huge discussion in Canada about building rapid rails. Does Stella-Jones have any expertise or area that they can contribute to that?

Thank you for the question. Eric, I'll...

Thank you, Mr. Wish for the question. So typically, I assume you're referring to high-speed rail. Yes. And typically, high-speed rail are built on concrete infrastructures because of the fastening systems and the speed of the train themselves, wood railway ties are not suited for those applications. So unfortunately, anything would be high-speed rail would not be in the expertise unless we eventually expand into some concrete manufacturing or do an acquisition in the future, but there's nothing in the cards in the short term with regards to that.

Okay. And the second question concerns the United States. In infrastructure building, is there a limitation because Stella-Jones, as I understand it, is a Canadian company. Are you allowed to bid on infrastructure projects in the United States? It's a hard question politically. But as of this morning, maybe you could answer what the rules are.

Well, I can certainly sorry. please go ahead. I can certainly provide you with some insight. If you have read our MD&A, you should know or will know that 75% of our sales are in the United States, and we have a very large footprint in the U.S. So in the U.S., we actually operate under Stella-Jones Corporation. So we are in the U.S., a U.S. corporation, and we source raw materials in the U.S., do the transformation into the sales and have a distribution network. So very much so we do participate to all federal bids and all types of infrastructure bids that are available or suited for our products.

And I guess the question is with rapid rail or high-speed rail, would Stella-Jones, would it be a big, big push to develop expertise in that area? Or it's not something you're really looking at now?

So it's not something that we're looking to develop internally. We have done our research. There's one major North American supplier in concrete products that we know of. We actually, we do know them and have had soft discussions in the past, if you want, but they're owned actually by a very large European manufacturer. So we either need to develop it internally as you're alluding to and go compete head-to-head with them, but that's currently not part of our R&D activities, if you want.

Speaker 1.

Are there any further questions, Mr. Secretary?

Madam Chair, there are no further questions.

As there are no more questions, this concludes our Annual Meeting of Shareholders, and we'd be pleased to meet with our in-person guests at this time, and we hope to see you all again at next year's meeting. Thank you for joining us today, and thank you for your support of Stella-Jones.

Good morning, and thank you for standing by. Welcome to Stella-Jones First Quarter 2026 Earnings Call. [Operator Instructions] I would like to remind everyone that this conference is being recorded on Wednesday, May 6, 2026.

I'll now turn it over to David Galison, Vice President, Investor Relations of Stella-Jones.

Thank you, Vincent, and good morning, everyone. Earlier this morning, we issued our press release reporting our results for the first quarter of 2026, along with our MD&A that can be found in the Investor Relations section of our website at www.stella-jones.com, as well as on SEDAR+.

As a reminder, all figures expressed on today's call are in Canadian dollars unless otherwise stated.

Please note that the 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 SEDAR+. These documents are also available in the Investor Relations section of Stella-Jones website at www.stella-jones.com.

Additionally, during this 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 SEDAR+.

Lastly, we have prepared a corresponding presentation, which we encourage you to follow along with during this call.

I'll now hand the call over to Eric Vachon, President and Chief Executive Officer of Stella-Jones for a strategic business update, followed by Silvana Travaglini, Senior Vice President and Chief Financial Officer of Stella-Jones, who will provide a more detailed financial overview. Eric, over to you.

Thank you, David. Good morning, everyone, and thank you for joining us today. 2026 is off to a solid start with results that highlight both the fundamental resilience of our business and our progress on key strategic priorities. The market dynamics we outlined in our Q4 call remains largely unchanged, and our first quarter performance is consistent with those expectations. Our utility products business continues to be the primary growth driver, delivering over 10% growth. This was fueled by strong demand for wood utility poles and the profitable contribution of our steel structures and crossarms businesses.

Meanwhile, our railway ties division demonstrated notable stability this quarter, effectively navigating a complex competitive landscape. While railway ties continue to deliver profitable sales, we're taking actions to further strengthen this business by optimizing our production network and aligning capacity with demand to ensure railway ties remains a cornerstone of our success.

We are also advancing our growth initiatives with good momentum. The acquisition of Locweld has provided us with an immediate platform for growth and our expected capacity expansion in Canada is well on its way to be fully allocated until the end of 2027. Our investments to double steel structure production capacity remains on schedule for completion by mid-2026, with a full ramp-up expected in the second half of the year.

In the U.S., we have taken a significant step forward in building our manufacturing footprint for steel lattice towers by selecting Fayetteville, Tennessee as a site for our new facility. This site has an existing newly constructed building that is suitable for our operations, which will help mitigate project risk. Its strategic location also offers access to a skilled labor pool and favorable proximity to key galvanizing partners. This approximately USD 500 million investment will add roughly 20,000 tons to our total production capacity. We continue to expect commissioning by late 2027 with the full production capacity by the end of 2028.

Let's turn to a performance overview of our main product categories. Starting with utility products, we are encouraged by the business' continued strength, which remains a cornerstone of our growth. The purchasing momentum that began in the third quarter of last year carried into the first quarter of 2026, supporting double-digit volume growth for wood utility poles. Importantly, growth continued to be anchored in our contract-based business, which we have deliberately strengthened by partnering with customers who value long-term supply security.

In terms of pricing, it was tempered this quarter by product mix fluctuations and continued pressures in the spot market. While spot pricing was below the levels realized in the first quarter of 2025, it remained broadly in line with pricing realized in the second half of 2025. Competition in the spot market remains intense, and we expect that dynamic to continue as additional capacity comes online later this year. Despite lower pricing, the strength of our volume performance helped offset these near-term pricing pressures while we maintain our focus on long-term profitability.

Turning to railway ties. Results in the quarter were broadly in line with the market conditions we expected. While Class 1 volumes remain under pressure from industry consolidation and a more competitive landscape, we maintained relatively stable sales by growing our commercial business. Combined with disciplined execution, this allowed us to preserve margins. At the same time, as part of our continuous improvement strategy, we're consolidating our production footprint by idling a treating plant and a procurement yard and reallocating volume to our most efficient facilities, ensuring our network remains aligned with the evolving needs of our customers. This strategic review work is ongoing, and we continue to evaluate network performance to optimize returns and position the railway tie business as a high-performing contributor to our infrastructure platform for years to come.

In parallel with the network optimization work, we remain focused on growth. Through Class 1 contract renewals, we see meaningful potential to strengthen our position and expand higher-value offerings such as bridge, crossing and pre-plate products. Additional discussions with Class 1s are opening opportunities to offer treating services. Beyond Class 1s, we continue to pursue growth in the commercial market with encouraging project opportunities ahead.

Consistent with our long-term approach, we will also continue to evaluate selective organic and M&A opportunities that can further strengthen our network and reinforce our role as a trusted partner to the North American rail industry. Overall, our priority in railway ties is clear to reposition the business for stronger returns.

Turning to residential lumber. The business faced softer demand this quarter. Despite this near-term backdrop, our confidence in the business and its long-term strategy remains unchanged. We continue to manage the business with discipline, leveraging our national distribution network and value-added capabilities to maintain strong service levels for our customers. We remain confident that residential lumber's value-added business model will continue to be a meaningful contributor to our profitability across market cycles. Overall, our first quarter performance reflects the strength of our infrastructure platform. Utility products continue to drive growth. Railway ties remained resilient as we undertake our optimization initiatives and residential lumber continued to be managed with discipline through a softer market. Across our businesses, we remain focused on execution, customer service and profitability.

With that, I will now ask Silvana to provide a more detailed overview of our first quarter financial results.

Thank you, Eric, and good morning, everyone. Sales for the first quarter increased by $18 million to $791 million, supported by higher volumes in wood utility poles and the full quarter contribution from our recent acquisitions. On an organic basis, sales increased 1% as the strength in utility products was largely offset by lower residential lumber sales, while railway tie sales remained relatively stable. Utility products sales were $469 million in the quarter, up 12% from the $419 million in the same period last year. This increase reflected the contribution from our 2025 acquisitions, Locweld and Brooks as well as organic sales growth of 6%. This growth was entirely volume-driven with volumes up 12% compared to the same quarter last year. Volume gains were partially offset by lower pricing, which was down 6%, largely due to a less favorable product mix.

Railway tie sales were $198 million, down 5% or $10 million from the prior year period, largely due to foreign exchange. Excluding the currency impact, railway tie sales were relatively stable as lower Class 1 volumes were largely offset by stronger commercial demand. As Eric noted, we have identified and initiated targeted actions within the railway tie business as part of our focus on continuous improvement. These initiatives are expected to generate approximately $10 million to $15 million in annualized cost savings starting in 2027. To implement these actions, we expect to incur onetime restructuring charges, the vast majority of which will be noncash and recorded by the end of the second quarter. By consolidating activity into our most efficient facilities, we are lowering our cost base, improving network efficiency and positioning the business to better protect margins through volume fluctuations.

Residential lumber sales were $76 million in the first quarter, down 14% from $88 million in the first quarter of last year. Volumes were negatively impacted by softer demand and pricing was also lower year-over-year as inventory costs averaged down throughout 2025.

Before turning to profitability, I'd like to take a moment to discuss our approach to reporting. Starting this quarter, we are introducing adjusted EBITDA and adjusted EPS as part of our financial disclosures. As we execute strategic initiatives, GAAP results may include nonroutine items that do not reflect our ongoing day-to-day business. This framework also allows for a more comparable year-over-year analysis by adjusting for the insurance settlement that impacted our 2025 results. It is important to note that for the current quarter, there were no adjustments to our EBITDA. A full reconciliation of these adjustments has been provided in our financial filings.

For the quarter, adjusted EBITDA was $136 million, reflecting a margin of 17.2% compared to $141 million and a margin of 18.2% in the first quarter of 2025. The decline was primarily attributable to 2 factors. First, we had a less favorable product mix for our utility -- wood utility poles. Q1 last year benefited from a greater proportion of higher-priced wrapped pole sales. Second, we recorded a $5 million mark-to-market adjustment on our stock-based compensation expense resulting from the appreciation of the company's share price. While these factors impacted our quarterly margin profile, our cost discipline and operating execution remained solid. When viewed in the context of the seasonal nature of our business, our Q1 margins remained well within our expected levels as we head into our peak demand season.

Moving on to cash flows. During the quarter, we generated $47 million of cash from operations, a significant improvement over the $60 million used in the first quarter of last year. This is a direct result of our disciplined working capital management. The strength of our operating cash flow was underscored by the stability of our balance sheet. Despite the typical seasonal increase in working capital in the first quarter, our net debt was unchanged since the start of the quarter.

We ended Q1 with $646 million in available liquidity and a net debt to adjusted EBITDA ratio of 2.6x. At 2.6x, our leverage ratio remains in line with our capital allocation strategy, which provides flexibility to fund seasonal working capital needs.

In summary, our first quarter results underscore the strength of our cash generation and balance sheet. Solid operating cash flow, stable leverage and ample liquidity give us the flexibility to support the needs of the business, fund strategic investments and evaluate growth opportunities from a position of strength.

With that, I will turn the call back to Eric.

Thank you, Silvana. To close, we are encouraged by our start to 2026 and by the progress we are making against our strategic priorities. We continue to build momentum in utility products, advance our steel growth initiatives and optimize our railway tie business. Combined with disciplined management in residential lumber, these actions keep us on track to strengthen returns and create long-term value.

I want to thank our employees for their dedication and hard work and our shareholders for their continued trust. We look forward to welcoming them at our Annual General Meeting later this morning.

This concludes our prepared remarks, and we will now open the line for questions.

[Operator Instructions] Our first question is from Hamir Patel from CIBC Capital Markets.

Eric, on the railway tie side, are you still expecting flat sales there overall for the full year? And I know last quarter, you mentioned you had 4 Class 1 contracts renewing this year. Have any of those been renewed yet?

Our views for the year are still flat sales year-over-year for 2026. And obviously, we hold our guidance for that low single-digit growth over the 3-year guidance period.

With regards to contract, there's still ongoing discussions, very positive on discussions with several of our customers. As I mentioned in my prepared notes, we're also getting discussions about moving to some treating services. So that could impact top line maybe more in '27 than in '26, but we will provide more color when that time comes around. But ultimately, the profitability and margin remains the same.

Great. And Silvana, I think you referenced $10 million to $15 million of cost savings by early '27. When is the earliest we'll start to see that -- the benefits there start to show up?

Yes. So we don't expect any benefits this year. Most of the benefits will only start in 2027. So we'll talk about the $10 million to $15 million that would be annualized starting in 2027.

Okay. Great. Just the last question I had on the res lumber side. Silvana, how much of the 11% decline was weaker volumes versus softer pricing? And how is your key customer there thinking about spring demand?

So in terms of the percentage decrease, it's pretty much 50-50 in terms of volumes and pricing. And I think we're starting to see a nice pickup in demand. So, obviously, the season was a little bit late to start this year, but I think we're starting to see some positive sign.

I'll let Eric chime in.

Just additional comment, Hamir. So our key customer remains bullish on the year with some growth over market share gains. We're prepared for a strong season. As Silvana said, a bit of a later start with the later spring starting, but the last few weeks have been actually very good on volume shipments. So we'll see if we can catch up by the end of the year, but the guidance still remains in that $600 million to $650 million.

Our following question is from James McGarragle from RBC Capital Markets.

Just on the utility poles, can you help us frame the cadence of the contracted backlog through the balance of '26? Specifically, do you have a line of sight to maintaining that strong volume growth that we saw in Q1 into Q2 and Q3? Just maybe you can comment on how you expect the pricing backdrop there to evolve in the back half as some of this new capacity comes on?

Thank you, James. So a quick reminder, first half of last year, if you remember, we had some softer volumes in utility poles. In the second half, we actually saw some better performance. So definitely, I would say the comp is easier in the first half of the year. So, obviously, you're seeing the 12% volume growth, which I don't think will carry through into the Q3 and Q4 periods that are upcoming. However, we still believe that we will hit that mid-single-digit net for the business, and that would incorporate that pricing headwind.

We think it will remain relatively stable for now compared to what we saw here in Q1. And hopefully, it holds that level, if you want, of pricing on the spot pricing market. And -- but net, we believe it will be mid-single digit as we have in our 3-year guidance.

And then in terms of margins, I know there was some impact from mix this year and margins were down year-over-year. So should we be thinking about the cadence of margin improvement or margin deterioration for the full year kind of in line with what we saw in Q1? Or anything we should be thinking about in Q2, Q3, Q4 that would change the trajectory of margins versus what we saw in the quarter?

So Q1 and Q4 of every year are the lowest volume quarters. So I'm not surprised to see the level of profitability we had this quarter. I think it's pretty much in line with our expectations. You could expect better margins for Q2 and Q3 as obviously, the volume helps us leverage better our network, and we're more efficient and there's also more demand. Definitely believe that we will be within our guidance range for the year. I think it's a bit of a normalization we're seeing this quarter, as Silvana pointed out, we had some product mix essentially being some higher wrapped pole volumes in Q1 '25, which sort of uplifted the margin profile for the quarter. But other than that, par for the course, I think we'll be within our guidance range for the year.

Our following question is from Benoit Poirier from Desjardins Capital Markets.

You've talked a little bit about the optimization of the railway ties production network. You gave great color about the initiatives, the opportunities, the benefit. Do you see an opportunity to do the same for utility poles and residential lumber?

So great question, Benoit. It's been a year now that we have added a CEO to the organization, and he's got strategic improvement initiatives going on in the business and continuous improvement. So it's definitely something that we are deploying throughout the organization. Obviously, there will be different impacts. If I think about our utility pole business, it's been a growth business now for several years. We're using capacity very well and increasing capacity. So I don't think, for example, restructuring in capacity, downward capacity adjustment would be something we will see in utility poles, but it doesn't mean that we are not working on other efficiency initiatives within the division. And I would say same for residential lumber, we're pretty happy with our footprint and our capacity usage there, but not to say that we're not looking for other opportunities to improve our bottom line.

Okay. And when I look at the organic growth for railway ties was just a slight negative, but how should we be thinking about Q2? It looks like that you're going to still be facing a tough compare versus a year ago. So just wondering whether we could still see the railway ties organic growth in the negative territory.

So, obviously, I want to call out FX because it was -- as you can see in our MD&A, a big impact this quarter. So if we exclude FX, we still see it flattish, Benoit. It is a very dynamic market. And as I mentioned, our team is adjusting very well, getting some extra business in the spot market or the commercial market. There's lots of great opportunities there. That's how we sort of navigated Q1 and compensated with that spot market. Not to say that as we're negotiating contracts with Class 1, we might see certain things switch, but I don't think it will be in Q2. It will be probably a bit later in the year. But for now, my thoughts are what I expressed earlier, should be flat through the year.

Okay. Perfect. And free cash flow, Silvana, very strong performance in Q1 in what is typically a seasonal weak quarter. Any explanation? I see less working capital build. Was it a call on the residential lumber inventory? Is it impact from network optimization? So any color behind the strong free cash flow performance in Q1?

Yes. So most of the favorable impact in the first quarter was us rightsizing some of the inventory, particularly in ties as we're looking to potentially, as Eric mentioned, opportunities for maybe TSO volumes, which is less capital intensive. We did make an effort already starting in Q1 to rightsize that inventory. So that was most of the impact. The build of residential lumber, obviously, with a bit of a later season was actually going the other way, and we definitely have poles in line with what we typically see in the first quarter, right? Also using the tools that we have with SAP, a lot more visibility into inventory management. So definitely, that is also helping out as part of that optimization and being efficient with our working capital.

Okay. And maybe last one for me. Could you maybe provide an update on the Brooks automation and the potential for selling crossarm in Canada? And maybe also with respect to the new location in Tennessee for steel lattice, I was curious to know how much of the upcoming capacity has been already sold.

So thank you, Benoit. So first part of your question with regards to Brooks, very happy with the progress in the integration. I would say probably fully integrated by now other than probably the IT systems that will be completed by the end of the year. We've opened the door to a lot of new customer contacts to the Brooks team, including Canadian customers. I can't divulge too much into the weeds, but yes, we're making inroads with Canadian utilities. So we're very happy with the progress there.

And the second part of your question was, I believe, was with regards to our selection of our Tennessee location for our steel lattice business. That is also progressing very well. So, obviously, we're -- we've selected the site. It has a building, as I mentioned. So it sort of derisks a lot of the project. We're already done and probably in the coming weeks, we'll be finalizing the purchase of all the equipment to be delivered in about a year from now. So we're on track to be -- to commission the facility at the end of '27. But things are working well. We've aligned our resources internally to be able to support that project. Obviously, again, under our CEO, we've developed an engineering team. So now we have actually employees that are well versed in this type of project and are dedicated to it. So like my VP of Sales likes to say, we have someone that goes to bed and wakes up in the morning thinking about these projects. So we're really focused on the success of the project.

Looking forward to commission it. And I also think you were inquiring about having some purchase orders there. So no firm purchase orders, a lot of discussions with customers, a lot of increased visits in our Canadian facility from U.S. customers to understand our quality control, our processes to certify the facility. And ultimately, once we have a U.S. facility fully functional, the opportunity will be, of course, servicing U.S. customers. We'll be able to move some production from Canada into the U.S., freeing up some capacity in Canada for Canadian projects. We have a lot of Canadian utilities that are looking to source Canadian content, and we will be very well positioned to answer their requirements. So all in all, very positive and upbeat on my part on what's going on there.

[Operator Instructions] Our following question is from Michael Tupholme from TD.

Question on the restructuring within the ties business. You mentioned 2 sites that are going to be idled. Is it specifically those 2 that gets you to this $10 million to $15 million of savings? Or are there additional opportunities or additional restructuring options contemplated as well?

So the savings Silvana mentioned, the $10 million to $15 million is associated to those 2 facilities, so a treating plant and a finished good -- or sorry, a raw material green tie consolidation yard. As I also mentioned in my remarks, it's an ongoing process. We're evaluating other opportunities. But for the time being, this is the adjustment we deem necessary. We have enough depth in our network to be able to accommodate the production or even a spike in demand if that would come in the coming years. We've seen the industry go up to 24 million ties. And today, it's maybe sitting around, I want to say, the high 19 million. But if there would be a spike at one point in the future, we definitely have the capacity, even though we're idling these facilities, within our network to be able to address the demand. So, obviously, with that information, you can understand that it was -- it's not an easy decision to make, obviously, because it impacts our employees. It impacts people that work for us. But from an operational and financial perspective, it made a lot of sense.

No, that makes sense. And then just as far as the restructuring charge, I realize it's largely noncash, but sort of did you quantify what we should expect that to be in the second quarter, Silvana?

No, we have. We're still working on those numbers. Obviously, there's -- when we talk about the noncash, it's really the write-down of the assets. So we're just trying to figure out which assets basically we can reuse in the network. So there's still some work to be done there.

Okay. Got it. As far as the pricing headwind in the poles business, you mentioned it was largely mix. Can you -- what happens as far as the prior year comp from a mix perspective as we move into Q2 and then through the balance of the year? Is that dynamic still at play from a mix perspective? Or is it more just the industry headwinds on the pricing side? Just trying to understand how we think about pricing and the composition of pricing, particularly or inclusive of the year-over-year comp as we move through the year.

So for Q1 of '25, it was a very unique situation with unusual revenue stream for utility wrapped poles. That does not come into play following Q1. So it's back to a normal comparison. So there's -- we would have that mix effect to explain the delta between profitability year-over-year for the balance of the year.

Okay. I guess as we move through the year, though, so that goes away that part of the headwind. But at the same time, you mentioned that from a volume perspective, the comps get tougher. So there's sort of an offset there.

Yes, exactly.

Okay. Also wondering if you can just -- I don't think it's been asked it, just talk a little bit about M&A opportunities. Obviously, you've got a lot on your plate with the Locweld expansion, the U.S. lattice expansion, closing facilities in ties. But just are you still focused on potential M&A opportunities? What does the landscape look like? Is there anything that we should be thinking about on that front?

Well, thank you for recognizing that we've got a lot going on, and we do. But fortunately, we also have a Vice President of Business Development. So he is dedicated to the pursuit of M&A or -- and finding new opportunities. So we still have a lot of interest. We have, I would say, a healthy pipeline of projects ahead of us in our traditional wood treating, railway ties and utility poles and as well on the steel transmission side, I would qualify it in that broader market, which, if you remember at our Investor Day, we had talked about an addressable market of a total of CAD 5 billion annual. So definitely, that's part of our strategic priorities as we were discussing here earlier in our prepared remarks. So definitely, our VP of Business Development has all of those 3 in a line of sight and working on some projects.

And then, obviously, I can't promise the timing on those. They have -- each project has its own cadence, but I would be very, very happy if we could execute on some of these in the next 12 months.

Our following question is from Maxim Sytchev from National Bank of Canada.

Eric, I was wondering if it's possible to get a bit more color on the state of the lattice market in the U.S. And I guess, any incremental data points you can point to? And if it's still the case that sort of all the end product is coming offshore still?

A lot of articles have been published and they keep on a regular basis about the -- I want to say the effervescence in the electrical grid in North America. So I think from our standpoint, we still see that market being very dynamic. We keep having discussions with our customers that are looking to invest and execute on large CapEx projects, a lot of transmission projects in there.

I was mentioning earlier in the other question, we have seen an increase in visits or certification visits from customers at our facility here in Quebec, a lot of interest from North American utilities to buy a bit more -- well, Canadian for Canada, but on the continent for our U.S. customers. A lot of interest for our U.S. business or our U.S. facility that's getting built as well. So I think that is also prompting the interest in how we're operating.

And to your point, you were asking about the offshore, they remain in play. We know the players. We keep having discussions with them. We share some notes to make sure we understand what they're up to. And I think they appreciate that we have a bit of a unique service proposal, product offering in North America, having a footprint closer to the projects, and that's what our customers appreciate. I guess that's about our thoughts at this point, Maxim.

Okay. No, that's helpful. And then one quick clarification. Is there any pinch point around preservatives given sort of all the geopolitical issues on kind of input costs or it's just immaterial?

I don't see -- not necessarily a pinch point. The only thing I guess I want to point to since you're bringing it up is, there could be a bit of headwinds because of fuel cost increases. So, obviously, our oil-borne preservative would have a bit of an impact and also on fuel could impact our carrying costs, our distribution costs. Nothing material for now, all built in the pass-throughs we have in our contracts with our customers. So nothing of great concern at this point. But, obviously, we're monitoring the oil price situation, well, in North America because it's closer to normal, but it's a global impact, I guess. But that would be my thoughts there on your question.

Our following question is from Jonathan Goldman from Scotiabank.

Just a few qualifying ones on my end. I think you called out the mark-to-market item on stock-based compensation this quarter being a $5 million headwind. I just want to know what was it last year? And just to be sure, you're not adjusting either of those amounts out of adjusted EBITDA.

Thank you for the question, Jonathan. I'll let Silvana answer the question.

Yes. So to the second part of your question, Jonathan, is that no, we are not adjusting any of the mark-to-market items. And last year, it was actually a negative -- a small negative amount under $1 million.

Okay. So $5 million this year, $1 million-ish last year. My second question -- sorry?

The Q1 last year was a net negative.

Yes, exactly. And then another one not to beat the dead horse here on the pricing decline in poles. But of that 6%, how much of it was due to mix versus competitive dynamics? And if we're thinking about pricing for the rest of the year, if we back into the competitive element in Q1, is it the expectation that, that's going to accelerate and get worse through the balance of the year as more capacity comes online?

So the Q1 impact is almost probably all -- not probably, it is all mix. So excluding that factor, I think we see the pricing pressures being relatively stable year-over-year. So maybe there will be some headwinds for sure, a couple of percentage points, but no more than that and not as significant as the first quarter.

Okay. That's good color. And then maybe one more for you, Silvana. I think you talked about it earlier in the call on working capital, it was specific to Q1. But for the full year, how should we think about investment in working capital?

Yes. So I've said in the past, kind of our rule of thumb is always that for every incremental sales dollar, we need to invest $0.40 on that dollar to support those sales. That said, as I mentioned, with perhaps more opportunities to do TSO, that might be lower because, obviously, that is less capital intensive. So for the year, I still think there will be a net investment of probably less than $50 million.

We have no further questions in the queue. Thank you.

Thank you, Vincent, and thank you, everyone, for joining us today. We look forward to updating you when we release our second quarter results. Until then, have a safe and enjoyable summer.

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

Good morning, and thank you for standing by. Welcome to Stella-Jones Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded on Thursday, February 26, 2026.

I will now turn the call over to David Galison, Vice President, Investor Relations of Stella-Jones.

Thank you, Jenny, and good morning, everyone. Earlier this morning, we issued our press release reporting our results for the fourth quarter and full year of 2025. 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 SEDAR+. As a reminder, all figures expressed on today's call are in Canadian dollars unless otherwise stated. Please note that the 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 SEDAR+. These documents are also available on the Investor Relations section of Stella-Jones website at www.stella-jones.com. Additionally, during this 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 other 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 SEDAR+.

Lastly, we have prepared a corresponding presentation, which we encourage you to follow along with during this call. I'll now hand the call over to Eric Vachon, President and Chief Executive Officer of Stella-Jones, for a strategic business update, followed by Silvana Travaglini, Senior Vice President and Chief Financial Officer of Stella-Jones, who will provide a more detailed financial overview. Eric, over to you.

Thank you, David. Good morning, everyone, and thank you for joining us today. 2025 was a pivotal year for Stella-Jones. We delivered solid profitability as we advanced our value creation strategy. By completing 2 strategic acquisitions in the utility space, we have propelled our mission forward to become the supplier of choice for our infrastructure customers. The additions of Locweld and Brooks have broadened our total addressable market. We are now leveraging these new growth avenues to expand our steel Ads tower business in the U.S. as we actively execute the growth priorities outlined at our Investor Day. The results reported today reflect the strength of our infrastructure-focused strategy and our team's unwavering commitment to long-term value. We successfully delivered top-line results within our latest guidance and met our 3-year commitment to return $500 million to our shareholders. I'm especially proud of our team for delivering EBITDA margins over 18%, ahead of guidance, amidst a year where all 3 of our product categories faced softer demand.

This full-year strength was supported by our performance in the final quarter of the year. As we look at the fourth quarter highlights, our results were bolstered by the volume growth in wood utility poles and the contributions of our newly integrated steel structures and crossarm businesses. This helped offset the lower volumes we saw in railway ties. Although ties sales came in below our forecast, the tie business delivered a solid margin performance and remained a resilient contributor to our overall profitability and margin strength. The operational investments to double our steel structure production capacity at our [ Kanik ] facility are well underway. We are on track for completion by mid-2026 with the full production ramp-up in the second half of this year.

Building on this momentum, we are taking an important step forward by establishing a U.S.-based manufacturing footprint for steel flattish towers. We will invest approximately USD 50 million to build a new greenfield facility in the Southeast United States, adding approximately 20,000 tons to our total production capacity. The selection is down to a few sites that offer superior access to skilled workforce and proximity to key galvanizing partners. With commissioning expected by late 2027 and full 3-shift capacity by the end of 2028, this facility will provide the scalability required to meet the growing demand of U.S. utilities.

In the fourth quarter, we also marked our entry into the pole fixtures and accessory market with the acquisition of Brooks. By adding these complementary products, we are better positioned to serve our utility customers and capture new cross-selling opportunities across our network. This acquisition is a perfect example of our strategy to leverage existing customer relationships for incremental growth. Notably, we completed this USD 140 million transaction without increasing our debt leverage, a result that underscores the strength of our cash flow and our disciplined approach to capital allocation. Integration of the Brooks acquisition is well underway and is progressing in line with our expectations.

From a sustainability perspective, we are excited to share that following year-end, we acquired a 1/3 equity interest in [ LizzlieBay ] Lodging, forming a partnership with local British Columbia First Nation in a forest harvesting company. This approximately $5 million investment will secure a dependable long-term supply of utility pole fiber, specifically for Western Red Cedar and Douglas Fir. It targets large transmission poles, a critical resource that is increasingly in short supply. We view this collaboration as an important advancement in our commitment to building mutually beneficial partnerships with indigenous communities in Canada.

I will now turn to a performance overview of our main product categories. Starting with utility products. After navigating a period of softer demand for utility poles that began in Q3 2024, the pace of purchase for certain customers accelerated in Q3, and that momentum carried into the fourth quarter. The volume growth was driven by our contract business, a direct result of our well-executed multiyear strategy. We have strategically expanded our pole business and focused on partnering with customers who value long-term supply security. We are now seeing the impact of those new contracts in our sales figures as well as the pickup in activity from some of our long-standing customers. Our contract business, which represents over 75% of our utility pole sales, has helped mitigate the impact of softer and more competitive spot market. While spot pricing and volume pressures persist, the improvement in volumes in the latter part of the year allowed us to deliver full-year sales growth in the low single-digit range, consistent with our outlook. This positive volume trajectory has created a tailwind that carries us into 2026 with confidence.

For our railway tie business, 2025 was a year of transition. We navigated the impact of the Class 1 railroads' shift to in-house treatment, several project deferrals, and a more aggressive competitive landscape. As a result, the volume gains anticipated for the fourth quarter did not materialize, and we ended the year with organic sales down 10%, below the mid-single-digit decline guidance. I'm, however, encouraged by the team's discipline. Despite these top-line headwinds, we focused on what we can control, improving margins and maintaining stable profitability.

Looking ahead, we expect a more modest growth environment for our tie business. Our Class 1 customers are currently navigating complex landscape of potential industry consolidation and macroeconomic headwinds, sentiments they have echoed in their recent commentary. While we expect this may result in relatively flat railway tie sales in the near to midterm, it does not change our long-term outlook. We remain focused on positioning the business to capture long-term growth, and we see a pipeline of opportunities ahead in both Class 1 and commercial markets. 2026 also coincides with the cycle of Class 1 contract renewals. We view these renewals as a strategic opportunity to further align our offerings with our customers' evolving requirements.

By leveraging our commitment to quality, availability, and service, we are positioning ourselves as a partner of choice for Class 1 railroads. At the same time, we will pursue growth of our commercial business. With the uncertainty in 2025 around government funding resolved, we expect more commercial project activity in 2026, and we are ready to meet this demand. Our 3-year outlook remains unchanged, and this is supported by a track record of resilience. Even with the pullback in 2025 sales, railway ties delivered a low single-digit sales growth over a multiyear horizon, underscoring the recurring nature of this maintenance-driven business.

Our residential lumber business demonstrated remarkable resilience this year, delivering a stable performance despite an industry backdrop of significant pricing pressures and muted demand. This is a clear validation of our value-added business model and the strength of our strategic alliance with our primary customer. While volumes were impacted by the market slowdown, we delivered the same sales performance as in 2024 due to higher pricing. This allowed us to recover the higher cost of inventory procured in early 2025. As we move forward, we have full confidence in our ability to deliver on our long-term targets, keeping this business steady within the $600 million to $650 million revenue range.

In summary, we recognize that growth is rarely linear, but long-term fundamentals of our business remain intact. We are well positioned to benefit from the solid tailwinds in our utility products business, which represents over 50% of our sales. This, paired with our strategic positioning in railway ties and the unique value proposition of residential lumber, reinforces our confidence to deliver on our 2026 to 2028 financial objectives.

With that, I will now ask Silvana to provide a more detailed overview of our fourth quarter and year-end financial results.

Thank you, Eric, and good morning, everyone. As Eric stated at the top of the call, we ended the year with sales in line with our latest guidance. Sales for the year were up $23 million to $3.5 billion, largely driven by volume gains for wood utility poles, the contribution of our recent acquisitions, and the favorable impact of currency conversion.

These drivers were in part offset by volume headwinds for railway ties. For the fourth quarter, organic sales declined 4% compared to the prior year. In Q4, we saw strong volume momentum in utility poles, which delivered a 9% organic sales growth. While the strong performance for Coles was tempered by softer volume for railway ties, the contribution from our Locweld and Brooks acquisition and the currency impact resulted in total sales that were relatively stable compared to Q4 last year.

For Utility Products, we generated $447 million in sales in the fourth quarter, up 16% from $385 million in the same period last year. The 2025 acquisitions of Locweld and Brooks contributed 7% to the overall sales increase, while volume gains explained the organic sales growth of 9%. Q4 pricing remained relatively stable as softer spot market pricing was largely offset by higher contract pricing. For volumes, we continue to benefit from the incremental commitments that we secured back in 2023 and 2024 and from an increase in purchase activity by some utilities. Volumes in the second half of the year were up 8%, resulting in full-year sales growth in the low single-digit range, consistent with our outlook.

Sales of railway ties were down 16% or $31 million in Q4 to $162 million, largely attributable to lower sales volumes. The timing of shipments, along with more competitive pressures, impacted volumes more than expected, resulting in full-year organic sales declining 10% compared to the mid-single-digit decrease previously disclosed. For the full year, our railway tie volumes were also impacted by a Class 1 customer now treating railway ties at their own company-owned facility, as well as by delays in the execution of some non-Class projects. Despite lower volumes, the margin performance of railway ties remained solid.

Residential lumber sales were also down 14% in the fourth quarter to $80 million compared to a particularly strong Q4 last year, which benefited from unseasonably warm weather. The decrease was primarily volume-driven as pricing remained relatively stable. For the year, despite unfavorable weather conditions in the first half of 2025 and general market softness, pricing remained above 2024 levels, supported by elevated inventory costs from purchases made earlier in the year. The company ended 2025 with residential lumber sales of $615 million, comparable to the $614 million generated last year.

Turning now to profitability. The business continued to generate strong EBITDA and robust margins in Q4, reflecting solid execution and the resilience of our business. EBITDA in Q4 increased to $122 million, and we delivered an EBITDA margin of 16.8% compared to $115 million in the fourth quarter last year and a margin of 15.8%. The uplift in EBITDA and margin was attributable to increased volumes of utility products, which carry a higher margin and a better profitability performance from railway ties. For the year, we maintained a robust EBITDA margin of 18.1%, excluding the insurance gain, consistent with our performance over the past 2 years.

Moving on to cash flows. Q4 cash flows contributed to the strong full year of cash generated from operations of $557 million and free cash flow of over $400 million. Our robust cash generation in 2025 reflected our disciplined focus on working capital, particularly as we optimize our inventory levels. Over the past 12 months, we deployed the cash generated to make 2 strategic acquisitions totaling $260 million while continuing to invest in the safety and reliability of our operations. We also returned $158 million to shareholders in 2025, achieving our 3-year $500 million commitment, returning a total of $506 million to shareholders. By reducing our share count by over 4 million shares since 2023, we have successfully driven a 13% EPS growth, outpacing our growth in both sales and EBITDA over the same period.

In 2025, we increased the dividend payout by 11% to $1.24 per share. And yesterday, the Board of Directors announced a 10% increase in the company's quarterly dividend to $0.34 per share. This marks our 22nd consecutive annual increase, which speaks to our commitment to shareholders and the confidence in the long-term fundamentals of our business. We continue to view share buybacks as a valuable capital allocation tool. As such, during Q4, we initiated another normal course issuer bid to repurchase up to 1.5 million shares. Given the company's growth strategy, we will continue to consider buybacks based on the timing of M&A activity, and we will return excess capital to shareholders when it makes sense.

We ended the year with almost $635 million in available liquidity and a net debt-to-EBITDA ratio within our target range. These metrics underscore the strong cash-generating power of our business. Even after deploying approximately $260 million for the acquisitions of Locweld and Brooks, our financial position remains robust, demonstrating our ability to fund significant growth while maintaining a strong balance sheet to support our long-term objectives.

In summary, we are very pleased with our performance and the strategic evolution of Stella-Jones this year. We have made significant strides in our value creation strategy, underpinned by 2 pivotal acquisitions and solid volume momentum in our utility pole business. As we scale our steel structure capacity and launch our first greenfield manufacturing facility in the U.S., our focus remains on the long term. Backed by a strong cash flow profile and a healthy balance sheet, we have the financial flexibility to continue pursuing both organic and inorganic growth. Stella-Jones has never been better positioned for sustained success.

I will now turn the call back to Eric for his concluding remarks.

Thank you, Silvana. Exiting 2025, we are stronger and a more diversified organization. We head into 2026 with a broader infrastructure offering and a clear road map to growth. We will scale our steel structure business, leverage our customer-focused approach and contractual strength to navigate evolving market dynamics and continue to reinforce our position as a supplier of choice for North America's infrastructure. We also remain committed to identifying strategic growth opportunities that enhance our portfolio and extend our market reach. We have the right strategy, the right team and a solid financial foundation to continue driving long-term value and ensure Stella-Jones continues to be a leader in the market and deliver exceptional value for years to come.

I want to thank our employees for their dedication and hard work and our shareholders for their continued trust as we move into this next chapter of the Stella-Jones story. Finally, we look forward to connecting and exchanging with investors at the 2026 Raymond James Institutional Investor Conference in Orlando, Florida, which will be held next week. This concludes today's prepared remarks. I will now open the line for questions.

[Operator Instructions] Your first question is from Benoit Poirier from Desjardins Capital Markets.

First question is on railway tie. When we look at the volume reduction in Q4, would it be fair to say that it was mostly driven by some special purchase made by some Class 1 customer that did not repeat in Q4?

Benoit, to a slight extent, yes. As I commented in my remarks, we did have a shift of a few commercial orders that got pushed into early 2026. To your point, yes, there's been a slight impact of that year-end preordering effect that you're referring to. And obviously, a bit more competitive landscape as Class 1s have tightened up a bit their maintenance programs, and there's a lot of competition in the market with inventory to sell. So we have seen some competitive -- some competition or enhanced competition in the market.

Okay. And when we look at 2026 for the segment, given the RTA conference is calling for flat volume, Class 1s reducing overall CapEx, and it looks like there's more competition. Could you even deliver negative organic growth for railway ties in 2026?

Our view is flat. I sort of agree with the Railway Tie Association, and how we're looking at the orders that are coming in and what Class 1s are communicating to us, we believe it will be a flat year.

And utility pole, great performance in the quarter. Could you walk us through the -- what could be some reasonable expectation in 2026? You finished at 9%. And given that you're going to be lapping very easy comps in the first 3 quarters of the year. Just wondering if there's an opportunity to show a higher single-digit growth for 2026 for utility pole.

So let's talk about the infrastructure products. So definitely for the -- well, utility poles, so slight distinction versus utility products. So if I exclude the steel business and the crossarm business, we've been guiding to mid-single-digit growth in our guidance. I think that still holds very well. As I mentioned, we saw some good momentum in Q4 or the back half of last year. It's carrying into this year. And it's a greater diverse group of customers, actually, sort of stepping up right now when I compare to the last few months of 2025. If you layer on top of that, obviously, steel structures and crossarms, yes, we definitely -- we expect a very good year here in 2026. We just talked about the railroad business. So for Class 1 is flat. It's -- we do some very positive dynamics in the commercial markets. We understand that the federal funded CRISI grants are still in effect here for at least a couple of more years coming our way. And we're definitely seeing our customers positively react to available funding. So I remain quite optimistic about what we can realize in 2026.

And last one for me on the steel side, Eric, we've seen several transmission line projects with Hydro-Quebec, Hydro One, BC Hydro that will likely involve Lattice steel products. Any thoughts whether your upcoming capacity in Quebec would be enough to meet those requirements? And with respect to the new facility in the U.S., with $50 million of CapEx, could you -- what should we be thinking in terms of potential revenue contribution and maybe the timing around the ramp-up? Yes.

So as I mentioned, our CapEx plan is progressing very well in the Quebec facility. So roughly, when we acquired the facility, we mentioned that it was a 10,000-ton business. If we round up numbers, it will be 150 this year and 20 in 2027. Doing the math of what we had disclosed on the sales when we acquired, you could think about $100 million in total sales for the facility. Our plans for the U.S. is a copy-paste of the footprint. So you could extrapolate along those lines. On the demand side, things are going extremely well. The capacity in our Quebec facility is sold out for '26 and then sold off for '27. So definitely -- and we're talking with customers now about projects in '27, '28 up to 2030. So the new facility will actually be very positive for us. We welcome because we do think we'll be able to sell that capacity. And it would ultimately give us an opportunity to shift some Canadian production destined for U.S. customers into the U.S., very favorable for our customers. But then to your point, freeing up to support Canadian needs as well. So we have a few cards to play here to optimize and fill up this capacity, and we're very excited with this new project.

Your next question is from Maxim Sytchev from National Bank Capital Markets.

I was wondering if it's possible to get a bit more color on the working capital movements because I think we had a bit of a free-up on inventory in 2025. And as we're looking into 2026 and volumes being pretty healthy, how, I guess, should we think about that interplay this year?

So Maxim, this is Silvana. Basically, I think you could look at it as we have kind of guided in the past, where the growth that we would be seeing in the wood treating business, you would have to assume that we would have to invest about 40% of the sales growth in our wood treating business as additional working capital. So depending on the assumptions that you put there, I just want to make sure that I did mention wood treating business because obviously, the investment in the working capital for this deal is different, right? Brooks is pretty much a stable business that we just acquired. So I just wanted to make sure that that's sort of taken into account as those calculations are done.

And then Eric, I was wondering because I think in the past, obviously, you mentioned that there's going to be some cross-selling opportunities between Locweld, Brooks, et cetera. I'm just wondering if you could maybe mention some of the early potential discussions with clients, any early wins? Anything you can telegraph that would be great.

With pleasure, Max. So we have laid out a plan, and then we're completing a bit of a restructure of our sales team. Obviously, we don't want 3 different salesforce calling on our customers from the same company. So we've restructured our sales team, branding Stella-Jones now with a broader product offering, introducing the specialists, and opening doors. So the team in [ Cardiac ], formerly Locweld has benefited from the introduction to several new customers in the U.S. And these customers have engaged very positively, have certified the Quebec facility to produce for them. So back to my earlier comment of the capacity being sold out very quickly. So that has been very positive. Same for the crossarms, we're making introductions of the Brooks sales team to customers that they were not necessarily involved with in the past. Brooks didn't have a presence in Canada, and we're actually now quoting and bidding some business in Canada, which I find is very interesting to be able to expand that offering into our Canadian footprint.

So good indications so far. And ultimately, if we need to, we can actually bring some of the treating in Canada at some of our facilities to better support some customers, but all very positive indications so far.

And then one quick one for Silvan. I mean, given the fact that we're greenlighting a facility in the U.S., is it possible to get an updated CapEx number for 2026 and 2027 by any chance?

So the regular CapEx, as you say, remains between the $85 million and the $95 million. So in 2026, we would need to add, as you know, the Locweld facility. We had said $15 million. Half of it was spent in 2025. The other half will be completed in 2026. And for the U.S. Lattice Tower, half of it is probably going to be completed in 2020 -- in 2026, and the second half in 2027.

Your next question is from James McGarragle from RBC Capital Markets.

I just had a quick question on the Tie business. Koppers today, they flagged some headwinds, which you talked about in your opening remarks. But they also alluded to what seems to be like a significant share gain, maybe a customer win. But then they also talked about to get that, they had to enact some pretty meaningful price reduction. So I guess with that, it seems like you have good line of sight to 2026. But can you just comment what you expect in terms of the outlook for pricing longer term as a result of some of your -- these competitive actions by your competitor?

Thank you for the question, James. So the comment you're making actually refers to one of my earlier thoughts when I'm referring to competitive dynamics in the market. So, to your point, there's some business that we did not win because the pricing was not attractive for us. As I also highlighted, although our top-line number has declined in the fourth quarter, we maintained dollar profitability for our railway tie division. And obviously, because of the sales dynamics, the percentage has increased. So we remain very disciplined in how we approach the market. We've got very strong relationship with our customers. And our competitors have their own game plan, I guess. And then we leverage what we sell based on the quality of the service and the availability of our products, and fully confident with our strategy, and I don't plan on giving up some return on our investment for the railway tie division. It's a key metric for our organization. I do believe our shareholders care about the returns that we provide to them as a whole. And obviously, the railway tie division is part of that dynamic. I guess that's how I view our business.

Now that's clearly evident in your returns on invested capital that you guys put up. And then just on the utility poles, it seems like maybe coming a little bit higher than the range you put out at your Investor Day in 2026, just given how strong Q4 was, and that seems like that strength carrying into early in the year. But can you just provide some additional insights into the spot pricing? It seems like it's a little bit weaker. How much weaker is it versus contract rates? And when you talk to your customers about these very long-term contracts, is there any pressure by them to say, hey, spot pricing is this? Can you work with us a little bit on the contract side of things?

So for the full year '25, the spot market is maybe 7% to 10% lower. But then again, the spot market is selling a treated wood pole, and sometimes the customers pick it up when we deliver, versus what we offer to a contract customer is minimum inventories, logistics services, finished good yards. So there's lots of service that go into it. So it's not an apples-to-apples comparison when you look at the spot market versus what we do for our contract customers, because of the long-term relationship, we're ready to stretch ourselves out. And we will go that extra mile, if you want. And the security of supply is key for many of our customers, especially for storm events, spikes in demand. For simply logistics reason, we have customers coming to us asking for peak volume. And we had some of that in the fourth quarter when one customer came to us saying like, look, I'm setting up logistically, can you deliver this type of volume in the last like 3, 4 years of 2025, which we did because we had the depth of inventory. So we were able to step up. But those are the things we do because we have that availability and we stock for our customers. So to explain your question on the percentage, we had a bit of a peak with the customer, although we're seeing a lot of customers get active here in 2026. So that might explain the above guidance number you're referring to. And then the flip side is trying to compare spot to contract is a bit difficult because it's not the same offering.

[Operator Instructions] Your next question is from Martin Pradier from Veritas Investments.

So I have 2 questions. The first one is in terms of utility poles. When you're saying single digit, does that include Brooks and the steel division? And if you could break down a little bit, how much will be the utility poles without the 2 acquisitions? And how much will the 2 acquisitions, each of them grow -- your expectation are they going to grow like 10%, 15% or each of them, if you can give us some color on that breakdown?

Certainly, thank you, Martin. So the guidance we're giving the mid-single digit is for wood utility products only, distribution and transmission poles. With regards to the 2 other divisions, as we had mentioned, Locweld's average out for the full year at full capacity was going to be like, let's say, $100 million in growth. For the Brooks business, we're still in the early days, but we bought this at USD 85 million sales annually. I won't put forward a percentage because we don't segment to that detail. You'll see the acquisitions, but at one point, they will be reported in the utilities product, it will get difficult to carve out. But as I just explained to the previous caller with our intentions to expand into Canada and offer to other customers, we're definitely hoping at least that mid-single-digit growth, I would say, at the minimum.

That gives us some idea. And you benefit a little bit on the residential side because you bought the wood at a fairly price -- good price last year, and then you maintain that in the contract. Now this year, I'm guessing the wood is going to be bought at much lower price because you're buying around this time. So how much of a difference that would be.

Well, it's a great question. So obviously, the lumber is a commodity, and it fluctuates over time. And if you track lumber prices for the last 5 years, so they do vary significantly. That's why we bookend the sales of the division from $600 million to $615 million. So you're right, we should see some pricing compression here in the coming year. But I would say relatively marginal. And then talking with our main customer, they do expect some growth in the category of products that we service them, it should be an offset. So still very confident of the similar range in pricing. And then we'll see where the market goes. Lumber prices have been slightly upticking here since the beginning of the year. We have a few months ahead of us, but we'll be replenishing well. We replenish every month. But as our inventory average cost trends up if the market keeps going, then we'll be adjusting that pricing. But for now, I guess my first part of my answer holds.

Your next question is from Michael Tupholme from TD.

Can you help us understand the company's CapEx profile over 2026 and 2027? I know you've given some information about maintenance CapEx annually at your Investor Day. But then there was also this announcement today about USD 50 million for your new Lattice facility. So just wondering if you can talk about CapEx expectations for each of the next 2 years, how that breaks down across maintenance versus growth? And then what sort of the phasing of that CapEx spend over the 2 years looks like in terms of the quarterly progression?

Certainly. Thank you, Michael. So I'll walk you through it. So for -- well, for 2026, we start with our regular CapEx allocation, maybe for the upkeep of asset quality, health and safety enhancements, but also productivity gains. And as we explained at the Investor Day, that was sitting at the, call it, $85 million to $95 million bracket. The Locweld investment is over and above on that. We had disclosed a $5 million investment initially. $7 million of that was done in 2025. So this year, '26, we expect like, let's say, $7 million or $8 million to complete the Locweld project, which will be done by midyear. Then the U.S. Lattice facility, we probably think it's about 50-50 -- the USD 50 million will be split between '26 and '27. So call it, USD 25 million for each of those years, and I'll let you take your FX rate to convert it.

Just -- sorry, just to clarify, the Locweld remaining spend is concentrated in the first part of 2026 here?

Yes, 100% because we plan on being complete by midyear to be able to ramp up -- have the full effect of the new capacity for the back half of the year.

Yes. And then the USD 50 million that's split roughly evenly, should I just sort of assume that's kind of evenly spread over the quarters for both years, with a bit of a ramp-up period here, I guess, in the first part of the year?

So if you want to trend it like we're announcing it today, obviously, there's deposits that -- you could probably spread it over, let's say, Q2, Q3, Q4 for this year. And for '27, you could do Q1, Q2, Q3 because I do expect the ramp-up to start in that back half of 2027. I guess that would be my best guidance there.

And then I apologize if this was already addressed. But just as it relates to the railway ties business and the decline you saw there, it sounds like it's all shipment-driven. But did you give a breakdown between pricing and shipments for that decline? And can you comment on that if you haven't already?

Yes. It was all volume, Michael. Slight gain on pricing because obviously, we did have maintained or improved margins on a percentage basis. As I explained earlier, the margin dollars remained the same, although we had lower sales, but it's all volume.

And is there any -- but I guess the competitive pressures you're alluding to is what's allowing this volume to sort of go elsewhere as opposed to staying with you. But is there any sense as to how that looks going forward? Is there any letup in that competitive dynamic? Or how do we think about that going forward?

So we've guided -- so I guess, as I mentioned, 2025 was a year of reset for the railway side. I want to say this is behind us. We guided earlier in the call that flat for 2026. There's a bit less on the Class 1 side, not much, but very, very positive on the commercial side, very active bidding going on right now for projects grants in the U.S. have been reconfirmed here for this year and actually for a couple of more years. So it's creating a lot of -- giving a lot of confidence for our customers to invest in their infrastructure. So we were calling it flat for now. And obviously, we're waiting to see what happens -- understand a bit more with consolidation in the market. What is that free trade deadline going to look like, and the impact. And a lot of our Class 1 customers have referred to these 2 events, if you want. So that's why I'm calling them out, because it seems to be a theme with our Class 1 customers.

Your next question is from Hamir Patel from CIBC Capital Markets.

Eric, I just wanted to follow up on the tie side. So I mean copper is clearly pointing to some significant share gain with one customer. You're pointing to relatively flat tie sales this year, maybe a bit softer on the Class 1 side. So could you just confirm you haven't lost a major book of business with the Class 1? Is that fair to say?

Yes. Yes. We saw a readjustment in Class 1 contract in the back half of the year, but I would say that's behind us here going into '26.

And then, just given that they've clearly been more competitive on price, I know your agreements are sort of staggered, but how many of your Class I agreements are coming up for renewal this year, and how many in '27?

We have 4 this year and 1 in '27.

And the timing of when maybe if any adjustments are made there, would that really affect more '27 pricing?

Yes. Most likely, it will.

And just turning to res lumber. We've seen Home Depot and some of the other R&R players in the U.S. kind of point to a flattish market this year. I know Home Depot also pointed to negative comps in Canada, at least in Q4. What are your customers' expectations around volumes for res lumber in 2026?

Yes. So well, specifically for what -- so obviously, treated lumber, we don't sell the general lumber market. It's low single-digit growth. We've seen -- well, our main customer has invested a lot in the department that we service, giving us more base to sell products or bringing in different types of products such as composites that we distribute, but now they're holding some more stock in the store. So there is a good belief from our customers, and it's true on the dealer side that we service that we could see a year with a small pickup, but low single digits.

And just the last question I had, Eric, I know the multiyear EBITDA margin objectives, 17.5% to 18.5%. Would you expect to be near the higher end of that range this year, just given you're coming off 2025 that was closer to 19%?

So just -- well, just to call it out, the higher percentage you see does have an insurance gain in there, right? So if you adjust for the insurance gain, the EBITDA margin for this year is 18.1%, so pretty much in the middle of that guidance. So I don't know if you picked up might not have time to read through the whole MD&A it's still early on the West Coast. But I'll say, if we adjust for that insurance gain, it's sitting at 18.1% in the middle of the range. And really happy we actually delivered 3 years in a row at 18%. We're snacking in the middle of that guidance, which, I guess, is where most likely analysts, yourself, and colleagues will sort of end up for now until we get better color on the year. But yes, that's pretty happy with our results.

Okay. And any maybe unusual weather-related headwinds in Q1 in the U.S. to point to?

So far, I mean, there's been some snow events, but nothing to impact our business per se. Q1 is always obviously a slower quarter, although we're seeing some good tailwinds from our Dole business going into the next year. The different ice storm events that we saw in the Southeast, Texas, for example, pulled lines down, but not really utility poles. So it's pretty normal business for us with a bit of obviously an uptick because of pickup for customers to do extra maintenance.

Your next question is from Jonathan Goldman from Scotiabank.

Eric, if we look at the waterfall that you guys put out with the IR Day, going from $3.5 billion of sales to $4 billion in ' 28. Just a few questions here. The capacity expansion that you have going on there in the U.S., is that factored into this $4 billion? And if not, would it increase the upper end then as that comes online at the end of '27?

Yes. So the -- I guess 2 parts to your question. One, it is not included in our guidance, and it would definitely be positive, exactly would be actually -- sorry, it would be in the following year, right? Because if it's online at the end of '27, we'd see most of the benefits in '28.

And then maybe moving to railway side and not to beat a dead horse here, but kind of lower this year than expected, you're calling for flat in '26. It seems like you kept the guidance of 2% to 3% annual CAGR. So that does imply a reacceleration, I guess, in '27, '28. I mean the industry is pretty flattish generally. What gives you confidence that you're going to see the growth come back at a higher level to compensate for the shortfall this year and last year?

It's a good question. Thank you. So as I mentioned earlier, we have 4 contracts being negotiated this year. And we're looking at different opportunities to increase our volume with our Class 1 customer base. Commercial business will remain strong until '27, '28 as far as we can see right now, with the federal grants being available. And I do think once our Class 1 customers have a better understanding of the impacts of industry consolidation, and hopefully, we can normalize or have better line of sight of how the North American free trade agreement will sort of pan out, we should see some greater activity, right? I think the call, but the CPKC who services Canada, the U.S., and Mexico feel that they will get better activity on their network once we have a clear line of sight as where that agreement goes as an example, because other Class have referred to the same phenomenon, I guess the same aspect.

Okay. I guess relatedly then, maybe it's the same answer. I think you're talking about like flattish ties this year, and that seems to be on volume consistent with the industry. But I think going back to Benoit's earlier question, if the industry is flat and there's some competitive dynamics going on, do you see some pricing pressure on top of that could take negative organic growth this year?

Not really. I think with -- so the guidance for the year in the business is, as you said, it is flat. We've actually discussed our pricing -- some pricing adjustments for this year with many customers. Then we have mechanisms that adjust pricing. So obviously, the spot market is one thing, but the Class 1 contract business is pretty per the mechanics of the agreements. And obviously, and I've said it a few times in the past, as we renegotiate these contracts, I'm actually looking for pricing reset just to make sure that we capture inflationary impacts that we've sort of absorbed in the last few years. So that's how I think let's say once we're past this year in '27, '28, we should see -- we should benefit from some better pricing.

I guess one more for me. If we can get an update on capital allocation priorities specifically, maybe you can give us an update on the M&A pipeline and how that's looking today.

Certainly, I'll let Silvana answer that question.

So in terms of the capital allocation, obviously, we talked about on the previous -- with the previous callers, the CapEx. So that is always the first priority for the business, the maintenance, plus these additional 2 projects that we have. We will continue, as we said, the buybacks based on the pipeline of M&A, and the dividend is always that staple that we rely on every year, and that the shareholders have confidence in that we could keep that stable. So I think for now, it's pretty consistent with what we've said, and then I'll let Eric discuss a little bit more the M&A pipeline.

Thank you, Silvana. Obviously, not much we can disclose, but definitely active in talking with potential targets in our new addressable market and our traditional wood treating business on the infrastructure part, obviously, we keep having discussions, healthy ones, and I would like to think that we could execute some acquisitions in the coming year. Always difficult to promise a deadline on these things because obviously, you have to dance a while with your new partner to understand the dynamics of the transaction. But yes, we're definitely still active in looking at acquisitions.

We have no further questions in the queue. Please proceed.

Thank you, Jamie. And thank you, everyone, for joining us today, and we look forward to updating you when we release our first quarter results.

Thank you. Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect your lines.

Good morning, everyone. My name is David Galison. I'm the Vice President of Investor Relations at Stella-Jones. Many of you may recall our inaugural Investor Day in 2023, where we provided a closer look at the business and the team. Building on the success of this past event and on the strong foundations we've laid, today, we will outline our plans for the future growth of Stella-Jones as a leading supplier to essential infrastructure providers across North America. As such, the presentation today will focus on infrastructure businesses. Now before I turn the floor over to Eric, some housekeeping.

Please note that the comments made today's presentation may contain forward-looking information, and this information, by its nature, is subject to risks and uncertainties. Actual results may differ materially from these views expressed today. For further information on these risks and uncertainties, please consult our relevant filings on SEDAR+. Please also note that all figures are expressed in Canadian dollars unless otherwise noted. During the presentation, 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 the Stella-Jones website and on SEDAR+. With this, I would like to welcome to the stage Stella-Jones' President and Chief Executive Officer, Eric Vachon.

Good morning, everyone, and welcome. On behalf of the entire Stella-Jones team, I would like to thank those joining us this morning, both in person and virtually via webcast. Today, we're going to walk you through our performance and evolution over the past few years and provide insight into the opportunities that lie ahead as we continue to build and grow our business. As you might expect, you will hear from myself and Silvana Travaglini, our Senior Vice President and Chief Financial Officer, but you will also get to hear from our expanded management team, including Kevin Comerford, Senior Vice President, Utility Poles and U.S. Residential Lumber; Pierre Lavoie, General Manager, Steel Structures, who joined Stella-Jones from the Rockwell acquisition; Sylvain Couture, Vice President and General Manager for Railway Ties; as well as Wesley Bourland, our Senior Vice President and Chief Operating Officer; and Rhiannah Carver, Senior Director, Project Management and Sustainability.

I'm proud to be joined by these members of our exceptional leadership team as we share with you our vision of the future. Today, you'll not only hear from our management team, but also from Katherine Duff and Omar Saeed from the Boston Consulting Group, who will provide their valuable perspective on the transmission and distribution industry. Before we begin, I would like to acknowledge that the land that we're meeting on are in the traditional territories of many nations, including the Mississaugas of the Credit, the Anishinaabe, the Chippewa, the Haudenosaunee and the Wyandot people and is now the home of many diverse First Nations, Inuit, and Métis. As an organization, we are committed to deepening our awareness and understanding of indigenous histories and cultures.

We recognize that this is an ongoing journey, and our long-term focus includes creating mutually beneficial relationships and procurement opportunities that contribute to the economic growth of indigenous communities. Over the last 2 decades, Stella-Jones has been focused on becoming a North American leader of treated wood products. We have successfully executed on this objective, driving growth both organically and through acquisition, with sales now approaching $3.5 billion. Building on the strong foundation of our past success, we now turn our focus to the future with a redefined vision, being a future-ready, agile organization committed to serving the utility and railroad industries. This enhances our vision to support our mission to broaden our addressable market, opening new avenues for sustainable growth.

In early September, we reinforced our new vision with an updated brand platform. We -- as we develop this new brand, it enabled us to align as a business on our vision and our mission of supporting infrastructures to connect communities locally and across North America. Before we continue, I'd like to invite you to watch a short video that showcases Stella-Jones brand platform.

[Presentation]

The theme of the video and of today's event is Stand Tall, Reach Wide. We chose a specific call to action because it speaks to the strength, stability and breadth of our current business and our aspirations for growth beyond our traditional product offerings. It also evokes the pride we take in the way we operate, pursuing continuous improvement across all functions and leveraging technology to drive innovation. As David mentioned, in 2023, we hosted our first Investor Day, which focused on communicating the fundamentals of our business and showcasing the strength of both our product offering and our management team. And today's event is designed to build on that foundation. To start, I will share how we have positioned and evolved the business to capitalize on key opportunities. I will then dive into our focused areas for growth and how our infrastructure-focused vision is guiding our strategic path forward.

We see multiple opportunities to leverage our deep customer relationships, expertise and asset base to expand our portfolio and earn a larger share of our customers' wallets. To support the next phase of organizational growth and operational excellence, we strengthened our leadership team with the addition of a Senior Vice President of Corporate Development and the Chief Operating Officer, both of whom who are with us this morning. These key hires are aligned with our long-term strategy to unlock new market opportunities, drive strategic partnerships and enhance innovation while driving operational efficiencies.

Let's take a step back and look at what we've accomplished. Over the last 3 years, Stella-Jones has continued to focus on growing its infrastructure business. Utility poles, railway ties and industrial products represent nearly 80% of the company's sales, up from 69% in 2022. We have built a high-value, strategically located, strong cash-generating business that provides a solid foundation on which to build and allows us to efficiently fund our capital allocation priorities. Our extensive network and strong offering in utility poles positions us well to benefit from the meaningful investments required by our customers over the long term to replace aging infrastructures, meeting growing power demand and increased grid resiliency. And for railway ties, our broad footprint and efficient procurement operations enable us to provide exceptional service to our customers while further strengthening our position and driving increased market share.

Also central to our efforts over the last few years has been the implementation of our enterprise resource planning or ERP system, which we began in 2019 and successfully completed this year. I'm proud to say that our team has delivered the project on time and on budget. This new system plays a critical role in enabling better data-driven decision-making across the organization and supports greater operational efficiencies and scalability.

Let's turn to our financial achievements. Over the last 3 years, we have increased sales by 14%, while expanding our EBITDA by almost 40% and EPS by 45%. We grew EBITDA margins by more than 300 basis points to almost 18%, and we are well on our way to returning $500 million of capital that we committed to shareholders for the 2023 to 2025 period. Over the last few years, we have also invested about $130 million to increase utility pole capacity and completed $350 million in accretive acquisitions, including the recent acquisitions of Rockwell and Brooks. These acquisitions have broadened our reach, enhancing our solution offerings and positioning us to achieve greater penetration amongst customers currently served by our utility pole business. And at the same time, we've maintained a strong balance sheet, kept our investment-grade rating while successfully completing the issuance of our $400 million inaugural bond offering.

Since our last Investor Day, we have also made significant strides in our sustainability journey, including setting targets for greenhouse gas emission reductions and further aligning our leadership's interest with those of shareholders through various initiatives such as the introduction of a minimum share ownership guideline. The company's success is anchored in our team's ability to service the utility and railroad industries with quality products and value-added services. Stella-Jones has established a reputation for timely delivery of products when and where they are needed. In addition to our network of 46 manufacturing facilities across North America, we have made meaningful investments in value-added services such as finished good yards and transportation assets to ensure we can efficiently service customers in close proximity to their operations.

Our expansive network enables us to respond quickly and efficiently to our customers' needs, an advantage that is especially valued when replacing critical infrastructure and one that is difficult to replicate. Our position as a long-standing supplier of choice has fostered a loyal customer base and contributed to our consistent profitable growth and we intend to keep growing. Using our current asset base over the next 3 years, we expect sales to grow at a CAGR of approximately 4% to 5%. We further expect to maintain EBITDA margins in the range of 17.5% to 18.5%. And one new metric that we will be tracking as part of our 2026 to 2028 objectives is earnings per share. We are targeting an EPS CAGR of more than 10% over that period.

I will let Silvana speak more about our targets later this morning. To support sustainable earnings growth, we are focused on targeted capital investment that leverages innovation and technology to drive operational efficiency and deliver enhanced value to our customers. There are multiple areas where we currently -- that we are currently evaluating, and this would include refining core functions such as pole peeling to minimize waste and ensure we can provide larger sized poles that are required by our customers, reducing operational costs and safety risks by automating traditional manual processes and leveraging technology and AI to streamline operational challenges, particularly around scheduling, workflows and logistics.

Our overarching goal on innovation is to be future-ready. You will get the opportunity to hear more about this topic during my fireside chat with Wesley. Accretive acquisitions and investments have long been core to our earnings growth, playing a key role in building our industry-leading wood utility pole and railway tie business. In addition to pursuing acquisition in our traditional wood business, our commitment to serving North America's utility and railroad industries opens new growth opportunities that will strengthen our position as a supplier of choice for our infrastructure customers. Let's dig a bit deeper into these new opportunities. This will illustrate the market we're positioned to serve and the multiple avenues we have to create and capture long-term value. One of the products we are best known for is wood utility poles.

The total addressable market in North America is estimated to be approximately $3 billion annually in which we hold a leading industry position. Of the wood poles we sell, approximately 80% support distribution with the remaining supporting lower voltage transmission projects. Within the transmission market, wood poles have limited use, which was part of our rationale for acquiring Rockwell, a steel transmission structure manufacturer. Most transmission projects use steel structures, either lattice towers or monopoles due to higher voltage levels and increased load requirements. Higher voltage requires lines to be suspended at greater heights and span longer distances between structures, which in turn demand stronger support structures.

The North American steel lattice market represents an estimated total addressable market of approximately $1.5 billion annually. In May of this year, we entered the transmission market with the acquisition of Rockwell, now Stella-Jones Steel Structures. Stepping out of our traditional wood pole business, which focuses on the distribution sector, an immediate goal was to scale our impact by doubling the facility's capacity from approximately $55 million in annual sales to more than $100 million, representing an increase in capacity to 20,000 tons of steel per year. Most of the U.S. Lattice tower market is currently served by foreign suppliers. In recent months, discussions with our U.S.-based customers have resulted in a strong expression of interest for us to establish a production facility in the United States. This represents an opportunity to further expand our capacity as the market remains largely underserved by domestic producers.

We are evaluating the potential for a greenfield lattice plant in the U.S. with a capacity similar to the Canadian facility of 20,000 tons per year, but remains in the early stage of this assessment. We will share further updates as our evaluation progresses. Tubular steel poles or monopoles for transmission projects represent a more significant untapped market opportunity with an estimated addressable market in North America of $3.5 billion annually. The market for tubular steel poles is composed of 4 to 5 major players along with a handful of smaller competitors. Currently, our tubular pole exposure accounts for less than 5% of Rockwell's sales, but the expertise gained through this acquisition positions us well to pursue and capitalize on future opportunities in this space.

While steel structures are a key pillar of our growth strategy, multiple other avenues of growth exists within the transmission and distribution market. We continuously assess the potential opportunities to broaden our product line and offer a wider range of products to our well-established customer base. When we look at the areas that interest us most, we've identified alternative pole materials such as composites as well as several other products and services required by our utility customers to maintain or expand their network, such as inspection services and structural pole fixtures, a market we recently entered with the acquisition of Brooks Manufacturing.

Our recent acquisitions demonstrate our readiness and ability to confidently expand into these new markets and capture a greater share of our utilities spend. While our utility structure business is expected to benefit from growing transmission and distribution demand, our railway tie business operates in a largely maintenance-driven market where demand has remained relatively stable for more than 2 decades in the $18 million to $20 million range of new ties annually. Even in this stable environment, we continue to identify meaningful opportunities to strengthen our position in this product category through strategic investments, innovation, expanded offerings and an unwavering focus on quality and customer service.

Railway tie customers look to Stella-Jones for solutions that will help them optimize their business model. This positions us to pursue growth opportunities through targeted capital projects that will enhance Class 1 customers' operational efficiency as well as through development of more favorable working capital solutions and expansion of product offering in both wood and alternate materials. Class 1s have long been searching for a wide, viable composite type solution that offers durability in high moisture environments and can be responsibly disposed of at end of life. While composite materials offer numerous advantages, they still have several limitations that make continued research and development essential. This presents an opportunity for us to explore expanding into alternate products that address Class 1s demand for long-life asset performance and their sustainability challenges.

Delivering a reliable alternative to traditional wood ties for specific applications would enable us to strengthen our position as a trusted partner and industry leader. Over the years, Stella-Jones has successfully grown through acquisitions. When we evaluate potential acquisitions, we look at each opportunity through a strict lens to assess the strategic fit. Our proven set of criteria is consistently used to evaluate all acquisitions and investments. That has been and will continue to be an important part of our successful acquisition strategy. The first set of criteria assesses the strategic value of potential acquisitions that can deliver and the market dynamics in which they operate. We look at acquisitions that build on our existing infrastructure portfolio and enhance our business resilience by leveraging our strong customer relationships and established distribution network.

We target markets supported by favorable tailwinds where customers are expected to continue investing to strengthen the electrical grid resiliency and maintain the rail infrastructure. When it comes to operational fit, our focus is on ensuring we have the right leadership team to effectively run the business while assessing alignment with Stella-Jones' culture. We aim to identify potential synergies and operational enhancements that can contribute to long-term value creation across the integrated organization. But ultimately, our decisions are guided by a clear focus on delivering sustainable long-term financial returns. Maintaining financial -- maintaining a solid return on capital employed or ROCE is a core priority. Each of our leaders is held accountable for ROCE performance and it is embedded in our compensation structure. In addition to ROCE, we also assess investments based on their potential for EPS accretion, margin strength and sustained cash-generating capabilities.

Looking ahead, we are well positioned to execute our growth strategy, supported by a strong balance sheet, consistent cash flow generation and a proven playbook that has delivered successful outcomes time and again. In summary, we are constantly looking to leverage our scale, relationships, experience and strategic network to expand and bring higher value to the markets and the customers we serve. We are focused on the next phase of growth for our company, whether it's through investments in organic initiatives or through acquisitions. We have the right resources and the best team in place to drive our vision forward.

Our team of more than 3,000 dedicated employees has been and continues to be the driving force behind our profitable growth. Their commitment has enabled our success to date, and they remain driven and focused as we enter the next phase of our journey. Thank you very much for your time and attention, and I hope you will enjoy the program that we've prepared for you today. With that, I'm pleased to welcome to the stage, Katherine Duff and Omar Saeed from Boston Consulting Group to provide an update on the dynamics and trends of the T&D utility space. Thank you.

Good morning, everyone. My name is Omar Saeed. I'm a principal at Boston Consulting Group, and I'm joined today with my colleague, Katherine Duff, who is a partner of Boston Consulting Group. The way we want to use this section is we want to talk about the capital and how it's flowing across the energy sector and where it's creating momentum. The energy sector is the largest capital-intensive industry in the world, and it's currently undergoing some of the most meaningful changes that we've seen in decades, both in where capital is being deployed and it's how it's being allocated across the energy sector.

Now to better understand this, at BCG Center for Energy Impact, we surveyed almost 300 of the largest global energy companies to understand who's spending what and where across the energy sector. The goal is simple: follow the capital, understand the shift in priorities and understand how the sector is being reshaped. Now with that, I'll start with the big picture. There is -- the prediction across the next 5 years is that the energy sector will deploy almost $7.5 trillion of capital in the next 5 years. Now within that massive number, there are 2 key points that I wanted to take away from this slide. If you look at the green part of the slide, more than 50% of that $7.5 trillion will be coming from global power and utilities. This is a meaningful shift that I'll unpack in the next slide. But the second piece that I also wanted to take from this is 20% of that $7.5 trillion will be coming from North American utilities. This is the second largest investment bucket after national oil companies, and it's only by a small margin. So here today now, we're at the epicenter of this growth.

Now those 2 pieces that I talked about, I want to unpack in the next 2 slides. The first one is global utilities and the second one is North American utilities. Let me start with the first one with the North American -- with the global utilities. If you look at this chart, what we're trying to show on the left-hand side is how much capital has been spent in the past and how the evolution has been up till today and what is being forecasted in the next few years. The gray bar in this chart shows oil and gas, and then the green bar shows power and utilities. And this is -- if you look at this, there are 3 clear distinct eras. If I look at pre-2020, it's characterized by oil and gas dominance. They're spending more than power and utilities. It's clear, as you can see in the chart.

If I look at today, so between 2020 to 2025, the second era, you see the oil and gas spend has almost plateaued, the power and utility spend has been accelerating, almost coming at parity. But the most interesting part in this chart is it's being forecasted based on capital plan in the next 5 years. And this is power and utilities are no longer playing catch-up. They're actually expected to outpace the spend of oil and gas by almost 30% to 35%. This is a meaningful shift. This is a structural shift. The center of investment gravity is pivoting from extraction and hydrocarbons to electrification and infrastructure. And that is a theme that's being -- that we're seeing globally.

Now that's a global picture. Let's talk about North American utilities and what is the evolution that we're looking at from a North American utility perspective. But before I do this, I want to just level set what are the different archetypes that we see within North American utilities. So if you look at the bottom of the graph, the light green when we call it integrated, those are typically vertically integrated regulated power and utility players. They own and operate generation, transmission and distribution. A good example of this would be Duke Energy. The second one is T&D. So they only -- they only focus on transmission and distribution. They're also regulated and a good example of this would be Con Edison. The third is hybrid. They own regulated utilities, but also operate in the unregulated business, such as competitive generation. And a good example of this would be NextEra.

Now if you remember that $1.4 trillion number that I wanted to anchor you with, more than 50% of that will come from integrated utilities. But nonetheless, the message is clear across all archetype. We're seeing a step change in demand. We're seeing a step change in growth, and that is consistent across all archetypes. What I'm not showing in this graph, but it's still meaningful to mention from the $1.4 trillion that is expected to be deployed in the next 5 years, $125 billion have been added only in the past 9 months. Utilities are revising their capital plan targets and they're revising them upward. The travel of direction is clear, capital is going up, and it's going up fast for North American utilities.

Now everything I've mentioned so far, we just talked about capital and how it's flowing and where it's going across the energy sector. What we haven't unpacked yet is what's driving this growth and how our utilities are planning on tackling and funding this growth. But with that, I'll pass it on to katherine Duff, who can talk through this.

Perfect. Thanks, Omar. Okay. So maybe not the most obvious plot, I'll just orient us to what this is and then talk about the drivers. So on the y-axis, you see load growth. Not surprising, load growth is driving capital growth. Capital growth is what we see on the X-axis. And what we're looking at is, as Omar was talking about, a couple of these different archetypes of utilities, and we see that integrated players are capturing the most load growth and commensurately, they are seeing the most increase in their capital plans. So higher capital growth than previously. So pretty straightforward, right? There's still -- there's load growth. Capital is going to need to be invested to meet that. Integrated utilities capturing the greater portion of that. But as Omar mentioned, T&D, hybrid also right in there.

Now as Omar alluded to, I want to talk about super positive growth, growth, growth, yes, but how are utilities actually going to meet that growth? And what are some of the considerations that they're going to have as they think about doing that? I want to just touch on 3 briefly. The first is where do I deploy my capital across generation, transmission and distribution to best meet that growth and best get a return. The second one is utilities operate within a financial framework, how are they going to fund this growth while keeping within the constraints that they have financially? And the third is key external factors, the one that I'll highlight being the most important is affordability. Affordability is headline news. How are they going to invest to meet this growth while keeping affordability in mind for their customers.

So with that, what I want to talk about is that trade-off between generation, transmission and distribution. What we have here is 5 integrated utilities, large integrated utilities, as we talked about, the ones getting the most of the growth. And here, we have in the light green, what they're investing in generation, and these are rolling capital plans, so rolling 5-year capital plans to show the direction of travel of that investment. So light green generation, the medium shade of green is transmission and distribution and the dark green is other.

Now I want to highlight a couple of things quickly that we can see by just looking at these 5 examples, but it holds across the board. They do not all look the same, right? The trade-off between where -- how much I'm putting in T&D, how much I'm putting in generation, how much I'm growing changes. Some really all in on huge growth on generation. Some huge growth on T&D, others evenly split. But what we can say across the board, in all of these, their capital plans are growing. And in all of these, their capital investment in T&D and in generation is growing. So it's a growth story on both, but it depends on that utility's individual service territory or service territories and where do they think they can deploy that capital to get the best return across the different options that they have.

Now I just want to do a double-click because T&D is the order of the day on what do we mean by T&D CapEx and how do utilities consider T&D CapEx and where -- what does that mean in terms of the types of investment. Now what we can see is a large portion of it is actually going to adaptation, hardening and resilience. You got 27% in traditional hardening and resilience, 7% in advanced technology for transmission, distribution, 26% and 12% for the hardening and resilience and then the advanced technology supporting that. Then the next biggest bucket is replacement. So replacing the infrastructure that they have as it ages. 34%, 30% and then expansion, 29%, 27%. This is a historic view, right? This is based on EEI 2022 survey in North America.

We don't have -- I mean, this capital hasn't been spent yet. It's not perfectly fully allocated yet, so we can't say what it is going forward. But from conversations we're having, from what we're seeing, still about 1/3 is on adaptation, hardening and resilience. And unsurprisingly, that expansion portion is growing a bit going forward as we think about that. Okay, the second thing I talked about, which is how are they going to fund this growth? Unsurprisingly, I think everybody in this room, utilities have a financial framework. They need to maximize cash flow from the core business, invest for future growth, protect the balance sheet, minimize shareholder dilution, grow dividends consistently and predictably. How are they going to invest the capital in this growth and maintain that.

Now increasingly, to fund this growth, they're having to turn to external sources of funds. Still, that's the traditional debt and equity, but they are starting to explore nontraditional sources of capital, so minority stake divestitures, partnerships to be able to stay within this financial framework, optimize within this financial framework, but go after this tremendous and exciting growth. Okay, so -- what do we want you to sort of leave this room with and remember? Demand surge. U.S. load growth is rising at 4% CAGR through 2030, led a lot by AI, data centers, electrification, in some cases, population growth, all of the good factors. What this is leading to is massive CapEx expansion, $1.4 trillion of CapEx to be spent by North American utilities in the next 5 years. And as Omar highlighted, that's 20% of all of the CapEx deployment in energy globally. So really at the epicenter of this growth.

Great, but some key considerations, I think we need to keep in mind. Historically, utility CapEx plans have been quite firm. But this is, as Omar highlighted, pretty unprecedented times, pretty massive capital deployment. So a couple of things that we want to keep our eye on as they evolve to see how utilities will decide to allocate this capital where it's going to come. Demand, where and when will load growth materialize, particularly data centers, right? We hear about that a lot, but where matters and when matters. Given where and when will this demand appear, how will capacity actually match demand, overbuilt, underbuilt, how is that going to play out? And what will that do to how utilities think about deploying capital into the future.

As I mentioned earlier, affordability, how will affordability evolve? And probably it won't be the same in every state, in every province. So how will that evolve going forward? And how will that change how utilities think about where and what they deploy? We're in an ever-changing policy and economic environment. So what will be the changes in policy trends, what will be the changes in the economic picture that will drive capital deployment. And finally, doing this will require ramp-up of supply chains, ramp-up of capital being funneled into these utilities. How is that going to evolve? Is it going to keep pace? Where is it going to keep pace? So really exciting times to be in the power and utility space and I think an area to watch. So thank you, guys.

Thank you, Katherine and Omar, and good morning, everyone. My name is Kevin Comerford. I'm the Senior Vice President of the Utility Pole and U.S. residential lumber business at Stella-Jones. I've been in this business for 33 years. Most of my career has been around the selling of the product to utility customers. And just in the last 2 years, it's grown to include all the other aspects of running the business, the resource operations and transportation aspects. So Stella-Jones is a leading supplier of wood utility poles in North America. We service large, medium, small electric and telephone utilities across the U.S. and Canada primarily.

Our wood pole business has seen strong growth over the last several years, increasing at an annual rate of approximately 12%, up to $1.7 billion approximately and utility poles account for nearly half of the company's total revenue today. This sustained growth is more than simply a rising tide lifts all ships, but rather the result of a well-designed and executed strategy. We have strategically expanded our business through a combination of capital investments, organic growth and acquisitions as well as a purposeful strategy to invest in long-term relationships, both with our suppliers as well as our customers, and I'll talk about that in more detail in a few minutes.

The North American electric system consists of, they say, 185 million structures, which serve both the transmission and distribution networks. Each year, it's estimated that more than 3 million poles -- new poles are placed into service to maintain, harden and expand the grid. As highlighted by the Boston Consulting Group team, the utility industry is entering a period of increased investment activity. Headlines are increasingly talking about hyperscalers, AI data centers, even new nuclear power plants, et cetera, all of which are going to be important contributors to the power market in the future. However, there are several other major trends that will also drive strong growth in the distribution and low-voltage transmission markets, which is really our business, the wood pole business.

Utilities are faced with the maintenance of aging infrastructure. We've all heard about that. Reports estimate that 40% to 45% of the distribution assets in North America are either very near or past their useful -- theoretical useful life. In recent decades, utilities have elected to defer maintenance to focus on other investment priorities resulting in a substantial backlog of deferred work that still needs to be addressed and much of it is in the near term. While individual utilities will manage these maintenance programs on their own time lines, we remain confident that this will translate into increased investment across this sector. At the same time, utilities must confront the growing challenge of weather events, which have become more frequent and more severe, straining some networks to the point of failure as we've seen.

Power interruptions and extended outages are costly for businesses and very frustrating for the average consumer. And as a result, utilities across North America are facing pressure to invest in system hardening to increase the resilience of these systems. And as mentioned here a minute ago, there's also the need to manage the ongoing growth of electricity consumption just beyond AI and data centers. There's significant investment required to keep pace with the reshoring of manufacturing back in the U.S. The continued growth in renewable generation that today is usually further away from the transmission grid than earlier projects, which requires more transmission as well as just general increased electrification.

Each of these drivers requires investments by utilities. With the growth in demand for the electricity and the need to harden the system, combined with limits on access to right of way, utilities are increasingly looking for stronger, meaning bigger or taller structures or both. This is important to our business as larger poles equal more volume. And while what we sell to our utility customers is poles, what we're really producing and manufacturing is volume. So there's usually between 6 and 8 classes, which has nothing to do -- class has nothing to do with the quality of the wood. It has to do with the dimension of the wood. In an individual length, there can be 6 to 8 classes.

An increase of one class moving to one size bigger results in approximately a 15% increase in the volume in that pole. Likewise, for poles that are in the same class, but 5 feet taller, a roughly 15% increase in the volume. So let me explain it this way. If you take a box of 64 crayons that we all had sort of growing up with a little sharpener in the back. If you take one of those crayons out and you replace it with a piece of sidewalk chalk, which is -- hopefully, you know what a sidewalk chalk looks like, it doesn't really fit back in the box because it's bigger. Now eventually, if you take all 64 of those crayons and replace them with sidewalk chalk, you've got a much bigger box and than the original one that you started with. And all that extra volume translates to more wood fiber that we have to procure and peel, more treating capacity, preservatives, more trucks and railcars needed to get it to our customers.

So a utility buying the same number of poles from us may actually be buying a much larger volume of poles from us. Taller and heavier trees to make these bigger poles can be a challenge to source as well, which makes the diversity of supply, which I'll talk about in a second, as well as species substitution critical to meeting the evolving demands of our customers. Thankfully, our procurement group excels at delivering both of these, which is a great segue into this. The map starts with the trees, the resource, the trees that will grow utility poles, which is not most of North America. It's just in these regions that if you're looking at the map, you can see. We have strategically located or positioned our network of 27 wood pole treating plants either in or very near this resource. We do that to minimize the transportation costs and optimize the recovery of fall down.

We source Douglas fir, Western Red Cedar, Southern Yellow Pine and Northern Red Pine in the Great Lakes areas. This large network of 27 treating plants also allows us to flex up and down in response to spikes in demand. Most of these treating plants have peeling equipment, what we call peelers in the industry, but we also operate 19 additional peeling facilities and a bunch of dots just came up on the map to increase not only our total peeling capacity, but also to get access to every part of that resource. We have a large staff of forestry professionals managing the production of these unique trees. So I say that even within a good standard trees where we're going to get poles, maybe 1 out of 10 will make -- meet the strict specifications required to make a pole. So getting around and seeing a lot of trees is critical to getting what we need.

So this not only requires a deep understanding of the resource and the science of silviculture and forestry, but also long-standing often decades-long relationships with the people who own these trees. Our supply chain, in some cases, extends, in many cases, over many, many years, where we purchase the trees or the rights to harvest those trees years before we actually sell them to our customer. So beyond this, we also have an extensive network of distribution yards, and those are all the other dots now filling in most of North America in strategic locations outside of the tree growing regions. So this allows us to give customers the same level of service, the ones that are in the middle of the continent as if they were right in the resource.

It also allows our customers to outsource the complexity of managing their own inventories of poles, which is extremely easy to mismanage if it's not your primary focus. As I like to say, if you don't go to bed at night and wake up in the morning thinking about poles, you're not thinking about them enough, and you should let us help with that.

Over the years, we've listened to our customers and evolved to address the challenges that they face. And one of those is the handling of the poles. The handling of poles is a specialty. They don't go on pallets. They don't fit into containers. They're long, they're heavy, they roll, all of which makes the loading and unloading and storing them dangerous for the employees around as well as expensive. So our team includes a transportation management group of career professionals. They manage a dedicated fleet of more than 700 railcars, more than 100 specialized company-owned trucks. Their unique experience in these logistical challenges and the ability to move poles hundreds or even thousands of miles into our customer service territories means that our customers are buying much more than just a utility pole from us, but rather a delivered product that is delivered to the point -- right to the point of use, in some cases, literally right to the hole where the pole is going to be erected on time every time.

Our customers value our reliability, supply and our quality. Coming through the pandemic with the resulting supply chain constraints, we took several strategic actions to position ourselves for the growth that we saw ahead. And while our strategy has been consistent over the years, more recently, we invested in the expansion of our treating capacity, our resource, meaning peeling, drying as well as our transportation and logistics capacity, specifically building new finished good yards, adding additional railcars and trucking equipment. As we brought this new capacity online, we focus on finding and partnering with customers who value long-term supply relationships. So when supply was tight and demand and prices spike, we didn't chase after those short-term opportunities we stayed home, and we prioritized our key strategic customers.

For us, there's great value in maintaining long-term customer relationships. It fits together here. We can plan around their demand even when their demand isn't always perfect. We can use that information to optimize our network, including long-term commitments on the supply side, building new finished good yards, more railcars, et cetera. And that insight that we get from this just allows us to expand and optimize this network more effectively. On the technology front, our focus has expanded to include optimizing both of our internal processes as well as our manufacturing operations. Technology plays an important role in enhancing the equipment that we manufacture with and the efficiency we get from that.

At our last Investor Day, we shared a recent innovation involving the use of robotics to frame poles. We will continue to look into and invest in technologies that help us automate repetitive processes. which we believe are going to help increase the yield that we get from the trees that we buy and allow us to identify natural defects earlier in the process -- in the manufacturing process, both of which result in significant cost savings to us. With the recent successful implementation of our new ERP system that Eric mentioned, we're entering into this sort of next phase, capturing and analyzing the vast amounts of data that we generate every day and then turning that analysis into some actionable information.

This enables us to make better and faster decisions, network optimization and ultimately help us deploy our resources in the most efficient way. Our obvious key areas of focus here in the coming year or years include production planning, inventory management and transportation decision-making. As we focus on optimizing our existing network and systems, we continue to pursue new opportunities to grow. We believe that our deep, long customer relationships, combined with this extensive network of equipment and the experts that we use to operate it are a perfect foundation for adding new products and services that our customers, I know will find valuable.

We won't touch on all of the areas that are listed on the slide, but it's sort of representative of options that we would look at and that are available to us. We'll evaluate each one of these potential opportunities against our disciplined investment criteria that Eric described earlier. Rockwell with Steel Lattice Towers and Brooks with Crossarms are the first 2 that we've acted on this year. Pierre in a minute will talk about the Lattice business in more detail, but I'll just take a second to talk about Brooks and why that's a good fit.

Brooks is a long-standing supplier with a proven track record and a strong reputation for product quality and reliability, which is very much aligned with the reputation that we have at Stella-Jones with our customers. They manufacture and sell a range of products into the U.S. market from a simple tangent cross arm up to more complicated dead-end assemblies all the way up to very complicated wood and steel assemblies for high-voltage transmission structures. We've got a couple of samples out there. I know some of you have looked at that. But if you'd like to stop by, I'd be happy to explain a little bit more what all those other things besides a simple tangent arm are.

But one interesting element of this business is that on an average pole structure utilizing a wood arm and not all poles utilize wood arms, but those that do, that arm will need to be replaced up to two times within the life cycle of that pole, providing a nice recurring and reliable sales volume. As Brooks has historically been focused on the U.S. market, we believe there are opportunities for expansion both in Canada and maybe other parts of the U.S. as well.

So in closing, we are very confident that our strategy is the right strategy and that our current position in the market with our customers are a perfect combination, not only to capitalize on this growth that we see coming, the investments by utilities, but also for further additions to our products and services in the coming years. And with that, I'd like to turn the podium over to Pierre to share more details about the business. Thank you.

Good morning, everyone. My name is Pierre Lavoie. I was with Rockwell for 13 years, acting as President and CFO for the last 6 years. In the decade that prior to joining Rockwell, I held senior finance roles with several diversified industrial companies. I was one of the owners of Rockwell until we were acquired by Stella-Jones in May of this year. Two of my partners and I were retained to assume leadership roles at Stella-Jones for the steel structure.

Locweld's legacy began in 1947 as a fabricator of steel doors and windows. Soon after, the company pivoted to support large-scale development of electrical infrastructures in North America, a milestone proudly recognized during our 75th anniversary celebration 2 years ago. Our culture has been built upon three critical pillars. First, continuous improvement; second, health and safety; and finally, sustainability. Continuous improvement is part of our DNA and a day-to-day feature of our operations.

The company has received significant recognition, including the 2024 Prix Performance Quebec, the highest distinction awarded annually by the Premier of Quebec, which highlights the work of our organization that have successfully implemented best management practices. As we speak here today, we are being presented with the Excellence Canada Platinum Award here in Toronto. This award recognizes outstanding Canadian organizations for their commitment to continuous improvement and pursuit of excellence. We are incredibly proud of our entire team for earning this highly coveted awards.

Our core business is the engineering and fabrication of steel lattice transmission structures for the North American market. Locweld is one of the oldest and most experienced steel lattice fabricator in the world. And today, steel lattice represents the vast majority of our business. We have fabricated more than 100,000 towers to date, the equivalent of 32,000 kilometers of transmission lines. We also fabricate steel monopoles mainly for the Quebec and Ontario markets, and we have broadly manufactured the largest monopoles in the country at the [indiscernible] of 252 feet or the equivalent of 25 stories, and a base diameter of 13 feet.

Our portfolio includes additional innovative value-added products. One of our senior executives was instrumental in developing the Rock Anchor, which is used to install wood utility pole in rock terrain, an excellent complement to Stella-Jones within utility pole products. We have sold thousands of units of these products, mainly in Canada with zero failures in the field. We look forward to growing our market in the U.S. for Rock Anchors under the Stella-Jones banner.

Our plant is located in Candiac, Quebec on the South Shore of Montreal. It occupies 220,000 square feet and sits on more than 25 acres of land. Our current annual capacity ranges from 8,000 to 10,000 tons annually of steel. Following an investment of about -- about, sorry, $15 million in new equipment, we will double our capacity to 20,000 tons of steel by mid-2026. We probably employ more than 200 employees, many with decades of experience in the lattice space.

Let's now take a look at some recent trends that are impacting the industry. Following a period of modest CapEx growth between 2015 and 2021 as mentioned by BCG, we have recently seen an acceleration in CapEx by electrical utilities for transmission projects. CapEx spending for North American transmission grid grew by 9% between 2023 and 2024 and is forecasted to continue to grow at that rate annually through 2029. Much of the increase is expected to be driven by investor-owned utilities in the U.S., but with meaningful growth also coming from Canadian Utilities.

Investor-owned utilities in the U.S. or IOUs are expected to more than triple their CapEx with investments growing to more than 15% annually over the 2024 to the 2029 period. Total CapEx spend over that period is expected to be USD 275 billion. Looking at last year's actual CapEx of approximately USD 31 billion, more than 1/3 was invested in lattice towers, monopoles and fixtures.

North of the border, Canadian utilities annual CapEx on transmission actually shrank by 3% from 2015 to 2024, as some utilities actively deferred CapEx or projects. Similar to the U.S., Canadian utilities CapEx is now expected to grow more than 6% from 2024 to 2029 period. Looking at the 2024 figures, Canadian Utilities invested approximately USD 6 billion in transmission lines with two major utilities accounting for more than 60% of that total, both are significant customers of ours.

The lattice market in North America is generally served by large foreign players, mainly from India and Turkey who have annual capacity in the hundreds of thousands of tons per year, local product players with some having similar capacity to ours, one Mexican fabricator and minor U.S. fabricators with limited annual capacity. We are considered one of the two prominent lattice fabricators in the North American market.

Despite U.S. tariffs on Canadian steel, we have maintained our sales in the U.S. with customers assuming the cost of the tariffs. Currently, more than 80% of our sales are into the U.S. market. Due to the strong demand, our customers' primary concern is securing reliable steel supply for their key projects. The cost of steel represents between 10% to 15% of the total cost of a typical transmission project. North American utilities are focused on product quality, responsiveness, fast deliveries and service leveraging North American facilities and capacity.

This is how we operate, and we believe this makes us uniquely agile and allows us to deliver exceptional value. Foreign players typically compete on price and while they benefit from much larger capacity in the hundreds of thousands of tons annually, they also require longer lead times.

Now I want to dig a little deeper into the dynamics of the steel lattice and tubular markets. The steel transmission structures market is valued at $5 billion, $1.5 billion for lattice structures and $3.5 billion for monopoles. Monopoles today accounts for roughly 75% of the market. However, lattice remains an important part, especially for higher-voltage transmission lines. But to this point, this has been more evident in the Canadian market. However, as the demand for high-voltage power sharply increases in the U.S., we anticipate increased event for lattice structures to support 345, 500 and 765 kV transmission lines. With grid hardening and resilience being a priority for utilities, we believe steel lattice will remain in demand as a material of choice for the future.

We have built specific expertise in the design, manufacturing, shipping and assembly of lattice towers. It's a challenging product to work with, think of it as a giant LEGO kit. There are multiple components that require a high level of precision to manufacture and assemble and every piece is critical. If even one piece is missing or delivered out of sequence, the structure cannot be put together. When this occurs in the field, it can lead to significant project delays and cost overruns. This challenge is even greater for international suppliers who must deliver components across oceans. We have proudly earned a reputation of having some of the best logistics, precision and fit in the industry. Our primary focus has and will always be on quality, service and delivery.

Thanks to our long-standing operating history, we have developed a specialized engineering expertise and capabilities that are exceptionally difficult to replicate or build from scratch. It's worth noting that the industry has experienced an erosion of skills and knowledge, as seasoned engineers with specialized lattice expertise have retired or are nearing retirement. Based on our years in the business and our accumulative expertise, we have effectively mitigated these challenges. We have the engineering capabilities and skill to support our customers and, when needed, to enhance their internal capabilities.

Our in-house engineering skills mean we can offer customized solutions to address specific challenges. We are ideally positioned to compete on projects, especially those with faster turnarounds or that demand greater flexibility. With more than 75 years in the business, we have long-standing relationships with key customers and their internal buying and engineering teams. As a North American supplier, we have the ability to be on-site with customers in a few hours. This is just one advantage we offer when they are choosing a supplier who can provide fast service and assistance.

Lastly, I want to talk about why Stella-Jones and Locweld went together as a combined organization. From the start, there was a natural fit. We both highly value quality, service, health and safety and continuous improvement. In terms of synergies, Locweld shares 15 key customers with Stella-Jones, who also serves over 1,000 utility customers, creating opportunities to leveraging these relationships. This acquisition also provided opportunities to cross-sell products like our Rock Anchor I just mentioned earlier, and to expand our offering to both existing and new customers.

With a strong balance sheet and access to capital, Stella-Jones has enabled the Locweld business to fund its next phase of growth by making investments in capacity and technology. Since the acquisition, there has been investments in new state-of-the-art equipment that can perform multiple operations, such as cutting, punching, shearing and clipping. These new machines are also faster, doubling capacity and improving efficiency by 60%.

Supporting our confidence to expand capacity, we were recently awarded the largest contract in our history with a major potential utility, a 60,000-ton contract to supply 735 kV towers over the next 10 years.

In closing, we think this is a very attractive time to be in the utility infrastructure business. We are embarking on a multiyear period of increased investment on the part of utilities. This represents an opportunity for established players with strong reputations and the resources to capitalize on this long-term growth potential, qualities that Stella-Jones Steel Structures possesses.

With that, I will now turn the podium to [ Sylvain ] to talk about the Railway Ties Business. Thank you.

Thank you, Pierre, and good morning, everyone. My name is Sylvain Couture. I'm the Vice President, General Manager of the Railway Ties division. I've been with Stella-Jones since 2004, managing operations across our different product categories, including utility poles and residential lumber. But I start my career in Railway Ties. I have a background in chemical engineering. And as part of my industry involvement, I was also the previous President at Wood Preservation Canada. In my more than 20 years with Stella-Jones, my roles have ranged across operations, project management, health and safety, environment.

As a reminder, Stella-Jones is an industry leader in the manufacturing and distribution of wood, railroad crosstie, switch ties, bridge timber, prefab bridge, crossing panel and pre-plated products. Our Railway Ties business continues to account for approximately 1/4 of the company's annual revenue. Out of our 46 facilities across the U.S. and Canada, 10 are dedicated to the production of railway ties. Our operations are typically located on or very near our customers' main rail lines and routes, ensuring we can deliver ties with efficiency when and where they need them. This includes manufacturing facilities and procurement yards.

Our facility are near the forest where we source both the oak and mixed hardwood species for approximately 600 sawmills. This strong and diverse network of relationships, combined with our scale, ensure that we can source raw materials that meet our customer-specific requirements.

There are an estimated 500 million wood ties installed across Canada and the U.S., representing 90% of the total installed base. These assets require regular maintenance, creating a recurring revenue market for the tie producers. The benefit of wood ties are their shock absorbing characteristics, ease of installation and cost-effectiveness related to steel, concrete or composite ties. With many of the main road established for more than a century, replacement ties account for approximately 90% of the market.

Ensuring the proper maintenance of a wood rail tie network can be a daunting task and requires suppliers with the foresight, capacity and original presence to anticipate customers' large-scale maintenance needs. Stella-Jones has the capacity to supply more than 10 million new ties each year, which represents a significant portion of the total addressable market in North America. The railroads spanning Canada and the U.S. control nearly 140,000 track miles and Class 1 accounts for about 2/3 of the roughly 20 million new railway ties needed each year. Commercial railroad, which includes short line, transit lines and contractor accounts for the other 1/3.

Traditionally, Class 1s prefer to work with multiple suppliers given the large volume of tie required each year to support their ongoing maintenance requirements. However, they favor reliable partners who can provide a high-quality, long-lasting product that is readily available and can be delivered quickly. At Stella-Jones, we have built a reputation for doing all three. While other compete on price, we choose to compete on quality, availability and service.

Quality starts at the sawmill. A wood tie cut from hardwood of a log must meet certain specification to ensure strong performance once installed under the track. We have 25 procurement specialists on the road to visit 600 sawmills annually to discuss our customers' requirement and tie specification, and we operate 17 tie procurement yards to consolidate untreated tie purchase. A wood tie must be air seasoned for 9 months on average to ensure optimal treating. Our ability to maintain this level of inventory underscore the strength of our balance sheet and our commitment to customer service.

In line with our customer-focused approach and commitment to availability, we also have assembled a fleet of 900 leased railcars that help us deliver the millions of tie wood supply each year more quickly, right where they are needed.

The railway tie market is mature, replacement-driven industry characterized by modest steady growth in the low single digits, roughly in line with the rate of inflation. Despite the market's maturity, we see several opportunity for additional growth. First, we can grow volume of our existing product with current customers by supporting their key projects. We can broaden our offering with higher-value products and solutions that meet evolving customer needs. And also, we can continue to pursue strategic acquisitions or investment offering adjacent product and service, helping us expand our capabilities and reach. Let's dig into each of these area individually.

As Class 1 contracts come up for renewal, we believe we're well positioned to secure a larger share of each customer business while building efficiency into our processes and optimizing our footprint. We continue to pursue price adjustment at contract renewal to address cost increases that are not captured by pass-through provisions. We recognize that price remain a key consideration for our customers. That's why we are open to exploring different solutions that balance value for Class 1s while effectively managing our risk profile.

These solutions can include investing in capital projects that enhance our customers' operational efficiency and drive volume gains. In such a case, we may consider structuring pricing based on volume levels. Solution may also involve offering treated-service only, where sales dollars are lower, but we maintain the same dollar margin, and we can reduce our working capital requirements.

All of these approaches will allow us to deliver value to the customer, strengthen relationships and grow volumes, all while preserving profitability. We have already successfully renewed one of our long-term Class 1 contract this year and are actively working on additional renewal as come up on a staggered basis over the course of '26 and '27.

Another key way we can generate more growth is by offering a broader range of high-value solutions, all backed by Stella-Jones reputation for quality and service. Our customer needs are evolving, and they're looking for partners who can bring new ideas and solutions to the table. Specific opportunity includes solutions like pre-plated tie. When crossties are delivered, steel plates need to be attached to them in order to fasten the rail, as you may have seen outside in our product showcase. This is a laborious and manual process that is largely complete in the field typically, often under extreme weather condition.

While Stella-Jones has been growing its supply of pre-plated ties, we believe greater automation of this process is the next step in driving efficiencies and volume gains. We have two pre-plating line and intend to leverage advanced machinery and robotics to further increase quality, reduce labor costs, speed up installation times and improve safety from start to finish. Recently, we secured a supply agreement with a Class 1 where we were able to double volume of pre-plate ties, leveraging an automated process. It's a demonstration of how innovation and customer focus translate directly into additional growth.

Another example of our customer-focused approach is the work we have done around wood treatment alternative, collaborating with customers on specification and engineering change. Stella-Jones has historically delivered ties treated with creosote. But in recent years, we have added other preservatives at the request of the customers such as DCOI, borate and QNAP.

The disposal of old ties has always been a challenge for customers. So at their request, we are collaborating on end-of-life solution. We are currently evaluating alternative ways of offering this value-added service. By branding our range of high-value solution, we're able to solve more of our customers' challenge. This type of collaboration position us as a trust partner, not just a supplier.

Lastly, we continue to evaluate opportunities to grow share through strategic acquisitions or investments. While we've made significant headway in this area historically, there are still select opportunities in the wood treated railway tie market. While treated wood is expected to remain the material of choice for the vast majority of railway tie applications, we continue to evaluate alternative materials that are better suit for specific applications. As Eric mentioned, one area of focus is composite ties where we are exploring options that are better suit for harsh environments.

In addition to sales growth opportunities, we're focused on enhancing overall business performance and driving efficiency improvements. Across the organization, we are continuously leveraging lean manufacturing, best practices and new technology to modernize our operations. These efforts are supported by a consistent CapEx plan and are making our facilities safer, more efficient and more reliable.

An example is our work on the bridge production line. The framing of bridge ties is complex. So there are numerous opportunity to improve throughput, precision and safety through greater automation. We are currently evaluating the feasibility of these initiatives, which align with our objective of advancing the industry and driving automation for improvement in product [ quality ] and efficiency.

Stella-Jones operational footprint is second to none in the industry. In combination with our significant inventory levels and industry-leading capacity, we stand ready to consistently supply quality product while retaining the agility to meet emergency needs and surged demand if needed. Over our operating history, Stella-Jones has developed a strong reputation for quality and service, and we want to be known as a supplier of choice. Many of our railway ties customers have used our ties for decades. And this has allowed us to build strong relationship with all of them.

Further deepening and strengthening these relationships is critical to our long-term success. We also take an active role in the industry, attending conferences and trade shows and participating in industry associations, ensuring we remain top of mind. We want to be the leader in the space at the forefront of innovation.

In closing, we feel strongly that Stella-Jones is ideally positioned to remain a key supplier for railroads across the U.S. and Canada. We have the scale, reach, track record and relationship to succeed. With that, I will now turn to -- back to David. Thank you, everyone.

Thank you, Sylvain. This brings us to our halfway mark. Let's take a short 15-minute break, and we'll see you back here at 10:35 to kick off our fireside chat with Wesley Bourland.

[Break]

Well, thank you, everyone. I hope you enjoyed the little break we had. So the next part of our presentation this morning is a discussion with Wesley Bourland, our Chief Operating Officer, who joined Stella-Jones in April of this year. And I figured -- we thought that this fireside chat would be a great opportunity to have a conversation and get everybody to get a sense of what Wesley is thinking, what he's working on.

So Wesley, as we -- let's kick it off with our first questions. And I'd like to know a bit more about your background and what you bring with your experience at Stella-Jones?

Yes, sure. I come to Stella-Jones with nearly 20 years of manufacturing operations experience. It's been across multiple industries from hardwood, steel infrastructure, wind towers, even railcar production.

A lot of my family served in the military. So I started my career early on as a lieutenant in the U.S. Navy. I served aboard a mine sweeper as the Operation Officer, operating mainly out of the Arabian Gulf. It was there that I learned a few key lessons that I think translate really well when you're talking about manufacturing, right, understanding precision, discipline in how teamwork can really apply there. So I bring that to the table, I think. When I moved to the civilian world though, I led multisite operations across North America. I've had full P&L responsibility and led transformations, utilizing kind of lean manufacturing and continuous improvement as a method of getting things moving forward.

So with Stella-Jones, I think I bring a focus on building solid teams, driving disciplined execution and really building on the culture we have here, driving results through that collaboration and teamwork.

Great. Well, definitely some great experience on the hardwood side and on the steel structure side. So we're very happy to have you join the organization. With that in mind, so what attracted you? What convinced you in the end that Stella-Jones would be a good next step for your career?

Yes, there were several things that actually attracted me to Stella-Jones. I mean, Stella-Jones has a very strong track record in product quality, right, customer focus and resiliency in the markets that it's been in. This is a business that's proven itself and has an opportunity to focus on modernization and technology and things like that as we move forward and work towards being future ready. And it's a great foundation to work on.

And when you and I first met, you talked about your vision for the company. I could tell you and I were very aligned and that my skill set and experience fit with that vision going forward. So Stella-Jones, again, it's a leader in the market, and it's a company that's ready to move forward and be future ready and I'm excited to be a part of that.

Great. So when you think about 20 years of experience in your background and so on. So what have you learned in those 20 years that you're bringing to Stella-Jones and how does it apply to us?

Yes. Every manufacturing operation has a different culture. Every site has a different culture, but there's some things that span across that, that make companies successful. It's that discipline process. It's engaging the employees and the workforce and it's looking for measurable improvements and making sure we're driving those all the way down to the shop floor and back up to the executive level. I'm a big believer in continuous improvement and how we drive that through the organization. We want to look for the best way to solve problems, but we also need to treat it as not just a tool or an action, but as a way of working when we go forward. So I think if we bring those sharper tools, better data and do things like that, we'll continue to drive the outcomes forward.

So we're building on a strong foundation here. There's an opportunity to combine the culture of Stella-Jones with those tools and drive that accountability to build momentum across the company.

Great. When I think about what we just discussed here in the last few questions and you want to summarize it before we get into sort of more technical things that you'll be doing with us in the next coming years, what are your thoughts on us creating a CEO position at this point in time in our life cycle as a company?

Yes. Stella-Jones has gone through a long period of growth, done very well. A lot of that's been through acquisitions, some of those family businesses that have come in. And so there becomes a point when a company gets to size where there's an opportunity to leverage that scale and take that complexity and start to knit those pieces together, leveraging the opportunities, sharing best practices, driving things forward that way. And so I see this as a role that can help align that operationally, systematically and culturally, right, reinforcing the current culture, continuing to build on it, especially as we look at moving into adjacent markets outside of our traditional ones. I think the goal and my focus is to make sure that the culture grows and adapts as the company continues to grow.

Great. So you've been with us for 7 months now. So how do you think you make an impact on our business?

Yes. Yes. I know 7 months. It's been a long 7 months, but it's been a lot of fun getting around and seeing everything. I see my goal is building on what works already. I'm not here to change the DNA of Stella-Jones and what's made it successful. But there are a few things I want to look at and make sure that we're trying to leverage and build on. There's the scale I've mentioned. In the past, the business units have handled procurement and transportation independently and on their own, as we've grown, there's an opportunity to look at that, to leverage that scale to improve the cost and bring efficiencies across the businesses. There's the continuous improvement mindset that we have, but how do we deepen that now? How do we get sharing across the different business units and make that grow and become a part of what we do and how we measure.

And then there's technology and capital deployment. We've talked about the capital deployment and what we've done. I think there's an opportunity to continue looking at that, how we're automating, how we're using analytics and smarter systems to help improve our consistency and build efficiencies and value for us as well as our customers.

And then finally, we have to maintain a relentless safety-focused mindset. Our record is good for the industry, but we need to be continually improving. We need to keep that first and foremost in what we do. A strong safety culture is a strong operating culture, and we have to believe that zero is possible.

Yes, I fully agree with that. And so as you know very well, every meeting we start, we'll do with health and safety, as we did today, actually, with our health and safety notice to the audience here, which makes me think about the employee aspect of our business, right? I said earlier in my prepared comments, on how our success is based on 3,000 employees that are dedicated, and trust me, I visit facilities, I talk to employees, and it's -- I'm always impressed on how people are dedicated and enjoy and want to work for us and want us to win as a company. But how does the people aspect fit in your view in what you're describing?

Yes. Well, I'll say you do a great job of that when you visit the sites, engaging the workforce. And the people are our business. They come to work every day, right? They bring their skills, they bring their experience and they bring pride to the products that we make that go out to our customers. And it's our job as leaders to make sure that we're encouraging that, whether that's through that safety mindset. We're engaging employees in problem-solving operationally, safety at the line level, but also measuring that, as I've mentioned already, right, from the shop floor up through the leadership team. We need to recognize those contributions and make sure that we're developing that workforce, looking at cross-training and things like that, creating capabilities and versatility in the people at our shops, which gives us flexibility. And when we give them room to grow, I think the company grows.

Yes, fully agree with that. So, we've talked about innovation and so on. So if we focus a bit more on technology and AI, so what are your thoughts there? How do we bring this into Stella-Jones and create efficiencies in our business?

Yes. I think there's definitely opportunities to look at technology and innovation as we look at it. And so as we think about that, we tend to look at the -- targeting the high cost, high variability processes. And when we do that, we want to ask ourselves, how can technology help us make this more efficient, make it safer, provide value out there. And so there's a few things that we're looking at. And you've heard about some of them already from the earlier speakers. We're looking at log scanning technologies, right, that help improve the yields in our pole peeling or pole operations, allowing us to provide a better class to our customers that they're asking for.

We're looking at automating our bridge line. It's a very complex product, lots of individual pieces serialized to be delivered to our customer. So how can we bring that consistency and improve that production rate there? We also have the pole framing and the pre-plating. We're in the process right now of getting into robotic pre-plating as Sylvain had mentioned, negotiating with our customers to move forward with that advancement. It brings value to us and efficiencies and safety, but it also gives it to our customer, truly making it a value-added product, eliminating some of the work they would have to do normally in the field.

And then there's the AI piece. We're monitoring some of the equipment and systems that we have, how do we integrate controls into those that provide us data that we can then begin to analyze and start to anticipate things, improve our treating processes, understand how we can be more efficient in some of the things we're doing.

And then there's partnerships with universities and suppliers looking at alternative preservatives. We need to be looking for things beyond what's in use today, just being future-ready, understanding greener preservatives that may be out there, still providing the protection that our customers want, but have less of an impact on the environment.

So these technologies, I think they make us safer, right? They can make us more consistent, and they bring value internally and externally. And that's a positive for both us and our customers.

Agreed. So when we had our initial conversation and ongoing conversation, I guess I look forward to seeing that technology being applied to our everyday processes where we can actually monitor pieces of equipment that we're not monitoring, getting to better preventative maintenance, for example, and so on. So those are all exciting ideas that your skill set and the engineering group that you're building will help us achieve this at Stella-Jones in the coming years. So that's interesting. So I mean the ultimate question is like how do we measure success...

Sure. Stella-Jones has a lot of data and has always looked at data. But near term, we've agreed to monitor a few key operational metrics that fit across the business or businesses, I guess, I should say. And so we're going to be looking at things like tons or cubes per man hour, right, which will allow us to measure our productivity and set expectations there. We're going to look at cost per cube or ton. That's going to track our efficiencies, help us understand our cost discipline and how we're doing that in the businesses. We want to measure customer complaints per unit. We talk about our quality and the success we've had there, but we want to measure how we're impacting our customers and make sure we're making changes in adapting as appropriate based on that.

And then there's cross training. I think that's an important measure for our people, how we're engaging them, how we're giving them opportunities and developing that flexibility in the organization. And then there's the near misses or safety observations. So getting into a very proactive look at what's going in our sites, driving that down to the shop floor again to get that engagement.

But at the end of the day, right, the real success is going to be developing accountability to those measures at every level. Again, I know I've said it three times, I think, now, but it's important from the shop floor up through the executive leadership team because when we build a culture where people service opportunities and are solving those problems proactively, we move forward very fast.

Great. So Wes, when you mentioned cost per cube, we're actually talking about how we can be more efficient on a cost per cube basis, which means reduced costs and savings. So for those of you who might remember, so a cube is -- refers to a cubic feet of wood, so 12-inch by 12-inch by 12-inch, it's a volume. For those of you who attended our first Investor Day, I actually had physical representation of a cube of wood. So for those who recall, that's what that actually is. So maybe a few more. So what does the future look like? Long term, where do we end up? What does the future state for Stella-Jones?

Yes, sure. And before I answer that, I'll say, with the Locweld acquisition, everybody is grateful that you didn't bring a ton of steel up here. Long term, it's about building the strongest, most resilient organization possible. It's about that future-ready mindset that you said. And to do that, I think we have to align that vision throughout the organization, right? We have to align at the site level, the BU level, even to our shareholders. It can't just be about what we're doing, but why we're doing it and helping people understand how the work that they do impacts our success as we move forward to that.

So we're going to build bench strength. We're going to focus on cross-training. We want to engage people because when they understand that vision and see how they contribute to it, we'll be successful.

Great. Any last thoughts for the audience?

Yes. Stella-Jones has a very strong legacy, a very strong history, has been very successful. I'm grateful to be here, a part of that. And as we look forward to becoming future-ready, innovating, building capabilities, technologies and modernizing, moving outside of our traditional products into those that are adjacent. This is an exciting phase of growth, and we want to be smart about it and focus on that innovation, those resilience while we do it and become future-ready. So I get the pleasure of building on that strong foundation, honoring what's made the company successful. And I'm very excited to be here.

Great. Well, Wes, thank you for doing this. I appreciate it. And I'm sure in coming quarters or years as you develop your structure, we'll be talking about potential cost savings for the organization and so on.

So with that, we're going to free up the stage. It might take a few seconds, and I'll give the podium to Rhiannah Carver for a discussion topic on sustainability. So thank you, Wes. Thank you.

Yes, thank you.

Great. Thank you, Eric, and hello, everyone. I'm excited to share with you today a little of what we've accomplished since the launch of our ESG strategy back in 2023. I'll also provide a preview of what we have planned for our sustainability goals and initiatives over the coming years.

So the ongoing evolution of how ESG is viewed, measured and reported has received a good deal of attention recently. Our approach is that ESG must be appropriate to Stella-Jones. We remain consistent because we've developed a strategy that is important to us as a company, and our intent is to continue to focus on initiatives that are strategic to our business.

Our strategy centers on ROI-positive projects and risk mitigation measures that are based on sound and practical governance and business principles. So as we move towards climate resilient, socially-just and equitable economies, Stella-Jones is ready to be part of that progress.

It's been 2 years since the launch of our foundational ESG strategy, which included many process-based goals that are important markers of our early progress and really set the foundation for some more outcome-based goals in the future. So since launching the strategy we have, reduced our total recordable injury frequency rate by 16% and implemented environment, health and safety third-party audits across our facilities. We've also implemented and published our greenhouse gas reduction road map, outlining the technologies and investments required to meet our greenhouse gas reduction goals and commitments.

We have also gathered diversity data for the entire workforce and benchmarked each facility's demographics against the local community, helping to identify areas of opportunity. We've also launched a leadership development program that more than 54% of managers have either completed or are currently undertaking. And lastly, we've completed a desktop ESG risk profiling assessment for 37% of our Tier 1 suppliers.

So at Stella-Jones Jones, we have six priorities, sustainability topics. But today, I'm just going to touch on three of those. That is climate change and greenhouse gas emissions, indigenous peoples and risk governance.

So beginning with climate change, I'm pleased to announce that we issued our first climate report within the 2024 annual report this year. Our greenhouse gas reduction pathway through our 2030 goal of a 32% reduction compared to 2022 encompasses five different project types. They are renewable energy, transport routing and mode optimization, energy efficiency and energy monitoring, utilization of biomass for energy production and identifying electrification opportunities for our equipment and processes.

So ROI-positive projects utilize new technology to reduce energy use and improve the performance of our equipment. One example that is quite exciting that's undergoing engineering feasibility studies is high-efficiency heat pumps to generate steam for our wood-drying kilns. The pilot project is based on a site in Quebec that combined with the low carbon electricity grid in Quebec could help reduce this site's carbon emissions by 75% and importantly, a 40% reduction in energy-related operational costs.

Under the topic of energy efficiency and energy monitoring, we are rolling out our real-time monitoring solution to six sites this year. This system tracks information and energy consumption from the key equipment and ties it with the operational data to provide our operators more accurate performance figures and enable faster reaction times when operating outside of accepted parameters. This solution is bespoke to Stella-Jones and is going to be managed by our in-house team of automation experts.

Although at the early stage, we also have seen some exciting developments on the topic of biomass, we are assessing combined heat and power technology that would utilize the wood byproducts at our sites to generate steam and electricity. This strategic initiative includes the assessment of co-location of peeling and drying equipment to ensure a stable biomass supply and the assessment of energy network buyback options available. Using our wood byproducts for energy generation is a central part of our greenhouse gas reduction road map, helping to expand renewable energy use across our network, whilst also lowering energy, transportation and waste costs.

Renewables are by far the largest part of our strategy, and I am pleased to announce that we've reached 2.5 megawatts of installed solar capacity across the network. A significant portion of the future planned reductions come from our renewable energy credit purchase that was completed in 2024. The 10-year contract for 100,000 megawatt hours from a wind farm in Texas will cover nearly all of our Scope 2 emissions.

Complementary to this, we have also completed the installation of a 1-megawatt battery at a treatment facility in Quebec. The battery is allowing the facility to avoid drawing energy from the grid during times of peak demand, also known as peak shaving, and that can help us reduce operational costs at that site by approximately 30%.

So moving on now to indigenous people, a topic where real progress is being made by our teams. In 2024, with the help of a third-party indigenous expertise, we developed a detailed indigenous people strategy, focused on more structured relationships with the indigenous communities in British Columbia. After sending our initial letter of intent to five priority bands in late 2024, we are now in the process of developing a memorandum of understanding with one of those bands, outlining the desire to develop a more formal relationship agreement, and our intent is to ensure we collaborate and work towards mutually beneficial goals, including community resilience, fostering economic opportunity in the forestry sector as well as continued protection of healthy working forests across Canada.

We are also pleased to announce that we are entering the final stages of an investment in Lizzie Bay Logging, an indigenous-owned logging operation in British Columbia. The investment of approximately $4.5 million will provide Stella-Jones with a 1/3 ownership stake in the company, along with the other indigenous bands involved. Stella-Jones will benefit through reliable access to utility pole fiber in Western Red Cedar and Douglas Fir, in particular, large transmission poles, which tend to be more limited in supply.

This partnership is a positive step towards more mutually beneficial collaborative business partnerships and procurement opportunities with indigenous peoples in Canada.

In addition to these two significant milestones in our indigenous people strategy, I wanted to touch on some other commitments we've made as part of our ongoing relationship building with indigenous peoples in BC. While Stella-Jones is not a significant land manager or tenure holder and the vast majority of our fiber supply still comes from third-parties procurement, we do have a dedicated Woodlands team that manages our modest tenure in BC. This team completes the indigenous computations for every harvest permit and maintains our land stewardship plans.

Working with the local indigenous bands to understand the environmental and cultural stewardship objectives for each tenure area has led to some additional commitments from Stella-Jones. These include allocated protection areas for caribou with no harvest designations applied. The agreement to replant harvested areas within 12 to 24 months ahead of the government's requirement for [ 60 ] as well as avoiding the harvesting of specific tree species such as whitebark pine to help at-risk species.

So overall, our Woodlands team and Stella-Jones takes a really long-term view of the management tenure, and we intend to continue to work collaboratively and respectfully with indigenous peoples.

The last topic I will talk about today is ESG risk governance, where our approach is all about setting a solid foundation and a culture of risk ownership across the business. We recently completed a supplier training course on human rights, where we provided guidance on identifying and addressing human rights risks in operations as well as our expectations for suppliers regarding fair labor practices and working conditions. Suppliers representing 11% of total annual procurement spend attended these trainings, which is a positive start for our engagement on sustainability-related topics.

We also completed a pilot on the task force on nature-related financial disclosures, all Stella-Jones' trading and peeling locations as well as 443 third-party fiber sourcing locations were assessed for nature and biodiversity risks and opportunities. Some of the risks analyzed included water stress, critical habitat, protected areas, forest loss fronts and habitat connectivity. As a company, dependent on healthy working forest, the TNFD approach is important to better understand the link between biodiversity and financial risk for Stella-Jones.

Having completed the assessment, our next steps are going to be more formal disclosure reporting and embedding these findings within our enterprise risk management process to ensure governance and oversight of any actions taken.

So despite the evolving regulatory environment, at Stella-Jones, we believe transparent disclosure on risk and opportunities, including those related to climate are integral to building trust and confidence with our many stakeholders, including all of you in this room today. For the first time in this year's annual report, we included financial disclosures on the physical and transitional risks posed by climate change, and we are on track to meet the recommendations of the Canadian Sustainability Standards Board's disclosure. You will see our sustainability disclosures further integrated into our financial reporting in years to come. This is not only about transparency, but it's also about setting Stella-Jones up to sustainable success for many years to come.

That is all for me, and I'm going to pass it on to Silvana. Thank you very much.

Thank you, Rhiannah, and good morning, everyone. I'd like to begin by expressing my sincere appreciation to our shareholders for your continued support and your engagement in our long-term strategic direction. Your commitment are instrumental to our success.

So far, you've had the opportunity to hear from Eric and our business leaders on how we operate and the opportunities that we foresee to continue to deliver value to both our shareholders and our customers. So now I'll walk you through some of the key financial priorities that will shape our path forward. But before I do that, I do want to take a few moments just to take a step back and look at our past financial performance and how this has informed us when we have set the objectives for the next 3 years.

So as you all know, we all -- we hold a leading position in the markets that we serve. They do benefit from strong secular tailwinds and recurring maintenance-driven demand. Our business is highly cash generative. It's supported by an extensive operational network and a well-established industry-leading customer base. A large part of our sales are to infrastructure businesses with the majority secured under long-term contracts, underscoring the strength of our customer relationships.

Our presence on both sides of the border means that we routinely supply finished goods using domestically-sourced inputs, helping us to mitigate the impact of potential changes in tariffs or trade disruptions. These attributes do contribute to the sales stability that we have seen over the years and our strong financial performance.

Despite the evolving market dynamics and macroeconomic headwinds, we have delivered an enviable track record of growth. A testament to the strategic focus, the discipline that we have within all our teams and the caliber of talent that is driving this organization forward.

Since we have yet to report our full year 2025 results, I will be referring to the trailing last 12 months ending September 30. And I do also want to mention that all the numbers that we are quoting here do exclude a gain on insurance settlement that we recorded in 2025, which we consider nonrecurring of $28 million, $21 million net of tax.

So if we start with our sales, you can see here that over the last 3 years, we grew our top line by an annual compound rate of 4.5%. With our sales from our infrastructure business accounting for 80% of the total, up from the 69% that we just had just a few years ago in 2022.

Our infrastructure sales delivered 9% of that growth with our Wood Utility Poles and Railway Ties increasing by 12% and 4%, respectively, while our Residential Lumber product category sales declined by 5% over that period of time. Following the reporting of our Q3 numbers, we remain on track to deliver the $3.5 billion in sales for 2025, which would mark the 25th consecutive year of growth for Stella-Jones.

In 2023, we did set out an ambitious profitability goal. We were targeting an EBITDA CAGR of 9% for the 3-year period ending this year. By Q3, we had exceeded that target, delivering an EBITDA CAGR of approximately 12%, which significantly outpaced our sales growth. From a margin perspective, we aim to expand our historical 15% margin, and we delivered this almost immediately, reaching 18.3% margin in 2023, up nearly 400 basis points from the 14.6% that we had realized in 2022. And this is well ahead of the 16% target we had initially set out. We've maintained an over 18% margin in 2024, and we continue to trend at about 18% in 2025.

A meaningful portion of this increase was driven by the growth in our higher-margin product category, as you know, which is our Utility Poles business, but just wanted to remind everyone that these results were delivered against the backdrop of inflationary pressures, more competition and growing macroeconomic uncertainty. As a leading manufacturer of our infrastructure products in North America, we have consistently leveraged our scale and strategic capital investments to strengthen execution and deliver value.

Turning to our EPS. While we grew our EBITDA to more than $600 million, we drove the improvement in our EPS even further as we did buy back shares. So we have delivered a 13% CAGR in EPS since 2022.

As Eric highlighted, we have strategically built a strong cash-generating business, allowing us to expand our operation and efficiently fund our capital allocation priorities. Since 2023, we have generated free cash flow of about $600 million, keeping us on track to return the targeted $500 million to our shareholders through dividends and share buybacks. Supported by improving profitability, we have consistently increased dividends, averaging an increase of 15% over the last 3 years. We also repurchased shares in the tune of more than $300 million in the 2023 to 2025 period, resulting in the cancellation of more than 4 million shares or roughly 7% of our shares. This did help drive further EPS gains.

Our strong cash flow has enabled us to make disciplined investments that have strengthened our operation and positioned us for continued growth. We have maintained inventory levels to reliably support the demand for our customers. We've invested in our facilities to preserve operational efficiency, ensured safety and support higher levels of service across our network. We've expanded capacity, as Kevin mentioned, completed strategic acquisitions to enhance our capabilities and broaden our market reach. So all of these accomplishments, we believe, reflect our commitment to deploying capital with rigor and focus, always with an eye towards long-term value creation.

So now turning to our outlook. Today, we are introducing a 3-year objective that we plan to roll forward each year, starting with the release of our Q4 2026 financial reports, and this is in order to always maintain a 3-year horizon. This framework will allow us to incorporate any investments or M&A activity that may occur while keeping our focus firmly on the long term. Based on our current portfolio of assets, we anticipate that our sales will -- total sales will grow by approximately 4% to 5% on a compounded annual basis between 2025 and 2028. This would translate into a 15% increase in sales to approximately $4 billion by 2028 compared to the $3.5 billion that we anticipate for 2025.

If we look at it on a product category basis, we expect our Wood Utility Poles to continue to account for approximately 50% of the company's total sales and be the highest growth business with a mid-single-digit organic growth. This growth rate is consistent with the expected annual spend -- the expected increase in annual spend by utilities for distribution installations in North America. In addition, we expect that our recent acquisitions of Locweld and Brooks to contribute about $225 million in annual sales by 2028. This reflects the additional capacity at Locweld following the completion of its CapEx project by mid next year.

Based on our current Railway Ties business, which is predominantly a black tie offering, railway tie sales are expected to grow at a stable low single-digit rate. As noted by Sylvain, we do continue to explore various value-added opportunities such as offering treated services only to our customers. This type of offering would allow us to preserve our margin and also reduce our inventory requirements, but may also moderate the Railway Ties forecasted sales growth.

For our Residential Lumber product category, we are reaffirming our previously disclosed annual guidance in terms of $600 million and $650 million in annual sales. Our confidence in sustaining the sales performance reflects the strength of our business model and the differentiated value that this product category provides. We have also relied on several multiple industry reports that does point to a very constructive backdrop indicating that renovation and remodeling activity should benefit from improving trends in home renovations and existing home sales.

From an EBITDA perspective, we anticipate sustaining elevated margins in the range of 17.5% to 18.5%. Part of this margin uplift will be driven by operational cost reductions, primarily resulting from improvements in supply chain processes. As Eric noted earlier, we will now be tracking EPS. So we have selected EPS as a target measure as it offers a clear and comparable view of our performance across the various capital deployment strategies. For our 3-year guidance period, we expect our EPS to continue to outpace the growth in sales. So our EPS growth would be higher than our sales growth. We are targeting an average annual EPS growth rate of more than 10%, which we expect will be driven by multiple profitability levers as well as share buyback activity.

This next chart walks you just through how we expect to achieve the $4 billion that I referenced earlier. You can see here the impact of the contributions from our Wood Utility Poles, from our Railway Ties as well as the contribution from our completed acquisitions.

Our disciplined approach to capital deployment has been essential to our growth, and it will remain a core pillar of our strategy. Over the next 3 years, we expect the EBITDA to free cash conversion rate to remain consistent with the average performance over the last 2 years, which is -- which represents a conversion rate of about 50%. Our strong free cash flow conversion underpins our capital allocation strategy, which is centered on 4 priorities.

First, a key priority for the business is always to reinvest in our asset base to maintain the quality and the efficiency of our facilities, ensuring that they remain reliable, safe and well positioned for the long-term performance. To that end, we anticipate investing about 2.5% of annual sales, which is consistent with our historical rate. This will translate to approximately $85 million to $95 million in capital expenditures per year.

In addition to this regular maintenance CapEx, we will continue to pursue growth CapEx opportunities that meet return requirements, such as the capacity expansion project that is currently underway at Locweld. As Eric mentioned, other potential growth investments could include a greenfield expansion in the U.S. for Lattice production as well as targeted investments in technology and innovation as highlighted by Wes earlier.

As we shift our focus to acquisitions and investments in new markets, we are placing greater emphasis on strategic growth in our capital allocation approach. We cannot commit to any specific level of M&A at this point or time line, but we are committed to ensuring that any investment that we make will align strategically, will offer meaningful synergies and demonstrate a strong financial performance with attractive margins.

In terms of our acquisition playbook, our 2 most recent acquisitions, Locweld and Brooks, align well with our strategic approach and demonstrate the disciplined execution of our M&A strategy. Both businesses serve the growing T&D market with product offerings that expand beyond our traditional business. They are expected to generate solid margins in line with our Utility Poles based on recurring sales, and they do also offer meaningful growth opportunities. We also see opportunities to leverage our sales and our distribution network and capital resources to drive incremental growth. And lastly, each acquisition came with an experienced and motivated leadership team that we have retained and whose values align closely with ours.

While growth opportunities will continue to play a key role, we do remain committed to returning capital to our shareholders through a consistent payout of dividends, which is a staple of the company's capital deployment. We are maintaining our current dividend policy, which targets to pay out dividends between 20% and 30% of prior year's EPS. We take great pride in saying that we have increased dividends every year for the last 21 years.

And lastly, in terms of capital allocation priorities, we will consider share buybacks based on the timing of M&A and on our leverage position. As such, we are moving away from a continuous buyback program to ensure that we do have that flexibility to act quickly should a growth opportunity arise. We continue to view buybacks as a valuable capital allocation tool, particularly during periods of slower growth deployment. However, the pace and the frequency of the buybacks may be more variable than what you have seen during the last 3 years.

Our approach to buybacks will be a little bit more opportunistic, allowing us to return capital to shareholders when it makes sense. A strong financial position that we have is supported by our investment-grade credit rating as well as our targeted leverage range, which is between 2 and 2.5x of net debt-to-EBITDA ratio. That said, as we have said in the past, we are prepared to temporarily deviate from that leverage target range in order to be able to either fund our working capital investments or if some strategic capital initiatives come around. But we remain focused -- if we do exceed and go beyond the range, we remain focused to be able to return that leverage ratio back within that range within a very reasonable time frame. We may also deploy excess capital to reduce our leverage ratio below the 2 to 2.5 in order to be able to preserve financial flexibility if we believe we would need it for some strategic opportunities.

So in summary, as we embark in our next phase of growth, our value creation priorities are clear, and our teams are all strategically aligned to drive growth. We aim to maintain strong EBITDA margins and an asset base that will consistently generate strong cash flows. With a strong balance sheet and access to capital, we are well positioned to execute on our strategic priorities. Our solid financial performance reflects the entire team's dedication to disciplined execution, delivering results not only for today, but for the long term.

So with that, we will take a brief moment to set up the stage for the Q&A portion of our event. I will ask the other speakers to join me on stage. So we will be taking questions from both the room as well as online. So for those in the room, if you do have a question, please raise your hand. David has a mic which he will come up to you so you could ask your question. And for those that are online, you can submit your questions and our moderator, Stephanie will share those questions with us.

That was fast and efficient. Great. So this is the last section of today's conference. We'll take the Q&A from the room and from anybody who's attending via webcast. So I'll open the floor as who would want to kick off the Q&A period. I see Benoit is all ready to go.

Benoit Poirier from Desjardins. Great job, everyone. First question is for Kevin. When we look at the revenue growth over the next few years, so 4% to 6%. Could you maybe able to break that down between volume, upsizing, pricing? And also given the capacity that you have, how much revenue growth could you support before investing further into CapEx, Kevin?

Sure. So the volume growth, the Crayola Crayon example that I gave you is happening. For sure, it's happening. Thankfully, it's not happening everywhere all at the same time, but -- we see it in various parts of the continent, various customers, but it absolutely is happening.

Okay. I'm sorry, the question on the capacity, how much growth in volume can we sustain with our current network. And I would say in some parts of our network, we could sustain lots of growth. In the next 3 years, I don't see any real issues with anything. Like I mentioned, there is going to be challenges sourcing a very narrow mix of trees that will make those heavier class poles.

But as I talked about, hopefully, we're leading that target by the network of appealing facilities and the resource team that we've got gives us a real strong advantage in the ability to do that. And I didn't really talk about species substitution other than saying it. But what that means is then we are doing some of this where a customer may need some -- a specific mix of wood immediately and their preference is to buy Southern Yellow Pine, and we can offer them Douglas for Western Red Cedar to meet that kind of spike in demand today.

And maybe my second question, and I'll pass the mic right after. Pierre, just in terms of Steel Pole, obviously, I'm just wondering what about the next steps to make the decision toward a greenfield in the U.S.? Is it mostly commitment from the utilities? So that would be the question. And also, if you could break down how you would characterize Lattice versus Monopole. You're exposed to both. It's only 5% of your total revenue at Rockwell. Is it a different margin profile? And now that you have kind of both expertise, could you go into the big pole organically or your preference would be towards M&A to build kind of more credibility?

Maybe, Pierre, you can answer the first part on the plant criteria, and then we can talk about M&A after.

So there are criteria for a greenfield in the U.S. So there's multiple criteria to consider. The first one is where do you go to galvanize your black steel. So you need to be close to a galvanizer because we don't have the intention of setting up a galvanizing plant. It's very expensive. It involves also environmental issues. So we don't have the intention of doing that. Second, where are you going to supply your steel, your black steel? So you need to be close to sources to reduce transport costs for the black steel.

Third is going to be the labor. So is there a pool of labor to -- over there enough to -- for a greenfield or a plant to operate. Also, where is the market, the fourth criteria, where is the market? So where is the work going to come from? So if you're closer to your work, then you have less freight afterwards. So those will be the criteria mostly for setting up a greenfield or a plant in the U.S.

And Benoit, with regards to how do we grow our business in the, I would say, the transmission market, right? So for me, it's a combination of the Lattice and the Monopoles. Obviously, we're focused on doubling the capacity in Candiac. We're studying that expansion into the U.S., as Pierre just mentioned. And obviously, in my prepared comments, I talked about the monopole industry being an opportunity. So there, we need to be mindful about adding capacity. We don't want to start a pricing war in the market, right? So I think there's work to be done there to study exactly how we enter the market, but it's definitely -- our intention is to keep studying it. Obviously, Marco, business development here is doing a lot of work on that front to identify potential acquisitions.

I'd like to come back to your first question, if you don't mind, because I think it is a part of the question we didn't quite address. So as you can imagine, we prepared a 3-year guidance. So as we did that, we put the organic growth behind it, we sort of said, "Well, how does that capacity fit?" So we know that for the next 3 years, we're pretty much okay. Otherwise, we would have announced a growth CapEx this morning. So I think we're in good shape right now. And in that bucket of whatever, $85 million, $95 million, there's always a bit of improvement in efficiencies and some capacity.

With regard to the pricing because I don't think we touched that point for you as you asked the question. So as you know, very fortunate to have 75% of our Wood Utility Poles business under long-term contracts. That's a bit of a shield for us to some extent. As they come to renewal, there's always the potential of other competitors bidding and so on. You know that we've seen some pricing adjustments or normalization in that spot market. I think we've hit some sort of leveling off at this point in time. Difficult to predict the future. I guess what we need to monitor as a company is how our customers are going to invest going forward.

So if we see this uptick impact Stella-Jones or the wood treating industry, as BCG explained this morning, I do think that the spot market suppliers, those other competitors of ours will benefit from that, and then it should -- we should be fine. And if for some reason, some of their customers go a bit dry on the capital and they can't support it, they might be more aggressive. We feel very confident with our portfolio of customers, over 1,000 customers that we're seeing some of them getting ready, being really active and having some capital to deploy and some of them are still a bit slow out of the gate, but I do think it's a trend as I've been saying for -- and we've been saying for a long time. It's coming. I think it's -- we're seeing good signs of it. Our Q3 results were good on the volume front. So I just wanted to get back to you because I wanted to make sure that we get those answers for you.

This is James McGarragle from RBC. I just had a question on the margin outlook and some of the assumptions that you're building into your guidance there. So can you just talk about what you see the risk from pull pricing right now in the spot market in terms of meeting that guidance and maybe some of the opportunity you see around creating the efficiencies that you alluded to in the fireside chat. Just trying to understand the drivers that kind of get you to the 17.5% versus the 18.5%.

Good. Thank you, James. Silvana I think you can handle this one.

Yes. So basically, at the higher end, so the 18.5%, that basically includes some uplift, as I mentioned, from operational efficiencies and the work that Wes is working on in terms of centralizing certain of our supply chain processes and getting some operational efficiencies there. So that is factored into the higher end. The higher end also does include the -- just the fact that we do have a greater weight with Locweld and Brooks into the higher-margin product category. In terms of risk on the lower side, the 17.5%, that has factored in the potential risk in all of the spot markets, right, not only Utility Poles, but there's also a spot market for Railway Ties and let's call it, a dealers' market for Residential Lumber. So those are all factored into sort of the lower end of the target EBITDA margin range.

Wes, not to put you on the spot, but can you speak about where do you think your initiatives can drive or contribute to our margin targets?

Yes. No, I can add to that for sure. As we're starting to build the structure around that, bringing in a new director of procurement, making sure we're focused on that, as Silvana hinted at, as we've grown, there's an opportunity to leverage our scale there, drive costs down and bring some benefits to the company. Rhiannah has also stepped over to the side and has taken over project management as well as the ESG. So as we look at that, how we're deploying our capital broadly and prioritizing in a way that gives us efficiencies, drives the ROCE targets and things that we've talked about. And then engineering, helping us look at those processes getting engineering internalized a little bit more than it has been so that we can focus on that going forward will all contribute to those things.

Thank you, Wes. And as I said, as we progress, we'll be reporting on a regular basis on our progress and how that's moving along.

I just want to take a couple of questions we got from participants that are attending remotely. So a quick question on what is our ROE or ROIC? And I guess I referred to ROCE earlier target. So for those of you who spend time reading the other public disclosures other than the annual report, such as the -- our circular and so on, you would understand that the target for management is actually, for ROCE is set at 12% as a target. We've been exceeding that for the last 3 years, over 13%, 13.5%, I believe, last year. So doing very well on that front.

And quickly, there's another question here is how do we -- as we expand into the Steel business, how does this impact our legacy Wood business and how do these 2 businesses complement each other? So to be clear, we've grown our business for the last 30 years on the wood treating industry. And we're not moving away from it. We're going to keep investing. It's a great business. It today has got us in a leadership position in North America.

However, as I explained, we are less exposed to the transmission market, which is really 80-plus percent based on steel products. And that's why the Locweld acquisition sort of unshackles the opportunities for us to be able to go explore confidently and either build or consider M&A in that space because now I've got -- our bench has just increased significantly with experts in the steel industry, how to procure, how to manufacture, what to consider and so on. So very fortunate to have this team with us.

So they're actually very complementary. Obviously, we're leveraging the customer base. We have, as Pierre mentioned, 15 of the key customers at Locweld were Stella-Jones', but we have over 1,000 employees -- 1,000, sorry, customers in our portfolio. And on top of that, we have a distribution network. We can leverage that distribution network to move products across North America closer to the customers when they're ready, potentially stage projects at some of our yards. So those are all things we're looking into. So definitely complementary, very excited about the tailwinds coming with those 2 businesses. David, we've got some more questions from the room?

I just had a quick follow-up, then I can pass the line. So on the EPS growth guidance, it seems like that includes acquisitions from 2025. So are we understanding that right that it should be kind of outsized growth over the EPS guidance that you gave and then maybe a little bit lower than that in 2027 and 2028. And just how are you thinking about your long-term ability to grow EPS? Is that kind of 4% to 5% top line growth combined with 2% to 3% share buyback gets you to a high single-digit type of level longer term? Just how should we be modeling and thinking about that going forward?

Silvana?

So for the EPS growth, the target that was set was really looking at different capital deployment strategies, right? So one end, we basically -- based on the projections on our current asset base, which we mentioned the 4% to 6% -- 4% to 5%, sorry, growth of the top line and with that EBITDA margin, that growth plus buybacks would give us the target of 10%, but we also modeled it at the other end where we would have M&A activity and less buybacks. So that's how sort of that comfort zone we got on the 10% because on both extremes, we were able to get comfortable that we would be able to exceed that. Going beyond that 3-year period, a little bit harder for me to answer that as we'll see how the business evolves over the next 3 years.

Sorry, James, I sort of cut you off, but thank you for following up. Maxim is next, I believe.

Maxim Sytchev, National Bank Financial. I had a question to go back to Poles. I mean if we look at the organic growth, it was, I think, 1% in Q3. And one of the things that we hear from utilities is the fact that it's been very difficult to pass on the rate increases onto the rate paying base. Do you mind maybe talking about the sentiment right now kind of like on the ground and whether that's sort of evolving because inflation has come down in terms of again being able to -- for your clients to actually to invest while there's still that perception of high inflation backdrop?

So definitely. Thank you, Maxim. I'll let Kevin chime in, but I just want to add maybe 1 or 2 comments there. So you're completely right. H2 last year, H1 this year, a bit softer on the volume. I definitely feel that a lot of our customer base were conscious of their capital deployment and how to be able to address that, acknowledging that there's the requirement for affordability for the end user, but also there's also the pressing matters of building stronger energy grid and actually more generating assets. We have seen -- as you know, we've reported our Q3 results, some improvement on that volume.

But I would say over our 1,000 customers, it's a bit spotty here or there. Some of them are like organized and well structured. Some of our customers that are public are -- have been very clear on how they have restructured their capital and how they issued equity or from financing, and we're seeing those move a bit more quickly. And others are saying like next year is going to be our year. So it's a bit -- but we're very fortunate since we're we have a presence in North America, Canada, U.S. and every region. So obviously, the strength of the portfolio helps us very much. But maybe more specifically into the details, Kevin, you can talk about.

You did a good job of answering that question. So yes, certainly, inflation, affordability are things that our customers have to tackle all the time. But maybe to Eric's point, one of those slides that BCG, the Boston Consulting Group put up there, which showed 5 utilities that are basically the same utility, all do it differently. Everybody has got a different path. And because they've got different priorities, different constraints, different PUCs that are telling you have to do this or you can't do that.

We absolutely have seen an example of a customer that said they're going to buy a lot of Poles to do their replacement and hardening. And then halfway through the year last year, they said, we're cutting that back to here because of some issue. And about April this year, they said, no, we're going back to this now suddenly. And that's just one customer. And as Eric said, that's one customer in one area. The good news is that they all kind of march to different drums, but we're everywhere. So the sort of that averages, laws of averages sort of tend to work in our favor.

Hamir Patel, CIBC. Eric, you had the slide showing the TAM in Tubular of $3.5 billion. I know it's a modest part of the Locweld business today. But if you do decide to expand there potentially through acquisitions, how sizable are potential targets on that side of the market? And how should we think about valuation multiples?

So I mean, we're doing the homework today. So I mentioned it -- I mean, you might think there's not much to do because there's only 4 to 5 big participants and then a handful of smaller players. But -- so we're definitely out there talking to individuals, meeting with different companies and understanding what are their plans, first and foremost. Obviously, they might not want to sell. So that's an easy one to conclude on. But there are some opportunities out there. Some of them are private equity owned. So obviously, that brings a whole new dynamic of when processes occur, expectation on multiples and so on. And we're very mindful of the multiples we pay.

I don't think we'll be in our traditional 6 to 7x in this specific space. I guess I can go as far as that. But we know where our trading multiple is today and overpaying on our multiple, we'll need to come up with a lot of great arguments to justify it to our shareholders as to why we think it's a good idea. So there's a limit there also as to where we can go. So again, we're mindful of the valuation and so on, but we do acknowledge that we'll have to do that extra effort to be able to get a presence in the space that is growing and has significant opportunities for us.

Fair enough. And just a last question I had on Railway Ties for Sylvain. Can you speak more to the composite tie opportunity you referenced there? What sort of volumes could that be? And would you have any interest in Steel or Concrete Ties?

So we're in discussions. We're looking at alternatives on the Composite Tie, but it's not a market that will necessarily increase the volume. It's more like a targeted area with harsh environment or high humidity that we look at. But it's more like value-add product that is specific for the area. Other opportunity, we're always looking. But definitely, we can confirm that we look really seriously on the composite side of the business because there's interest, right?

No, there is interest. I was going to say that's a good point. So all our Class 1 customers buy Composite Tie. They have a small program. But I don't want to quantify it for everybody, but it's a very small volume. So they're essentially trying it out and trying a lot of different suppliers. And there are different qualities and different price points for these products out there. But one comment we regularly get is like we'd love to see Stella-Jones be able to come up with a solution, and we can leverage, obviously, the distribution and so on. So what we do believe is that the -- it's not a growth aspect, but it's a substitution, right? So it won't be [ Wood Utility or go ] to Composite, but we're going to be offering something that's better value added and has more resilience in the network and perform better.

So could that -- once you've got the right product and it gets adopted, does that have traction? And does it become 500,000 ties a year, 1 million ties a year when we do 7 million to 9 million ties a year depending on the years. So I'm just giving you orders of magnitude. But today, Class 1s, I would say, would order on average less than 200,000 ties a year, if not 100,000 in some cases. So it's nothing big and they spread amongst right now several suppliers because they're putting them in track to try the same way they're doing it with DCOI, for example. I referred to that earlier.

A lot of our customers have taken DCOI treated ties. They put it in service and now they're monitoring it. They're trying to figure out the experience and what does that mean? And will they one day have the idea to meaningfully move away from a Pole treated tie? That's not for tomorrow for sure. But they're definitely willing to work and the -- and to do some R&D on it, and we're super happy that they're talking to us about it because it gives me the signals that if we come up with something that's meaningful, we would have an opportunity to have great discussions with them.

Yes. Benoit from Desjardins. And moving into that same vein, Kevin, you mentioned that you were exploring also [ adjacent ] opportunities on the Poles side with inspection, with Composite also. So how do you assess those opportunities? And what would you like to see to make you confident that -- the go ahead going forward? What are you assessing when making a decision about those adjacent opportunities?

So I would say that there's a big universe of things that could kind of fit into our approach to an acquisition, and you guys are familiar, Eric has described that. From my perspective, it also has to sort of complement what we already do. So there could be a lot of things. I don't know that I could start listing what they are. But certainly, there's a big business out there supplying, like you say, the in situ inspection, repair, maintenance side of the business. There's also smaller items that utilities buy that sort of go through distribution.

Our products don't really go through distribution per se. We put them through our distribution yards, but they don't go through those third-party distributors. Brooks, Crossarms do. About half of their volume goes through that channel. And I think that the Rock Anchor is another item that we're not going to be shipping full truckloads of those to customers. Those will likely go through a distribution channel as well. So there's -- that opens a whole another range of things that as we -- it's early days, don't get me wrong, with Brooks and this business, but there are things in there as well that I think would complement the business that we've got today and utilize some of our distribution network and really the relationships we have with our customers.

So Benoit, I would add to that, and we've had this conversation before. When I look at the distribution pole, in some occasions, there's as much hanging on that pole in value as the pole itself and Crossarm is a very good example. Brooks manufacturers with Crossarms. Now that we're in the business, we understand we can talk to our customers, can we get into Steel and Fiberglass Crossarms.

But so as we enter this room, there's a few more doors that we can knock on and open up and understand what's there. It might not be for us. It could be for us. I wont's say Stella-Jones does not aspire to be the Amazon of nuts and bolts for the utility industry. That's not what we want to do. But there's still some meaningful components that have very attractive financial EBITDA profile that are accretive, that our customers are going like, all day long, Stella-Jones, if you guys want to do this, use your network, consolidate and be that supplier for us, we'll do it.

And those are the customers that we're targeting. It's not all thousand of these customers that want us to do this for them all day long. But we do have a few great partners. And we're a big organization, but our utility customers are significantly larger. And when you have their support, it's easy to build a business model around that. Yes, Michael.

Mike Tupholme, TD Cowen. Eric, a question about the Contracts and Utilities business. I guess we've heard in the last several years some discussion about how there's been a lengthening of the duration of the contracts on the Wood Poles side. I'm wondering if you can provide a bit of an update on that. And then secondly, talk about on the Steel Structures side, what -- how contracts look? What does the duration look like there? What does the structure look like for those contracts?

Thank you, Michael. So I'll pass that on to my colleague. I'll let Kevin start it in. Pierre can answer for his division, but go ahead, Kevin.

Sure. I mentioned in the presentation that going through this COVID cycle of constraints, et cetera, I said we didn't run after and chase short-term opportunities. We met with a lot of utilities that are current customers. And really, we're looking -- we were both interviewing each other, if you will, looking for us, looking for longer-term relationships where we can build yards and start planning for the resource needs, and so that remains strong.

And as we've talked about, there is a balance there. We can't -- I don't -- actually, I don't want 100% long-term contracts because it gives me no flexibility. So there's a certain amount that I need as I call it, discretionary or customers that I have not made a promise to, and that's spot volume. And so I use that spot volume to turn off or turn on to fill in where a contract customer slows down or speeds up. That's kind of part of the calculus of how to make that work.

Thank you, Kevin. Pierre, do you want to give us the perception on the steel side?

So there's 2 types of clients. The first type, some clients are really good at forecasting their demand. So those clients, they will ask a long-term contract on that period. That's why we got a 10-year contract for 60,000 tons. That's one of those clients. Other clients, they focus more short term. They don't know their forecast, but they want to contract. So on those contracts, what we're going to do, we're going to set up the price for, let's say, towers between 0 and 5 towers, between 5 and 10 towers, between 10 and 20 towers. So there's a contract for that. When they're ready with their forecast, they come to us and say, "Okay, price it." Then we give a price and then they will issue to you. Both contracts, there's clauses for indexation for the steel, for the zinc, for the labor and the overhead. So everything is indexed. So the contract that's starting today will be good for many years in the future because of those indexation clauses.

Perfect. And then one follow-up, different subject. On Residential Lumber, not a lot of discussion about that today. I know you've reiterated the $600 million to $650 million of revenue guidance. How do you think about that business strategically going forward? I mean it's not targeted to grow the way the others are. So how does it fit into the portfolio in your mind at this point?

Well, thank you, Michael. I'll start. If I take a step back, it's funny, we had a conversation yesterday about that. But the same rigor we put around M&A, when we look at the criteria for financial performance, we do with our current business. So that's a review that happens once a year at a strategic meeting with our Board. And so -- and obviously, Residential Lumber becomes -- is often a topic of discussion because it's been brought up by a few shareholders and a few analysts over time. And my answer hasn't changed. It's -- obviously we give a range of $600 million to $650 million because really, we want -- well, first, it's not a business that we're going to invest and do more M&A. We've been clear about that.

It will grow depending on how well the customers we support grow their market share. So could one day that range change? Perhaps. But you're right, for the guidance, we've kept it where it is. Today, it's a business, and we don't segregate profitability, but it's slightly under a corporate average. That inventory turns 4 to 5x a year, which is not the case for Wood or Utility poles. So it generates a lot of free cash flow for us. It does well. So there's metrics that it does hit very well on. That being said, anything is for sale for the right price. So it's not as if it's something that we would not consider. If we see it's a great offer that comes to the table, we will go to the Board and have a discussion. It might be something that we need to do eventually if we want to consider transformational acquisitions. So you can see that more or less, we're still at the same place. But for now, it's a great business. It does very well for us.

I got a question right here on the screen, if you don't mind because it's been there for a little while, but it's for Rhiannah, and I'll read it out. So Rhiannah, you alluded to changing political and regulatory landscape around ESG. And how do you see that impacting Stella-Jones' ESG initiatives going forward?

Yes. Great. I think the short answer is not much. Our ESG program we've developed is really pragmatic and valuable to our business, which is why it's remained consistent. That said, we do obviously stay abreast of any changes in regulation, whether it's ESG-related or other. Our team of legal experts make sure we understand what those changing expectations or regulations are. And if it happens, we, of course, will make sure that we're going to be compliant in both sides of the border. That's a commitment.

Jonathan Goldman, Scotiabank. I guess going back to the polls outlook, the mid-single-digit organic growth target that you have there, is that aligned broadly with your Utility customers' growth CapEx plans? And what would you see as the high side and low side risks to that organic growth target?

Great. Well, thank you, Jonathan. So Silvana, you are architect behind our guidance. I'll let you give some feedback.

Yes. So it's definitely supported by both market industry data that we get. As you saw, BCG also obviously did not go into that much detail, but we do get reports, and it is based on their market industry data as well as projections that we do internally with Kevin and his team in terms of the volume growth that is expected. Maybe just to answer, I think it was Benoit's question, when we put out the projections 4% to 6%, we always assume in there that there is just inflationary price increases. So part of that is pricing. So let's call it a 2% with the remaining being the volume increases, which are in line with the expected increase in CapEx spend generally for the distribution wood market in North America.

In terms of upside and downside, I think you've heard the team. There's always the timing of projects from utilities. Obviously, we are -- that is mitigated in part by the scale and scope of that business and the customers that we have, but there's always that risk. And we talked about the strength of our business with the contract pricing. So fairly confident that putting an inflationary price increase in our projection is reasonable and modest.

David, anybody else?

[indiscernible].

Oh, there's a hand up right here.

Mike Tupholme, TD Cowen. I know you're still evaluating the possible greenfield opportunity in the U.S. But can you give us a sense for what the capital cost of something like that would look like if you proceeded and what the development time line is to -- for -- to bring that project online if you go ahead with it?

Still early days to come a number. I could definitely think about a range of could it be like $45 million to $55 million in capital investment. Obviously, we are not clear on different state incentives. So we're actually working with someone that's sort of guiding us to what would be the right place to meet [ PRS ] criteria, but then there's also different incentives in different states, not necessarily fiscal incentives and so on or subsidies for labor and so on. But I would say that would be a fair range more or less for that 20,000 ton steel facility.

I'm sorry, the time to actually develop and bring it online.

I would say from the day we formally announced it, I would say, probably 18 months.

Dan Hansen, American AgCredit. Real quick, I saw on your slide, you had an AI bullet up there more or less. Could you just talk about your strategy around how you guys think this may impact you given obviously, the physical limitations of your business and being able to apply it. But maybe can you talk about your strategy around it and what you guys are doing with it?

Well, thank you. I like the question because we don't often get those types. And it's interesting because you don't think about AI when you think about Stella-Jones. So the first thing actually, we're doing, we have -- and we're in the process of putting first and foremost, a framework, right? So we will have, by the end of the year, our own AI internally, which is supported in the backdrop by one of the well-known Generative AI, but it ensures confidentiality for us internally. And then once we have this internally, we also need to make sure that, for example, all our employees don't have access to salaries, right? So we need to make sure that we have a good robust framework internally, and that will be done here by the end of the year and also provide training to our employees of the opportunities, the risk and what is possible with AI. So we're definitely working on those fronts.

When I think about what we can do as a company, so we -- so we just completed our REP implementation, very sophisticated system that gathers a lot of data. Just on the costing perspective. For example, there's like several buckets of costs where I can monitor things in a more finite way. So how do I navigate this and quickly get information to make me take better decisions on that. So that would be an example.

On the Residential Lumber side, we said we will talk about residential lumber, but our main customer there provides us with a boat load of data that actually we have someone in our IT department who's trained in business intelligence, but he's actually a data scientist. And we sort of unleashed this young man a few weeks ago with this data, and he's finding trends in what we do for our customers. Then we're going like, that's interesting. This SKU sells super well in Western Canada and nothing moves in the East, but it's not even listed. And actually, we had -- we got our mind sparked with that idea because actually, last year, one of our salesperson figured out like "Why don't we put this in Ontario? And lo and behold, sales pipe for that SKU?"

So then if I think about what Wesley wants to do, so if we can put enough gizmos on our pumps and our different pieces of equipment and we can gather data, we can actually do predictive maintenance on it, right? We can understand how that goes. Pierre's project at Locweld, all the equipment we're ordering is generating data as it produces every day, and it's actually funneled to a big database, and we can actually use AI to understand what's more efficient, who is actually working better, what is the best practice in our facility and how we can sort of use that and deploy it internally.

So as we learn more and do more, we realize maybe we can apply this to the business. I mean it won't peel poles better. It won't -- it might treat better actually, you don't know how that can work. But -- so I guess there's some level of excitement there with small initiatives internally that is going to get us to the next step. And part of Wesley's department with a few young engineers that can think outside the box and actually maybe move the needle for us. And it's again of like how big can you dream, what is possible, and we have to try things to learn more about how we can apply it.

Any further questions?

Well, I know we've got lunch outside, and we can definitely keep talking for those who want to hang around for a little while. But -- so I'll conclude the Q&A period. I want to thank all our speakers, everyone who joined us this morning in person and online. It's very much appreciated. I want to thank the Stella-Jones team who dedicated their time to prepare the event. Obviously, a lot of time goes into this and really happy with our speakers because, obviously, we don't do this very often as a group. So I think we did extremely well. So thank you so much.

And so as you have heard many times today, our value creation priorities are aligned with our vision and mission to be a partner of choice for the infrastructures that connect our communities. We have the right team, the right assets, the right customers and the opportunities to stand tall and reach wide.

And with that, I wish you a very good day and a safe one as well, and thank you very much again for attending our second Investor Day.

Good morning, and thank you for standing by. Welcome to Stella-Jones Third Quarter of 2025 Earnings Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded on Wednesday, November 5, 2025.

I will now turn it over to David Galison, Vice President, Investor Relations of Stella-Jones. Please go ahead.

Thank you, Ina, and good morning, everyone. Earlier this morning, we issued a press release reporting our results for the third quarter of 2025. 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 SEDAR+. As a reminder, all figures expressed on today's call are in Canadian dollars unless otherwise stated.

Please note that our 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 SEDAR+. The documents are also available in the Investor Relations section of Stella-Jones website at www.stella-jones.com.

Additionally, during this 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 SEDAR+. Lastly, we have prepared a corresponding presentation, which we encourage you to follow along with during this call.

I'll now hand the call over to Éric Vachon, President and Chief Executive Officer of Stella-Jones, for a strategic business update, followed by Silvana Travaglini, Senior Vice President and Chief Financial Officer of Stella-Jones, who will provide a more detailed financial overview of the quarter.

Éric, over to you.

Thank you, David. Good morning, everyone, and thank you for joining us today. First, as some of you who are joining us virtually may have noticed, Stella-Jones recently unveiled a new brand platform. This includes not only a refreshed look and feel, but also an updated brand positioning to make Stella-Jones the backbone of solid infrastructures for stronger communities across the continent. We are thrilled with this new brand platform, which aligns seamlessly with our focus on building a strong, agile business and on being a partner of choice to our infrastructure customers.

Our results reported today reflect another successful quarter, supported by the continued strong execution across our businesses. Our Q3 results benefited from the organic sales growth of our pressure-treated wood businesses as well as the contribution of our steel structure division, formerly known as Locweld. Particularly noteworthy is the continued improvement in volume momentum for utility poles. We remain encouraged that this positive trend will continue and be sustained going forward.

Although railway ties sales did not increase as anticipated, the company generated more EBITDA and maintained strong EBITDA margins and cash flows. This allowed us to reduce our leverage to 2.2x and further enhance our financial flexibility to support ongoing strategic initiatives. The integration of our steel structures product category into our business and operational investments into the production capacities are well underway, having committed the majority of the planned $15 million capital. We remain on track to complete the expansion by mid-2026, with production ramping up in the second half of the year. We remain well positioned as quoting is very active for long-term contracts to fill the expanded capacity for major North American transmission projects. Consistent with our focus on creating long-term shareholder value, we were pleased to announce the closing of the Brooks acquisition, which further expands our product offering as we leverage our extensive sales and distribution network to better support the needs of our utility customers. This acquisition provides us with a presence in the wood distribution crossarm and transmission framing component markets, aligning with our vision to make Stella-Jones a partner of choice to our infrastructure customers. We look forward to welcoming into our team the group at the Brooks facility as we continue to focus on enhancing growth through acquisitions as a cornerstone of our value-creation strategy.

I'm pleased to share that we published our latest ESG report in September, highlighting meaningful progress in our sustainability journey across the organization. Notably, we obtained limited assurance of our Scope 1 and Scope 2 greenhouse gas emissions, an important milestone in our commitment to transparency and accountability. We also advanced on our GHG reduction road map, launching several impactful projects aimed at lowering emissions throughout our network, such as the integration of heat recovery events or real-time energy monitoring at select facilities. I want to thank our team for their dedication and hard work in driving these initiatives forward and helping us build a more sustainable future.

I will now turn to a performance overview of our main product categories starting with utility poles. As you are aware, a large part of our business is contractual, and our strong network and focus on quality have helped us secure additional contracts, which we are now starting to benefit from. Our volume growth this quarter is coming from these new contracts while we continue to see softness in the spot market. Given the additional industry supply, the slower demand has continued to impact spot pricing, which have remained below levels realized in 2024.

For the full year, our utility pole sales growth outlook is expected to be in the low-single-digit range versus 2024. The pipeline of opportunities for volume growth in the utility pole business remains strong and continues to be key for Stella-Jones. While the pace of investments will continue to be influenced by our customers' capital deployment strategies, we have positioned the business well to benefit from meaningful investments required by utilities to replace aging infrastructures and increasing grid resiliency.

For railway ties, volumes in the third quarter continued to be impacted by a Class 1 customer treating their railway ties internally as well as a lower-than-expected increase in commercial volumes. While commercial orders have been helping close the gap in volumes, delays in certain project starts are pushing deliveries into next year. As a result, we now expect the larger volume shortfall to act as a headwind for the remainder of the year, and we are now forecasting a mid-single-digit year-over-year decline in railway ties. Despite the lower volumes, our teams have worked diligently to improve margins and profitability. Once we reset this year with the lower external purchase from our Class 1 customer, we continue to expect our railway tie business to achieve a low-single-digit sales growth. We remain confident that we can leverage our upcoming Class 1 contract renewals and our customer relationships to develop potential solutions addressing the evolving needs, allowing us to capture a larger share of the industry's volume.

The residential lumber business performance was solid with similar quarterly volumes as last year and better pricing in response to higher cost of inventory. In the fourth quarter, we will be focused on building inventory and working to support customers as we see good momentum going into 2026. We continue to anticipate sales in this product category to trend in the $600 million to $650 million target range over the long term. As we enter the last quarter of 2025, we are maintaining our financial objective for the year and remain confident in the long-term sales growth trajectory of our infrastructure product categories. The disciplined execution of our strategy will serve us well as our team remains engaged and dedicated to delivering strong customer and shareholder value.

With that, I will ask Silvana to provide a more detailed overview of our third quarter financial results.

Thank you, Éric, and good morning, everyone. Sales for the third quarter were up 2% organically compared to the prior year quarter, driven by higher infrastructure volumes, primarily for utility poles. Including the contribution from the Locweld acquisition, total sales were up 5%, or $43 million, compared to Q3 last year. Led by higher volumes, EBITDA increased to $171 million, and we continued to deliver a solid EBITDA margin of 17.8%.

For utility poles, we generated $480 million in sales in the third quarter, up from $448 million in the same period in 2024. The pace of purchases of some utilities improved, and we benefited from new contracts secured last year. Volumes in the quarter were up 5%. Partially offsetting these volume gains was a 3% decline in pricing, largely driven by ongoing pricing pressures in the spot market. Our utility poles sales also benefited from a full quarter contribution and better-than-expected sales volume from our steel structure business, whose results are reported in the utility poles product category.

Sales of railway ties were up $6 million this quarter to $211 million, all attributable to better pricing. Commercial volumes were higher this quarter, but not enough to offset lower Class 1 volumes, which continued to be negatively impacted by a Class 1 customer now treating railway ties at their company-owned facility. Despite relatively unchanged volume, pricing for ties improved by 2%, supporting margins in the quarter. Residential lumber sales increased to $201 million in Q3 2025 compared to $191 million in the third quarter last year. The increase reflects higher pricing supported by elevated inventory costs from purchases made earlier in the year. Demand levels were largely unchanged from the same period last year.

Turning now to profitability. The business continued to generate strong EBITDA and EBITDA margin, reflecting the resilience and strength of our business. EBITDA in Q3 rose by $9 million to $171 million, largely explained by higher sales volume, partially offset by lower pricing, particularly for utility poles. EBITDA margin came in at 17.8% for the quarter and 18.5% year-to-date, excluding an insurance settlement gain. During the quarter, cash generated from operating activities was $198 million compared to $186 million in Q3 last year. Strength in cash generation benefited from a reduction in inventory as we continued to focus on optimizing inventory levels. We expect to end the year with lower inventories.

Our prudent and balanced approach to capital allocation provides us with the financial flexibility to pursue strategic growth opportunities as well as return capital to shareholders. Over the last 12 months, we generated cash from operations of over $500 million, allowing us to invest approximately $90 million in our business, acquire Locweld, and return approximately $145 million to shareholders, with the remaining capital used to reduce our net funded debt.

As of the end of September, we had returned $454 million to shareholders out of the $500 million committed for the 2023 to 2025 period through dividends and share buybacks. And yesterday, our Board of Directors approved a quarterly dividend of $0.31 per share. Our business is highly cash generative, and we continue to view share buybacks as a valuable capital allocation tool, which is why our Board of Directors had the confidence to authorize a new normal course issuer bid for share purchases for the upcoming year, which we announced in a dedicated press release earlier today. Stella-Jones is authorized to repurchase up to 1.5 million common shares for the period starting November 14, 2025, and ending November 13, 2026, representing approximately 2.7% of the common shares outstanding. We ended the year with $780 million in available liquidity and a net debt-to-EBITDA ratio of 2.2x, down from the 2.4x at the end of last quarter.

In summary, we are pleased with our results for the quarter, which highlight the breadth of our network as well as the strength of our business and of our teams. Our healthy financial position and strong cash-generating ability allows us to continue moving our value-creation strategy forward with both organic and inorganic investments. Stella-Jones is well positioned for continued growth and success.

I will now turn the call back to Éric for his concluding remarks.

Thank you, Silvana. To put our results in perspective, we had a very good quarter as stronger utility pole volumes helped offset lower-than-expected railway tie volumes and margins remain strong overall. We generated good free cash flow and lowered our leverage while continuing to invest in our business. As we move into the final quarter of the year, our guidance for the year remains intact, and we are encouraged by the progression we are seeing in our business. Additionally, we look forward to sharing our updated views on the opportunities ahead at our upcoming Investor Day on November 20 to be held in Toronto.

Before I conclude, I would like to welcome our 2 new Board members, Renée Laflamme and Sean Donnelly, whose wealth of experience and perspective will strengthen our Board and support the company's long-term success. Renée brings over 25 years of experience in financial services and insurance with a strong track record of introducing change and innovation to create value, including digital transformation and artificial intelligence. Sean's tenure as President and CEO at ArcelorMittal Dofasco, his experience in metallurgical engineering as well as his experience on the Board of a utility company will provide valuable insights.

This concludes today's prepared remarks. I will now open the line for questions.

[Operator Instructions] Our first question comes from the line of Michael Tupholme from TD Cowen.

Éric or Silvana, there were some minor changes in the language around 2025's outlook commentary for utility poles in the MD&A. You're saying, ex-Locweld, you're now calling for marginal year-over-year growth in utility poles for the full year. I don't think the language was quite framed like that last quarter. So I guess the question is, is there a change in your views around the full year expectation for growth in poles. That marginal year-over-year growth, is that consistent with last quarter? Or has there been a bit of a change there? Just not clear to me.

Thank you, Michael, for the question. So if I look back, last time we reported results, our H1 views were that we were behind in the first half of the year on volumes for utility poles and that we would have some positive momentum in that year to finish more or less flat. Now as we look at our results in the third quarter and looking at the pickup in momentum in volume demand, we think for the year we'd be slightly up. So obviously, a low-single digit in H2 that more than offsets the H1 lower volumes, if that's helpful for you.

So it sounds like a little bit of an improvement. So would that then mean you're still on track and expecting to get back to that mid-single-digit utility poles' organic growth by year-end 2025 as you had previously expected?

Yes, sir. Exactly.

And then maybe just one more here on poles. I think in the commentary, Silvana just talked about the pace of purchases of some utilities improve, but there's still -- you're still calling out in the MD&A macroeconomic challenges. You did see some continued pricing pressure in the spot market. So it sounds like there's different dynamics at play, some of which are a little more encouraging and, again, then still calling out some challenges. So notwithstanding your answer to the earlier questions about a slight uptick in your expectations for the year, can you try to frame up what you're seeing in the market now and how you think about some of the things that were holding utilities back previously and the spot market pricing pressure, when we can overcome some of that and start to see more of the positive side of what you're describing really come through here?

Thank you, Michael. So as a reminder for everyone, 75% of our total utility poles sales are under long-term contracts and the other 25% is in the spot market. And the dynamics that we're seeing currently in the market for pricing are in that 25% category, which is, again, the spot market business. There is still some spotty demand in certain areas in North America. There is healthy inventory levels. So we are seeing, as a whole, some pressure on pricing in the market. So that's when we compare 2024 to 2025. So far this year, if we compare the trend quarter-to-quarter in 2025, it has more or less stabilized. So happy to see that leveling off, if you want. And then we'll see how that overall market demand trends into next year. We are very fortunate that we're seeing this volume increase that I was talking about, and to your previous question, be within our long-term contract customers.

So obviously, we have a very long list of great customers that are the North American utilities. And those who have the long-term contracts, as far as we can observe, have been deploying capital strategically for the infrastructure upgrade or grid upgrade, if you want. But I can't say that it's moving that fast across the entire industry. But I do believe that there is some positive momentum to come here for the whole industry coming into '26 and '27.

And maybe just one last one. Just as it relates to the spot market pricing pressures. Based on the visibility you have, do you expect to see ongoing pricing pressure in that market for some period of time here? Is there any kind of light at the end of the tunnel as to when we could -- whether it's the comps getting easier or were some of the improvements in the industry maybe excess inventory getting soaked up, et cetera? Is there any visibility on that? Or should we be assuming continued spot market pricing pressure for some time?

Well, it's difficult to predict. I think what's encouraging, as I described, if I look at Q1, Q2, and Q3 of this year, we've seen that pressure subside and flatten. So hopefully, that is the lower level of where we stand today. And obviously, we're normalizing, I guess, versus 2024. We're now at, I would say, hopefully a healthy run rate and any uptick in demand would just help that dynamic going forward. I guess something else to keep in mind without going too much into the weeds is what are the type of products our customers are looking for. So I have mentioned in previous calls, as we look at the demand profile over time, our customers are demanding or ordering more and more larger sized poles, which are harder to procure, harder to find. And then again, there's where our customers can find what they need at Stella-Jones versus an operation that has one facility and one procurement team and that in a given geographical area doesn't have the access or the network we have as a company with the breadth of our network. So that is also, I guess, potentially something that would be good for us going forward because we do have access to large quantities of inventories with profiles of poles that are what our customers are looking for.

And your next question comes from the line of James McGarragle from RBC Capital Markets.

I just had a question on the railway tie segment. You flagged some potential share gain in 2026. Can you just talk about what's driving that? And then just as a quick follow-up there. Can, you just talk about where you're at in terms of renewing some of these railway tie contracts and potentially passing on higher price?

Yes. So obviously, I guess one of the comment is, if I understand your question, with the pullback of -- given Class 1 that's now treating at their own treating facilities, it's a reset this year. So going forward, as we conclude 2025, I would expect 2026 to resume our low single-digit sales increases. We are looking at the contract renewals right now with a few Class 1 customers. So 2 things there. Obviously, each time we have an opportunity to renegotiate our long-term contracts, we're always shooting for the most volume we can get from them. And I think what we need to do is not -- it's the service that we do, it's the quality of the product, but it's also how we can help them solve certain of their needs, maybe logistically, maybe with new services. So we're definitely looking into opportunities from that perspective.

And then with regards to price increases, I think we've been clear in previous calls that we are coming to the table and discussing with our customers to find mechanisms to adjust the pricing and ensure we preserve or improve margins over time. Obviously, as you can understand, customers never want to pay more for the product, so we need to come up with a value proposition. And our whole team is very much focused on that aspect and seeing how we can be that go-to supplier, I guess, for the rail infrastructure business.

And then I think there was 4 contracts that were coming up for renewal. Is that still the case? Or have any of those been negotiated recently?

Yes. Still 4 that are outstanding. One might get just renewed for a 1-year period. Obviously, I don't want to start calling out names, but yes, we're still discussing with all 4 customers. Obviously,, some of them are later into next year. So some of them are well advanced and some of them are really preliminary as we're positioning ourselves. But I guess it will be an ongoing topic here through 2026.

Okay. Appreciate the color there. And then just one more on the railway tie segment, then I can turn the line over. Just on CN's lowered CapEx, they meaningfully reduced their CapEx when they reported Q3 results. It seemed to be that the maintenance would be intact, which I assume is where the ties would fall in that, that would impact your business. But any risk there to your tie outlook into '26 on the back of that announcement from Canadian National? And I'll turn the line over after that.

Thank you, James. So with regards to the CN, we've obviously done all our work planning next year's program. Volumes are similar year-over-year. So we're not impacted by this, I guess, this CapEx reduction announcement. So we're definitely part of that maintenance piece of it. And our discussions with the CN just are reflecting flat volumes year-over-year.

And your next question comes from the line of Benoit Poirier from Desjardins.

Just to come back on the railway ties questions. Obviously, any thoughts about the non-Class 1 customers these days? And what do you foresee from those segments?

I think we had a reasonably good year for the industry as far as the demand goes. We have certain contracts -- not contracts, POs or bids that we have in hand that we are seeing the delivery dates being pushed now into next year. I'd like to think that we're past the comments or review by the U.S. federal government on different programs. If you remember in H1, there were a lot of reviews on different subsidy programs and things of the like, created a bit of uncertainty as far as the funding for, I guess, the short lines in particular. I think that's behind us. So I'm actually feeling positive about what's coming in 2026 with regard to that, that having resumed. Yes, that would be my comment there.

Looking at utility, Éric, American Electric Power and Quanta Services unveiled this morning a $72 billion partnership on a transmission expansion. I was just wondering, given you're obviously well connected, well positioned with the utilities, is it something that we might see down the road from you guys?

Meaning as far as benefiting from that announcement?

Exactly. Is it something that will benefit Stella-Jones?

So I believe that last quarter, AEP in their public disclosures had put forward 70 - 7-0 -- $70 billion in CapEx in the next 5 years. So the announcement of Quanta actually puts more actionable or meaningful actions towards executing on that CapEx. I know in the past 8, 9 months, they have given a good look at their capital structure to be able to deploy and invest in their network. So we're very pleased with that. We're very well positioned with AEP. They're one of our key customers. And obviously, from a distribution pole, transmission pole business and now with [ latest ] or steel structure division, I think we have opportunities here to bid on upcoming projects that will be coming forward.

Okay. And looking at your NCIB, Silvana, it has been renewed, but lower amount versus the previous 2 years. So just wondering, should we see that as a signal that the fact that you foresee more growth opportunities ahead? Any color with respect to the share buyback envelope?

Yes. So I guess 2 comments on that, Benoit. The first is even though we had bigger programs, as you probably saw over the last 2 years, we did repurchase probably more in the 1.2 million shares. So we do think it is almost -- being more consistent with the actual usage of the program over the last 2 years. And we are definitely very mindful of all the potential investment activity going forward. Definitely, that is part of the mix.

Okay. And maybe last one, a quick one for me. In terms of working cap, Silvana, anything to call out going into Q4 and 2026?

Yes. So, into Q4, as we typically see, we would expect, particularly for residential lumber, a build in inventory in that last quarter of the year, but more than offset by the decrease that we would expect in ARR just because of the seasonally lower sales in the Q4 versus Q3. So I think we would expect either a neutral or a pickup in the last quarter of the year in terms of our working capital, so adding already to the inflow that we have year-to-date. And going into 2026, I guess the color that I could give around that is that depending on the expected increase in sales that you put forward, we always say that we probably -- 40% of that increase is needed in terms of build of working capital for that additional sales growth.

[Operator Instructions] And your next question comes from the line of Martin Pradier from Veritas Investment Research.

My first question is about building material. I thought that the prices were up during the quarter, but the wood price declined. And you mentioned that there is a delay between when this gets into the sales. What delay are we looking at? I mean, when are the lower prices of wood going to impact your sales down the road?

Thank you, Martin, for the question. So maybe as a reminder, when we start the year or as the industry calls it a season, we have a large buildup of inventory. And with our key customers, we set the price for -- in this case, for 2025. So we have not adjusted -- and you're completely right, the price of lumber has declined somewhat since January of this year. But we've also built a program for our customers. And when we negotiate a price, we need to hold it through. So we have not adjusted prices so far this year, slightly a bit here or there in the third quarter, but nothing that you could probably notice through our financial results.

I do expect these prices to hold until the end of the year. We'll negotiate them again, revisit those prices when we start the new year here with our customers. We're actually currently -- through November and December of this year is when we set the programs for 2026. So we're discussing pricing now. So there might be a slight decline. We're trying to see where the market is trending right now. Obviously, there's a lot going on and to consider with duties and tariffs and curtailment of capacity. I do believe that a lot of sawmills in Canada are having a tough time financially because of the lower prices of lumber. And I do believe that their intention is to see that price go back up to make it worthwhile for them to operate. So if there would be an uptick here in lumber prices in the next 3 months, I think it wouldn't be that much of a decline in pricing next year. So hard to predict, but something that we monitor daily.

my second question was, I was quite impressed with railway ties sales in this quarter, which was positive. And you come from 2 years of -- 2 quarters of plus 10% negative. But my understanding is that the next quarter is going to be negative again because there were a lot of sales in Q4 last year, and you're saying that some of these programs are delayed and then going to go to 2026. Is that the right way of thinking about it?

Yes. I think you're thinking about it right. Q4 is typically a slower quarter. We see sometimes orders straggle Q4 of this year and Q1 of next year. But the way we're looking at it is, as you just expressed it, it will be slightly lower. So we will conclude the year in that down in the mid-single digits, if I think that's what you were expressing.

And your next question comes from the line of Michael Tupholme from TD Cowen.

Éric, I just wanted to ask you if you could comment on the Brooks acquisition. Haven't talked about that much on this call. Just in terms of what you see that acquisition adding in terms of expanded product offering and whether you can roll that out more broadly across the network or if further acquisitions would be required in order to have that expanded product offering more broadly available? And then also just maybe just if you could comment on the M&A pipeline in general.

Certainly. So the Brooks acquisition brings a few things. One, obviously, as Locweld, a bit of a diversification of our product offering, although mainly treated wood, but in the crossarms space. So very happy now to have a larger catalog, to have more in-depth discussions with our utility customers. We have acquired also a team with skill set and knowledge about this industry. So crossarms are unique dimensions with very particular procurement dynamics because of those dynamics. So we've acquired a leader in this space with some good knowledge.

So the next steps, to your question, is obviously, there are customers that Stella-Jones has that Brooks was -- I don't know if they, let's say, didn't have much exposure to, we can definitely make new introductions or reintroduce them. I do believe that there might be an opportunity for us to consider if there's a -- if we can bring this into the Canadian market as well because Brooks has no exposure to the Canadian market. I believe they would have enough capacity/we would also internally in Canada, in particular, to be able to consider expanding that offering to our customer base. So obviously now that we have full access to the team and the assets, we're putting -- first integrating the group; and secondly, thinking about that strategy going into 2026.

With regards to the acquisition pipeline, Michael, so, I'll go back to start with the basics. There's still some targets in wood poles and railway ties that are of interest to Stella-Jones, and we keep monitoring those opportunities. Definitely interested in expanding or growing our steel structure division. So obviously, with Locweld or the Candiac, we'll be doubling the capacity, as I said, mid of next year. But I do think there's some other opportunities for us to keep growing that division. We've had a lot of positive feedback from our customer base interested in understanding how will Stella-Jones be able to support these massive projects that are upcoming here. So one of the previous questions, for example, on AEP, when you think about $70 billion, obviously, there are generating assets in there, but there's also a good part of the money going there for transmission lines, which would, in most part, be steel and not to forget the maintenance of the entire network to which we're exposed.

So definitely some thoughts there. And as we keep exploring opportunities and as we make these acquisitions, we get introduced to new relationships and discover new opportunities of businesses that service the utilities or the rail space that have attractive margin profiles and would be a good fit, and they're actually looking for a partner to come and help them grow the business. But when I say partner, it's really selling the business to us because with our access to capital, as we did with Locweld for example, we were able to invest and increase the capacity and get to that critical mass where certain customers are now taking notice. So I guess that would be how I need to think about the pipeline going forward.

And your next question comes from the line of Hamir Patel from CIBC Capital Markets.

Éric, your poles business, looks like the wood prices were down close to maybe mid-single digits in the quarter. I know you mentioned the spot market is about 1/4 of your mix. So that kind of suggests that spot pricing was down maybe mid-teens year-over-year in Q3. Is that a fair interpretation? And just wondering how much of that is mix? And if you could comment on how much lower is the spot market versus your typical contract price.

So I think you're not quite there, Hamir, but I'll let Silvana cover that for us.

Yes. So Hamir, so in the quarter, we said that our pricing accounted for a 3% decline in sales, and we said most of that was the spot pricing. But there was also some mix in there for our contracts. So like year-to-date, our pricing/mix decrease is less than 1%. So we're still expecting for the year that the spot pricing will remain below 2024. And as Éric said, there's some normalization there because the spot pricing last year was almost in line with our contract pricing. So we do expect that decrease to continue into the second -- into the last quarter when we compare to the same quarter last year. And that the contract pricing, as we always mention, is really we would have just expected as we have seen so far, just contractual increases that we have about mostly inflationary like 2% to 3%. But we have -- and I believe Éric must have mentioned, but we have seen the average spot pricing pretty much be in line with what we saw in Q2 in Q3. So we have seen some stabilization, if you want, between Q2 and Q3.

And any sense yet as to how we should think about CapEx for 2026 and where you stand with potential greenfields on the steel side in the U.S.?

Yes. So maybe I'll answer the CapEx piece, and then I'll pass it over to Éric. So we continue to expect, based on the -- on our current asset base, probably the higher end of our range, probably in the $85 million to $90 million, and this does not include the expansion CapEx expected for Locweld, which part of it is being done this year, but it will spill over into next year. It will only be ready probably mid- to second-half of next year. So you have to keep that in mind to add to our regular CapEx spend.

And I'll follow -- I'll conclude on that topic, Hamir. So with regard to the expansion of our steel structure division, definitely focused right now on ensuring we properly execute on that expansion CapEx and roll it out. It's a big change because we're changing out the entire shop floor of the facility. I think we're well on our way. I had a few meetings in the last few weeks on the planning of that and how we're going to execute in the first 6 months of next year. But that being said, is there a potential for another greenfield facility in the U.S. or Canada or in North America, definitely looking into this and having discussions with customers. Obviously we do not want to build a facility that has no orders on the books. So we're seeking for commitments, but still working on the project, and we'll be discussing more at the Investor Day.

And just the last question I had, Éric, I know the RTA recently held their annual conference. What were the volume trend expectations that you're hearing out of the various Class 1s? I know you already commented that CN was tracking flat, but curious about the others.

Yes. Pretty, much flat for everyone, Hamir. There's no big intention of increasing maintenance programs as far as we've heard. We obviously have the UP and the NS that are a bit prudent as they're -- well, they can't talk to each other necessarily, but UP is expecting to close this transaction next year. So I think out of that, there could be some different views, but that would probably spill into '27 at that point in time. So I would say those -- so most Class 1s that were there or all of them were indicating similar volumes year-over-year.

Thank you. We have no further questions in the queue. Please proceed.

Well, thank you, Ina. Thank you, everyone, for joining us today, and we look forward to updating you when we release our fourth quarter results. Make it a good day.

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