Q2 2026 Stella-Jones Inc Earnings Call Transcript
Key Points
- Utility products showed strength with positive volume momentum in wood utility poles and a solid contribution from the Cross Arms acquisition, driving a 7% sales increase in the segment.
- The company is advancing growth initiatives, including the steel structure capacity expansion in Candiac, which is on track to double capacity by Q3 2026, with demand already allocated through 2027.
- Railway ties commercial business growth offset a significant portion of lower Class 1 volumes, and a Class 1 contract renewal includes volume growth, with potential upside from bridge timbers.
- The company generated strong cash flow of CAD192 million in Q2, reduced net debt by over CAD100 million in the first half, and maintains a solid balance sheet with CAD759 million in liquidity.
- Management remains confident in achieving its three-year adjusted EBITDA margin target of 17.5%-18.5%, supported by optimization initiatives and a more favorable business mix, with margin performance expected to improve in the second half of 2026.
- Adjusted EBITDA margin declined to 16% in Q2, down from 18.3% in the prior year, due to near-term cost headwinds including higher environmental, maintenance, and fuel costs.
- Residential lumber sales were down 5% in Q2, with both pricing and volumes lower, reflecting softer demand and adverse weather conditions.
- Railway ties volumes declined 1% in Q2, with Class 1 volumes lower, and the company is tracking below its flat sales guidance for the year.
- The steel structures business experienced temporary production losses and lower throughput due to equipment changeover, impacting sales and profitability in the quarter.
- The company faces a lag in recovering cost increases through pricing, particularly in utility poles and railway ties, which may not be fully offset until contract anniversaries in 2027.
Good morning and thank you for standing by. Welcome to Stella Jones Second Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. (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
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