ANNUAL
REPORT 2024
TABLE OF
CONTENTS
Stella-Jones1 manufactures products, namely treated
wood utility poles, which support North America’s growing
needs for electrical distribution and transmission, as well
as treated wood railway ties for the operation and maintenance
of railway transportation systems.The Company also
manufactures and distributes premium treated residential
lumber and accessories to Canadian and American retailers
for a variety of outdoor applications.
The Company’s strong financial position2 and strategic focus
on infrastructure product supply has enabled Stella-Jones
to continue its growth, while maintaining an outstanding
reputation for customer service. Its robust operating
track record, extensive expertise and solid underlying
fundamentals allow Stella-Jones to connect communities
and economies across the continent.
INTRODUCTION
2024 by the Numbers & Five-Year History ................................................ 03
At-a-Glance ...................................................................................................... 05
Our North American Network ..................................................................... 07
Message from the Chair of our Board of Directors ................................... 09
Message from our President & CEO .............................................................. 11
Product Category Overview .......................................................................... 13
Sustainability Overview and Climate Report .............................................. 17
Share Information ............................................................................................. 21
Board of Directors & Senior Management ................................................. 22
Management’s Discussion & Analysis ..................................................... M-01
Consolidated Financial Statements .......................................................... F-01
Annual Report for the Fighting Against Forced Labour
and Child Labour in Supply Chains Act (Canada) .................................. A-01
Corporate Information ................................................................................... 23
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0 2
1 Stella-Jones Inc., or (“the Company”)
2 All figures in this document are in Canadian dollars, unless otherwise stated
2024 BY THE NUMBERS
FIVE-YEAR HISTORY & KEY METRICS
FOR THE YEARS ENDED DECEMBER 31
2024
2023
2022
2021
2020
In millions of Canadian dollars,
except per share data and financial ratios
OPERATING RESULTS
Sales
3,469
3,319
3,065
2,750
2,551
Operating income
503
499
359
326
309
EBITDA1
633
608
448
400
385
Net income
319
326
241
227
210
FINANCIAL POSITION
Inventories
1,759
1,580
1,238
1,106
1,075
Total assets
4,103
3,708
3,073
2,665
2,426
Long-term debt2
1,380
1,316
941
734
606
Lease liabilities2
323
294
167
144
139
Shareholders’ equity
1,941
1,652
1,557
1,448
1,373
PER SHARE DATA
Earnings per common share – basic and diluted
5.66
5.62
3.93
3.49
3.12
Book value
34.8
29.05
26.34
22.71
20.75
Declared dividends per share
1.12
0.92
0.80
0.72
0.60
FINANCIAL RATIOS
Operating income margin1
14.5%
15.0%
11.7%
11.9%
12.1%
EBITDA margin1
18.2%
18.3%
14.6%
14.5%
15.1%
Return on average equity1
17.8%
20.3%
16.0%
16.1%
15.8%
Return on average capital employed1
13.7%
15.8%
13.4%
13.7%
13.7%
Working capital ratio1
7.48
5.07
6.11
5.74
6.05
Net debt-to-total capitalization1
0.46:1
0.49:1
0.42:1
0.38:1
0.35:1
Net debt-to-EBITDA1
2.6x
2.6x
2.5x
2.2x
1.9x
1 These indicated terms have no standardized meaning under GAAP and are not likely to be comparable to similar measures presented by other issuers. Refer to the section entitled
“Non-GAAP and Other Financial Measures” of the Company’s Management’s Discussion & Analysis (“MD&A”) for an explanation of the Non-GAAP and other financial measures
used and presented by the Company and a reconciliation of Non-GAAP financial measures to the most directly comparable GAAP measures.
2 Including current portion.
2020
2021
$2,551
2022
$2,750
2023
$3,065
2024
$3,319
SALES (IN MILLIONS OF $)
$3,469
2020
2021
2022
2023
2024
$633
EBITDA1 (IN MILLIONS OF $)
$385
$400
$448
$608
2021
2022
2023
2024
$326
NET INCOME (IN MILLIONS OF $)
$319
$210
$227
$241
$326
2020
1 These indicated terms have no standardized meaning under GAAP and are not likely to be comparable to similar measures presented by other issuers. Refer to the section entitled
“Non-GAAP and Other Financial Measures” of the Company’s Management’s Discussion & Analysis (“MD&A”) for an explanation of the Non-GAAP and other financial measures
used and presented by the Company and a reconciliation of Non-GAAP financial measures to the most directly comparable GAAP measures.
2 Through dividends and share repurchases
RETURN TO SHAREHOLDERS
TOTAL CAPITAL
RETURNED2
(IN MILLIONS OF $)
SHARE REPURCHASES
(IN MILLIONS OF $)
DIVIDEND PER SHARE
0
60
80
100
120
140
160
180
200
2020
2021
2022
2023
2024
$90
$153
$1.12
$0.60
$0.72
$0.80
$0.92
$60
$100
$108
$155
$180
$229
$142
$195
220
2021
2022
2023
2024
$326
RETURN ON AVERAGE
CAPITAL EMPLOYED (“ROCE”)1
13.7%
13.7%
13.7%
13.4%
15.8%
2020
Sales of $3.5 billion
increased by 5% compared
to 2023. Stella-Jones’s sales
have grown for the past
24 consecutive years.
EBITDA1 grew to $633
million and EBITDA Margin1
remained elevated at 18.2%,
primarily due to organic
sales growth of Stella-Jones’
infrastructure products.
15.1%
14.5%
14.6%
18.3%
18.2%
EBITDA Margin1
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04
AT-A-GLANCE*
Stella-Jones is a leading supplier to North America’s electrical
utilities, providing treated wood utility poles, which are preferred for
their durability, cost efficiency and safety during maintenance work.
The Company is also a leading supplier of treated wood railway ties
and timbers for Class 1, short line and commercial railroad operators
across the continent. In addition, Stella-Jones manufactures
premium treated residential lumber products and accessories for
outdoor applications for Canadian and American retail partners.
24 consecutive years
of increased sales
Established reputation
rooted in high-quality customer service with procurement,
manufacturing, and distribution capabilities
Over 3,000
employees across North America
72% of sales
generated in the United States
Established track record
with the ability to meet expected long-term
customer demand
20 consecutive years
of dividend increase
Coast-to-Coast
North American presence that includes
44 wood treating facilities and a coal tar distillery
* All data as at December 31, 2024
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OUR
NORTH AMERICAN
NETWORK
BRITISH
COLUMBIA
Galloway
New Westminster
Prince George
ALBERTA
Carseland
WASHINGTON
Arlington
Tacoma
OREGON
Eugene
Sheridan
NEVADA
Silver Springs
ARIZONA
Eloy
NOVA SCOTIA
Truro
PENNSYLVANIA
Dubois
McAlisterville
VIRGINIA
Goshen
Warsaw
KENTUCKY
Fulton
INDIANA
Winslow
TENNESSEE
Memphis
SOUTH
CAROLINA
Whitmire
GEORGIA
Cordele
ALABAMA
Bay Minette
Brierfield
Clanton
Montevallo
ARKANSAS
Rison
Russellville
TEXAS
Jasper
Lufkin
LOUISIANA
Alexandria
Converse
Pineville
WISCONSIN
Bangor
Cameron
QUEBEC
Delson
Gatineau
Rivière-Rouge
Sorel-Tracy
MANITOBA
Neepawa
PRODUCT CATEGORY
Utility Poles
Railway Ties
Residential Lumber
Coal Tar Distillery
ONTARIO
Guelph
Kirkland Lake
Peterborough
Shelburne
Stouffville
MISSISSIPPI
Scooba
Wiggins
07
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08
A MESSAGE FROM THE CHAIR
OF OUR BOARD OF DIRECTORS
DEAR SHAREHOLDERS,
Each year, our entire organization, from Management and
employees to the Board itself, takes dedicated and measurable
steps to refine and advance the Company’s long-term strategy
and key priorities of value creation and sustainable growth.
In 2024, Stella-Jones again focused on initiatives to position
ourselves to benefit from ongoing tailwinds in our industry.
We continued on our successful path of securing long-term
customer contracts, coupled with increasing overall capacity
and efficiency throughout our network while maintaining
unparalleled customer service. To allow for further informed
decision making, Stella-Jones also entered the final stages of
the implementation of a Company-wide Enterprise Resource
Planning (“ERP”) solution, which the Audit Committee was
tasked with overseeing since we began this initiative. Each wave
has brought us insights so that we can continue to have visibility
into trends and implement productivity gains coupled with
enhanced security and business continuity. Importantly, in 2024,
our first ever bond offering brought new and interested parties
into the Stella-Jones collective, providing for an even stronger
capital base for future growth.
Similarly, the Board of Directors continued to build and shape
its corporate governance strategy to reinforce the Company’s
long-term positioning. Last year, I highlighted areas including
broadening certain committee mandates to provide more
comprehensive Board oversight of key areas and the inclusion
of chosen Environmental, Social and Governance (“ESG”) factors
and initial share ownership guidelines for executives. In 2024,
we expanded on last year’s adoption of share ownership
guidelines for our senior management team, formalizing and
rolling out an official policy in relation thereto, which further
strengthens the alignment of our leadership’s interests
with those of our shareholders. Our Human Resources and
Compensation Committee (“HRCC”) also took steps for
Board members, expanding their minimum share ownership
requirements to be based on the value of both their cash
compensation and deferred share unit grants.
From a governance perspective, we work to ensure that the
Board is positioned to provide the best possible oversight
through a combination of fresh ideas and seasoned experience.
In 2024, we introduced a committee chair rotation policy to
allow each Board committee to gain new perspectives while
facilitating succession planning. To that end, we named Anne
Giardini as Chair of the Governance and Nomination Committee,
succeeding Simon Pelletier, and added Robert Coallier as Vice-
Chair of the HRCC in anticipation of Jim Manzi’s retirement from
the Board in May of 2025. Their contributions have already been
notable and we are confident that they will continue to drive our
Company forward from an overall governance and accountability
perspective. We wish to wholeheartedly thank Jim Manzi for
helping lead the way to a more accountable and performance-
based philosophy of global compensation for the entire Stella-
Jones organization. We also extend our most sincere gratitude
to Board member Rhodri Harries, who has chosen not to seek
re-election, for his invaluable contributions to the business
in his tenure, particularly in his role as part of our Audit and
Environmental, Health and Safety Committees.
Annually, the Board performs assessments with an eye to
improvement as needed of the Board composition and
skills. This year, we updated our Board skills matrix to
underscore the importance of climate change, cybersecurity
and artificial intelligence in an ever-changing world, and
continued our dedicated Board training to fortify our oversight
of the organization. As part of our commitment to risk
management and the ongoing sustainability of our business,
leaders across the organization and our Board engaged in
dedicated crisis management planning and related exercises
in 2024, establishing a crisis team at the management level,
complemented by the formation of an Executive Committee
of the Board, to together address urgent, time-sensitive
matters affecting the organization. Lastly, our Board
continues to participate in on-site plant visits to strengthen
its understanding of our people, our processes and the vital
components of our enterprise.
SHAREHOLDER ENGAGEMENT
In 2024, we continued a concerted effort to engage investors and meet directly with
shareholders. This past year, our Board and committee Chairpersons met investors
representing approximately 25% of total shares outstanding, and our senior management
team interacted with a wide range of unique continuing and new potential equity and
fixed income stakeholders. We appreciated the opportunity to showcase our Company
and team while participating in enhanced dialogue to better understand shareholders’
perspectives and enrich our overall relationship through an ongoing commitment to
transparency and responsiveness.
We are mindful of the degree of clarity required to allow shareholders to better
understand Stella-Jones’ progress along stated strategies and paths. For the past
several years, we have steadily increased the breadth and quality of information
in our ESG Report and quarterly Management Discussion & Analysis so that our
shareholders can gain greater insights into our Company’s performance, progress
towards our goals and trends within the industries in which we operate.
POSITIONED FOR SUCCESS
As we look to 2025 and beyond, Stella-Jones is in a strong position with solid
fundamentals. The measures we have taken, both operationally and financially,
will help us solidify our preparedness for the future. And as a Board, we believe
we have the right mix of skills and expertise to help Stella-Jones through
this next wave of growth.
I want to thank our employees for their ongoing efforts and
dedication to Stella-Jones. I also want to acknowledge the
efforts of our leadership team. They have created a culture
that embodies continuous improvement and the setting
of high expectations throughout our organization.
Our Board has adopted this mindset as well, creating
together an extraordinary organization-wide dynamic,
which will help us continue to achieve our goals
together. Thank you as well to our shareholders
and other stakeholders for your ongoing support
throughout the year.
Katherine A. Lehman
Chair of the Board of Directors
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1 0
A MESSAGE FROM
OUR PRESIDENT & CEO
TO OUR VALUED SHAREHOLDERS,
I am pleased to welcome you to our 2024 Annual Report, which
provides an opportunity to highlight Stella-Jones’ achievements
and strategic initiatives over the last year. 2024 was underscored
by our commitment to unparalleled customer service and
operational excellence. Our dedicated team navigated a dynamic
environment, seized opportunities and collected wins, ensuring
that we continue to deliver for our customers and shareholders.
This is and will continue to be the force that propels us on our
growth journey.
A JOURNEY BUILT ON GROWTH
I have served the Company over 17 years, five of which as
CEO, and I have seen Stella-Jones evolve into a leading North
American provider of vital infrastructure products that support
the electrical grid and continental transportation. Looking
back, one thing has always remained constant: Stella-Jones’
unwavering dedication to service its customers.
Our ability to consistently deliver quality products and services
has been key to our progress. In just the last five years, sales
grew at an average compound rate of 10%, EBITDA more than
doubled from the $313 million generated in 2019, and our
EBITDA margin expanded by almost 400 bps. We consistently
generated solid cashflows and improved our return on average
capital employed as we focused on enhancing profitability and
capital efficiency. Over the last year, we witnessed a slower than
anticipated pace of purchases by utilities, but the underlying
fundamentals of our infrastructure business remain rooted in
maintenance requirements, which play out over a longer-term
horizon. The demand for our products remains very compelling,
and we are on track to meet our financial objectives.
2024 was our 24th consecutive year of sales growth. We increased
sales to $3.5B and delivered $633 million of EBITDA, or a margin
of 18.2%, a reflection of the remarkable efforts of our team and our
ability to remain laser-focused on our business’ robust underlying
fundamentals. We also generated strong operating cash flows of
$408 million, further strengthening our balance sheet, and returned
to shareholders $348 million out of the $500 million commitment
for the 2023 to 2025 period.
The year was further marked by significant investments in
our facilities, people and technology to build our capabilities,
increase our financial capacity and strengthen our business.
These investments will also drive our future prospects and
position us to continue to grow.
WHERE WE’RE GOING
I am excited about the future and the long-term growth prospects
of the infrastructure markets we serve. Utilities’ capex spending is
expected to remain elevated for many years, driven by the need
to upgrade existing systems and strengthen the electrical grid in
North America to support heavier loads. Our utility pole business
is well-positioned to benefit from this multi-year secular growth
trend. And for railway ties, with our strong competitive advantages
and customer-driven innovation, we will continue to work on
enhancing relationships with our Class 1 customers and executing
on opportunities to drive increased profitability. We are committed
to being a partner of choice for our customers. As such, in 2025, our
focus will be to build even stronger relationships by expanding our
offering to our infrastructure customers. We will be very selective
in the acquisition process, prioritizing opportunities that enhance
our market and product reach, contribute to earnings growth and
ensure a healthy return on invested capital.
As we head into 2025, we are pleased with our strong financial
position and flexibility, which we were able to bolster on
October 1, 2024 with an inaugural bond offering of $400 million.
This recent bond offering provides us with additional financial
flexibility to actively pursue growth opportunities. We are
dedicated to maintaining our investment-grade leverage ratio
and a disciplined capital allocation strategy. Following three years
of capital investments that were focused on increasing utility
poles capacity and upgrading our network assets, we will look to
optimize capacity in 2025 to enhance our operating model. As
we enter the final year of our three-year financial plan, we will
continue to lead our business with discipline.
BUILDING A BETTER FUTURE
Beyond the meaningful advancements on the initiatives
outlined in our Environmental, Social and Governance
strategic framework, sustainability at Stella-Jones also means
safeguarding and future-readying our business for years to
come. In late 2023, we assessed employee engagement, which brought us to invest in
communication tools, leadership development programs and career planning to increase
transparency and improve retention. We also progressed in our technological transition
to a new Enterprise Resource Planning system, which should be completed later in
2025. This new system will provide us with better decision-making data and enable the
interface with emerging technologies for years to come. These initiatives are part of a
strategic plan to ensure Stella-Jones has the resources and tools to support growth
and remain an employer of choice.
Lastly, in recent years, we unified our Environmental Health and Safety approach
in North America, further attesting to our commitment to fostering a culture where
safety matters above all. The loss of a colleague, friend and community member in
a fatal workplace accident at one of our manufacturing facilities in 2024 serves as a stark
reminder of the importance of vigilance, care and continuous improvement in workplace
safety. The reverberation of this event will be felt by our network and our people for a long
time, as we continuously strive to improve our health and safety programs and culture.
RESILIENCE IN ACTION
Change is often the only constant, but our employees across North America have
been a consistent pillar of strength over time. Through an unwavering
dedication to customer service and extensive industry expertise,
Stella-Jones has been able to foster a culture of ownership and
excellence. This approach to business, combined with strong
fundamentals in each of our product categories, have enabled
us to seize opportunities for growth. Over the last 32 years,
Stella-Jones has excelled at developing solutions for
customers, supporting emergency response, innovating with
technology, exploring new raw materials and expanding
community engagement to build an industry leading
business. Our resolve to achieve excellence remains
steadfast, making Stella-Jones the backbone of solid
infrastructures, for stronger communities.
In closing, I thank our Board of Directors for their
continued trust and support of our management team
and corporate strategy. I also want to acknowledge our
shareholders for your continued faith in Stella-Jones.
Eric Vachon
President and Chief Executive Officer
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1 2
UTILITY POLES
“Elevated spending plans of our customers
to strengthen aging infrastructure and our
ability to secure long-term sales contracts,
all speak to the strong fundamentals of the
utility poles product business.”
Kevin Comerford
Senior Vice-President,
Utility Poles and
U.S. Residential Lumber
5-YEAR SALES (IN MILLIONS OF $)
2024 SALES
2024 PERCENTAGE OF SALES
2024 ORGANIC GROWTH
2020
2021
2022
2023
2024
$888
$925
$1,227
$1,571
$1,705
$1,705 MILLION
49%
6%
Sales of utility poles increased organically in the mid-single
digit range in 2024, despite the slower pace of purchases
and a deferral in the execution of projects by utilities.
The outlook for the utility poles product category remains
strong as Stella-Jones’ customers continue to invest in
replacing aging infrastructure and increasing grid resiliency.
To cater to growing infrastructure demand, Stella-Jones
has completed its extensive capital expenditure program,
resulting in a broader and more flexible footprint, and
providing opportunities to continue to improve
operational efficiencies.
RAILWAY TIES
“In 2024, the railway ties business benefitted
from both our unwavering dedication to
customer service and replenished untreated
tie inventory levels, which allowed us to better
service our North American customer base.”
Patrick Kirkham
Senior Vice-President,
Railway Ties
The railway ties product category continued to
demonstrate its consistency and resilience throughout
2024. Its solid performance was a reflection of favourable
market dynamics for non Class 1 business and the
Company’s customer-centric approach. The Company
leveraged its solid financial position to replenish
inventory in 2023 to service the strong non Class 1
market. Railway ties sales to Class 1 customers also
increased in 2024, despite the reduction in maintenance
programs of certain Class 1 railroads. Stella-Jones remains
confident in the long-term outlook for railway ties and
in the product category’s ability to continue to deliver
at minimum low single-digit sales growth.
5-YEAR SALES (IN MILLIONS OF $)
2024 SALES
2024 PERCENTAGE OF SALES
2024 ORGANIC GROWTH
2020
2021
2022
2023
2024
$733
$700
$750
$828
$890
$890 MILLION
26%
6%
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1 4
RESIDENTIAL LUMBER
While residential lumber sales were lower relative to
last year, there are many encouraging indications for the
business heading into 2025. Lumber prices are trending
upward and industry reports suggest that the remodeling
downturn is expected to reverse by the middle of 2025,
with renovation and remodeling spending expected to gain
from improvements in new home construction and existing
home sales. These industry developments suggest residential
lumber sales are expected to continue to be within the
Company’s $600 to $650 million target range in 2025.
“The beginnings of an upward trend in lumber
prices in the second half of 2024, as well as
early indications of an increase in demand,
are promising signs for our residential lumber
business as we head into 2025.”
Brian Grant
Vice-President,
Canada Residential Lumber
Sales and Procurement
5-YEAR SALES (IN MILLIONS OF $)
2020
2021
2022
2023
2024
$665
$773
$744
$645
$614
2024 PERCENTAGE
OF SALES
18%
2024 SALES
$614 MILLION
INDUSTRIAL PRODUCTS
Stella-Jones offers a variety of select wood species and
preservatives for outdoor applications across the industrial,
marine and civic sectors. These products, which include
timbers for railway bridges, crossings and construction, and
marine and foundation pilings, can withstand a wide range of
weather and geographic conditions. In addition, the Company
manufactures creosote, a wood preservative used in its
treating activities, and additional coal tar-based products,
which are sold to third-party customers.
5-YEAR SALES (IN MILLIONS OF $)
2020
2021
2022
2023
2024
$119
$121
$143
$148
$154
2024 SALES
2024 PERCENTAGE
OF SALES
$154 MILLION
4%
LOGS AND LUMBER
This product category includes the sale of logs harvested in
the course of Stella-Jones’ procurement process, which are
determined to be unsuitable for the manufacturing of utility
poles. Additionally, in the course of procuring residential
lumber volume, Stella-Jones engages in reselling excess
lumber into local home-building markets. Logs and lumber
do not generate significant margins.
5-YEAR SALES (IN MILLIONS OF $)
2020
2021
2022
2023
2024
$146
$231
$201
$127
$106
2024 SALES
2024 PERCENTAGE
OF SALES
$106 MILLION
3%
2024 ORGANIC
GROWTH
3%
2024 ORGANIC
GROWTH
(5%)
2024 ORGANIC
GROWTH
(17%)
16
15
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
1. CLIMATE GOVERNANCE
The Environment, Health & Safety Committee of the
Board of Directors oversees the Company’s climate
strategy, targets and objectives, and reports to the
Board on performance and progress. The completed
climate transition risk and opportunity scenario analysis
used the same likelihood and impact categories as
the Enterprise Risk Management (“ERM”) framework,
whilst the physical risk analysis used a bespoke set
of criteria. The identified strategies and actions for
all scenarios are managed through the ERM process.
Senior management reviews the results of all climate-
related risk and opportunity analyses.
In 2024, the Company completed a gap analysis
with the International Sustainability Standards Board
(“ISSB”) disclosure requirements and has developed
a roadmap for implementation. The roadmap builds
upon the work already completed in enhancing
disclosures around climate related risks and opportunities.
In the Company’s 2023 ESG Report, transitional risks and
opportunities were disclosed for the first time.
SUSTAINABILITY OVERVIEW
SUSTAINABILITY PERFORMANCE HIGHLIGHTS 2024
Stella-Jones is pursuing a trajectory that integrates both financial performance and
shareholder value objectives, as well as the Company’s sustainability priorities.
In 2024, we accelerated climate action, making progress on the implementation of our
greenhouse gas (“GHG”) reduction roadmap and increased transparency through new disclosure.
• 25% women in management
• 39% of facilities representative*
of local area diversity
*Considered representative
as being within 2% or higher
than local area diversity.
OUR
PEOPLE
• 66 Stella-Jones locations1 and
443 third-party fibre sourcing areas
assessed for nature and biodiversity
risks and opportunities in line with
the Taskforce on Nature-related
Financial Disclosures (“TNFD”)
• 356 suppliers assessed for human
rights risks
ESG RISK
GOVERNANCE
• 7% reduction in total
recordable injury rate
• 13 third-party Health & Safety
audits completed
• Advanced work on Indigenous
Relationship Agreements with
five First Nations in 2024
• $9M worth of Indigenous economic
investments underwent due diligence
HEALTH
& SAFETY
INDIGENOUS
PEOPLES
• Vendors representing 25%
of total procurement spend
were screened for ESG risk
• 79% of residential lumber
procured from third-party
sustainably certified sources
CLIMATE CHANGE
& GHG EMISSIONS
RESPONSIBLE
SUPPLY CHAIN
• 2.5 Megawatts of
installed solar capacity
• $3M CapEx invested in GHG
reduction projects
CLIMATE
REPORT 2024
CONTENT
1.
Climate Governance
2.
Climate Strategy
3.
Climate-Related Risks and Opportunities
4.
Metrics and Targets
Achieving new levels of
disclosure and transparency
2. CLIMATE STRATEGY
Stella-Jones has committed to reducing greenhouse gas
emissions in its operations (Scope 1 and 2) by 32% by
2030 compared to a 2022 baseline. Our GHG reduction
roadmap, first published in our 2022 ESG Report,
outlines the initiatives and technologies identified to
help achieve our target. 2024 was focused on completing
engineering work and feasibility studies to further refine
the roadmap including more detailed capital allocation.
RENEWABLE ELECTRICITY
In 2024, Stella-Jones signed a ten-year agreement
to purchase renewable energy certificates (“RECs”)
generated from the Mesquite wind farm in Texas.
The agreement provides Stella-Jones with RECs
generated by the project starting in 2025 and will
enable the Company to effectively cover 100% of its
annual electrical consumption in U.S. and Canadian
facilities with renewable energy.
Complimenting the REC purchase, the Company
completed its second solar power installation in 2024
at its Cameron, Wisconsin, utility pole manufacturing
facility. The system is expected to cover 48% of the
site’s total electrical requirements and will bring Stella-
Jones’ total installed solar capacity to 2.5 Megawatts.
OPTIMIZING OUR ENERGY USE
Energy efficiency audits have been completed at six
facilities and the site-specific GHG reduction plans
developed. In 2024, the first set of projects from the
audits commenced, including installation of waste heat
recovery units for wood kilns, upgrades to feedwater
heating systems, and the development of real time
energy monitoring for large consumers such as boilers.
The carbon reductions from this first set of projects
are expected to be realized during 2025, whilst the
Company continues to execute the audit plan and
identified opportunities.
1 Includes wood treating and utility pole peeling facilities.
18
17
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
roadmap, and a net-zero pathway where emissions reduce
by 90% by 2050.
The primary financial impact of these risks is increased
direct costs of product inputs. Under a 1.5°C scenario with
a business-as-usual approach, cumulative carbon pricing
costs could reach $4 billion by 2050. Additionally, projected
fibre costs may rise by 33% between 2025 and 2050 under
the same scenario. To enhance resilience, Stella-Jones is
implementing its GHG reduction roadmap to mitigate
carbon pricing impacts and maintaining strong relationships
with a diverse fiber supply base to ensure supply flexibility.
Projected revenue from increased market demand could rise
by up to 28% in 2050 compared to 2025 under a 1.5°C scenario,
driven by growing electrification requirements. The Company’s
strategy to capitalize on this opportunity includes leveraging
strong customer relationships, ensuring quality and reliable
supply, and promoting the benefits of wood utility poles
as a sustainable, renewable, and carbon-positive material.
151,879
MT CO2
103,278
MT CO2
Renewable Energy
Transport Optimization
Energy Efficiency & Energy Monitoring
Biomass
Electrification
2022
2030
11%
16%
17%
2%
53%
USING ALTERNATIVE FUELS
Renewable diesel known as R99 was piloted at four locations
during 2024. R99, which is made from a mix of waste and
organic oil feedstocks, reduces emissions from mobile
equipment by as much as 70% on a life-cycle basis. The total
amount consumed in 2024 was 131,239 gallons, equivalent
to 874 MT CO2eq avoided.
The opportunity to utilize the wood by-product generated
on site in energy production continues to be a focus across
the Company. Currently 13 facilities utilize wood fired boilers,
and in 2024 the Company undertook feasibility studies for
another four locations to switch from natural gas to wood
fired units or cogeneration opportunities.
3. CLIMATE-RELATED RISKS
AND OPPORTUNITIES
PHYSICAL RISK TO OUR TREATMENT FACILITIES
The physical risk posed by climate change, both acute
and chronic, has been modelled using Munich RE NATHAN
Globe of Natural Hazards under a 2-degree warming
scenario, and the long-term time horizon of 2100.
The financial effect is a relative risk rating which is
calculated as the maximum financial loss per facility
based on real asset values. The climate-related physical
risks that could reasonably be expected to impact
Stella-Jones over the long-term include extreme heat
which impacts production through increased downtime
and additional costs incurred to help mitigate the effects
of extreme heat on our workforce, and wildfires, which have
the potential for catastrophic loss of assets and inventory.
The maximum financial effect of the time-horizon is modelled
at $171 million. Assumptions include no change to the
physical asset inventory under the modelled time horizon.
TRANSITION RISK AND OPPORTUNITIES
The assessment of transitional risks and opportunities used
representative concentration pathway (“RCP”) 1.9, where
global warming is limited to below 1.5°C, and RCP 7.5 which
is a high warming scenario of 4°C. These scenarios used a
bespoke climate model over a 2030- and 2050-time horizon.
In the 1.5°C scenario, increased carbon pricing would
lead to higher costs for the fuels used in our production
processes as well as a reduction in the supply of fibre and
higher overall fibre cost due to increased incentives to set
aside harvestable land for carbon mitigation and offsets.
The overall demand for utility poles is expected to increase
under the 1.5°C scenario.
The assumptions used in the modelling included estimates for
carbon pricing and Stella-Jones’ growth over the different time
horizons. The analysis also included three pathways; business
as usual, implementation of Stella-Jones’ decarbonization
OUR ABSOLUTE SCOPE 1 & SCOPE 2
EMISSIONS REDUCTION PATHWAY
UNIT
2021
2022
2023
SCOPE 1 -
GHG EMISSIONS
MT CO2EQ
95,886
123,685
134,634
SCOPE 2-
GHG EMISSIONS
MT CO2EQ
25,648
28,194
31,006
SCOPE 3 -
GHG EMISSIONS
MT CO2EQ
Data not captured
965,930
1,035,651
4. METRICS AND TARGETS
Below is the Company’s 2030 GHG reduction target and an overview of scope 1, 2 and 3 GHG emissions. Stella-Jones
has adopted an absolute emissions reduction target, ensuring a total reduction in emissions, even as the business
continues to grow. The Company is also evaluating a Science-Based Target (“SBT”) to align its absolute emissions
reduction with the global climate goal of limiting warming to below 1.5°C. As part of this process, Stella-Jones
is assessing the inclusion of a Scope 3 reduction target.
TARGET: REDUCE SCOPE 1 & 2 GHG EMISSIONS BY 32% COMPARED TO A 2022 BASE YEAR.
19
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
20
SHARE
INFORMATION
FOR THE YEARS ENDED DECEMBER 31
2024
2023
2022
2021
2020
(unaudited)
TRADING DATA ON COMMON SHARES1
52-week high ($)
96.19
84.63
50.90
54.09
47.37
52-week low ($)
68.16
46.95
30.54
38.58
23.34
Closing ($)
71.19
77.12
48.52
40.01
46.28
Total Volume
37,606,084
31,771,617
41,242,642
43,453,116
47,590,783
Average Daily Volumes
149,230
127,086
164,971
173,120
188,852
OTHER STATISTICS
Dividends on common shares (in millions $)
63
53
49
47
40
Dividends per share ($)
1.12
0.92
0.80
0.72
0.60
Dividend yield (%)
1.6%
1.2%
1.6%
1.8%
1.3%
Average number of shares outstanding (000’s)
56,403
57,963
61,421
65,002
67,260
Average number of diluted shares outstanding (000’s)
56,407
57,969
61,421
65,002
67,264
Shares outstanding at year end (000’s)
55,825
56,867
59,116
63,773
66,187
Public float (000’s)
41,089
49,112
50,987
56,051
50,837
Market capitalization (in millions $)
3,974
4,386
2,868
2,552
3,063
Enterprise value2 (in millions $)
5,354
5,702
3,809
3,286
3,669
1 Based on data from the TSX.
2 Enterprise value is defined as market capitalization plus long-term debt, including the current portion.
2024 CLOSING SHARE | PRICE & VOLUME
VOLUME
PRICE
BOARD OF DIRECTORS
AND SENIOR MANAGEMENT
BOARD OF DIRECTORS
SENIOR MANAGEMENT
Katherine A. Lehman
Chair of the Board,
Stella-Jones Inc.
Member of the Audit
Committee
Director since October 2016
Michelle Banik
Member of the Governance
and Nomination Committee
Member of the Human
Resources and Compensation
Committee
Director since January 2024
Robert Coallier
Vice-Chair of the Human
Resources and Compensation
Committee
Member of the
Audit Committee
Director since January 2020
Anne E. Giardini
Chair of the Governance
and Nomination Committee
Member of the Environmental,
Health and Safety
Committee
Director since January 2021
Rhodri J. Harries
Member of the Audit
Committee
Member of the Environmental,
Health and Safety Committee
Director since May 2020
Karen Laflamme, FCPA, ASC
Chair of the Audit Committee
Member of the Governance
and Nomination
Committee
Director since December 2018
James A. Manzi, Jr.
Chair of the Human Resources
and Compensation
Committee
Member of the Governance
and Nomination Committee
Director since April 2015
Douglas Muzyka
Chair of the Environmental,
Health and Safety
Committee
Member of the Governance
and Nomination Committee
Director since December 2019
Simon Pelletier
Member of the Environmental,
Health and Safety Committee
Member of the Human
Resources and Compensation
Committee
Director since May 2012
Eric Vachon, CPA
President and
Chief Executive Officer,
Stella-Jones Inc.
Director since October 2019
Eric Vachon
President & Chief
Executive Officer
Silvana Travaglini
Senior Vice-President
and Chief Financial Officer
Richard Cuddihy
Senior Vice-President
and Chief People Officer
Kevin Comerford
Senior Vice-President,
Utility Poles and U.S.
Residential Lumber
Patrick Kirkham
Senior Vice-President,
Railway Ties
Marco Albanesi
Vice-President, Corporate
Development and Treasury
Joel Alexander
Vice-President, Procurement,
Southern Yellow Pine
Dean Anderson
Vice-President,
Utility Pole Sales
Steve Bryant
Vice-President, Operations
Southern Yellow Pine-West
Sylvain Couture
Vice-President,
Utility Pole and Residential Lumber
Operations, Eastern Canada
Jason Dallas
Vice-President, Railway Tie
Procurement
Marcell Driessen
Vice-President,
Human Resources
Marla Eichenbaum
Vice-President, General
Counsel and Secretary
Brian Grant
Vice-President,
Canada Residential Lumber
Sales and Procurement
Mathieu Hebert
Vice-President, Finance
James Kenner
Vice-President, Risk
Management and General
Counsel, U.S. Operations
Steve Larocque
Vice-President,
Information Technology
Jeremy Meyer
Vice-President,
Utility Pole Sales
Andy Morgan
Vice-President, Utility
Pole Operations
(Western Species)
Gordon Murray
Vice-President,
Research and Development
Glynn Pittman
Vice-President, Utility
Pole Operations
(Southern Yellow Pine)
Jim Raines
Vice-President,
Global Railway Tie Sales
Patrick Stark
Vice-President, Environment,
Health and Safety
Jon Younce
Vice-President, Utility Pole
and U.S. Residential Lumber
Procurement
David Whitted
Vice-President,
Railway Tie Operations
and Production Planning
A full report of Stella-Jones’ corporate governance practices is set out in the Management Proxy Circular for its May 7, 2025 Annual Meeting of Shareholders.
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
$0
$20
$40
$60
$80
$100
$120
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
21
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
22
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
(in millions of Canadian dollars)
MANAGEMENT’S
DISCUSSION
& ANALYSIS
M-01
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
M-02
TABLE OF CONTENTS
INTRODUCTION
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
OUR BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
OUR MISSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
OUR STRATEGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
2023-2025 FINANCIAL OBJECTIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
NON-GAAP AND OTHER FINANCIAL MEASURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
FOREIGN EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11
OPERATING RESULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
QUARTERLY RESULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
FOURTH QUARTER RESULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
STATEMENT OF FINANCIAL POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
LIQUIDITY AND CAPITAL RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
SHARE AND STOCK OPTION INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
COMMITMENTS AND CONTINGENCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
RISKS AND UNCERTAINTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30
MATERIAL ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES . . . . . . .
31
DISCLOSURE CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32
INTERNAL CONTROL OVER FINANCIAL REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING . . . . . . . . . . . . . . . . .
32
2
M-04
M-05
M-05
M-05
M-07
M-08
M-09
M-10
M-12
M-13
M-17
M-17
M-19
M-22
M-24
M-25
M-25
M-25
M-26
M-31
M-32
M-33
M-33
M-33
INTRODUCTION
The following is Stella-Jones Inc.’s management discussion and analysis (“MD&A”). Throughout this MD&A,
the terms “Company” and “Stella-Jones” shall mean Stella-Jones Inc. with its subsidiaries, either individually or
collectively.
This MD&A and the Company’s audited consolidated financial statements were reviewed by the Audit
Committee and approved by the Board of Directors on February 26, 2025. The MD&A provides a review of the
significant developments and financial position, operating results and cash flows of the Company as at and for
the year ended December 31, 2024. The MD&A should be read in conjunction with the Company’s audited
consolidated financial statements for the years ended December 31, 2024 and 2023 and the notes thereto.
This MD&A contains statements that are forward-looking in nature. The words “may”, “could”, “should”,
“would”, “assumptions”, “plan”, “strategy”, “believe”, “anticipate”, “estimate”, “expect”, “intend”, “objective”, the
use of the future and conditional tenses, and words and expressions of similar nature are intended to identify
forward-looking statements. Forward-looking statements include, without limitation, the financial guidance and
other statements contained in the “Strategy” and “2023-2025 Financial Objectives” sections below, which are
provided for the purpose of assisting the reader in understanding the Company’s financial position, operating
results and cash flows and management’s current expectations and plans (and may not be appropriate for
other purposes). Such statements are based upon a number of assumptions and involve known and unknown
risks and uncertainties that may cause the actual results of the Company to be materially different from those
expressed or implied by such forward-looking statements. Such items include, among others: general political,
economic and business conditions, evolution in customer demand for the Company's products and services,
product selling prices, availability and cost of raw materials, operational disruption, climate change, failure to
recruit and retain qualified workforce, information security breaches or other cyber-security threats, changes in
foreign currency rates, the ability of the Company to raise capital, regulatory and environmental compliance
and factors and assumptions referenced herein and in the Company’s continuous disclosure filings. Unless
required to do so under applicable securities legislation, the Company’s management does not assume any
obligation to update or revise forward-looking statements to reflect new information, future events or other
changes after the date hereof.
The Company’s audited consolidated financial statements are reported in Canadian dollars and are prepared
in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (“IFRS Accounting Standards”). All amounts in this MD&A are in Canadian dollars unless
otherwise indicated.
This MD&A also contains non-GAAP financial measures, non-GAAP ratios and other financial measures which
are not prescribed by IFRS Accounting Standards and are not likely to be comparable to similar measures and
ratios presented by other issuers. Refer to the section entitled “Non-GAAP and Other Financial Measures” of
this MD&A for an explanation of the non-GAAP financial measures, non-GAAP ratios and other financial
measures used and presented by the Company and a reconciliation of non-GAAP financial measures to the
most directly comparable GAAP measures.
Additional information, including the Company’s Annual Information Form, quarterly and annual reports, and
supplementary information is available on the SEDAR+ website at www.sedarplus.ca. Press releases and
other information are also available in the Investor Relations section of the Company’s website at
www.stella-jones.com.
3
M-03
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
M-04
OUR BUSINESS
Stella-Jones is a leading North American manufacturer of products focused on supporting infrastructure that
are essential to the delivery of electrical distribution and transmission, and the operation and maintenance of
railway transportation systems. It supplies the continent’s major electrical utilities companies with treated wood
utility poles and North America’s Class 1, short line and commercial railroad operators with treated wood
railway ties and timbers. It also supports infrastructure with industrial products, namely timbers for railway
bridges, crossings and construction, marine and foundation pilings, and coal tar-based products. Additionally,
the Company manufactures and distributes premium treated residential lumber and accessories to Canadian
and American retailers for outdoor applications, with a significant portion of the business devoted to servicing
Canadian customers through its national manufacturing and distribution network.
The Company’s organic growth and strategic acquisitions have allowed it to expand its North American
network by broadening its product offerings and capacity, to reinforce the strength and reliability of its raw
material sourcing, and to provide greater service to customers. This strategy has contributed to solid and
sustained customer relationships across North America and has expanded access to critical suppliers. It has
also enabled the Company to further strengthen its seasoned management team, adding extensive expertise
in all divisions throughout North America.
Stella-Jones’ proven track record of delivering solid results has set the foundation for a strong cash flow-
generating business, enabling the Company to continually reinvest in its network and return capital to
shareholders through steadily increasing dividends and share repurchases.
As at December 31, 2024, the Company operated 44 wood treating plants and a coal tar distillery and its
workforce comprised more than 3,000 employees. The Company’s facilities are located across Canada and
the United States and are complemented by an extensive procurement and distribution network.
The Company’s common shares are listed on the Toronto Stock Exchange (TSX: SJ).
OUR MISSION
Stella-Jones aims to be the performance leader in the industries in which it operates and a model corporate
citizen, acting with integrity, and exercising a rigorous standard of environmental and social responsibility, and
governance.
Stella-Jones is committed to providing a safe, respectful, inclusive, and productive environment for its
employees, where problem solving, initiative and high standards of performance are rewarded.
Stella-Jones will achieve these goals by focusing on customer satisfaction, innovative work practices and the
optimal use of its resources and by investing in its people through training and development to enable
professional growth across the organization.
OUR STRATEGY
Stella-Jones’ strategy is to solidify its leadership position in its core product categories and in key markets,
through organic growth, network efficiencies, innovation and accretive acquisitions. The Company pursues
infrastructure-related and other strategic opportunities that leverage its extensive network, customer base,
fibre sourcing and numerous competitive strengths while also contributing to its ability to generate a consistent
cash flow.
The Company integrates environmental, social and governance considerations into its daily business
decisions and strategies, recognizing that this will make it a more resilient, agile, and sustainable business.
4
Capital Management
The Company’s capital allocation strategy leverages its consistent and strong cash flow generation while
enhancing its long-term stability and shareholder value creation. To maintain the Company’s strong financial
position and financial flexibility, capital is deployed in a disciplined manner, balancing growth investments and
the return of capital to shareholders.
The Company’s current strategy is to:
•
Invest between $75 and $85 million annually in capital expenditures to maintain the quality and
reliability of its assets, ensure the safety of its employees, improve productivity and pursue
environmental and sustainability initiatives;
•
Pursue accretive infrastructure-related acquisitions that enhance the Company’s strategic positioning
and drive future earnings growth;
•
Maintain a durable dividend payout, targeting dividends equivalent to 20% to 30% of the prior year’s
reported earnings per share; and
•
Return excess capital to shareholders through share repurchases.
As part of its capital allocation approach, Stella-Jones targets a net debt-to-EBITDA ratio between 2.0x and
2.5x, but may deviate from its leverage target to pursue acquisitions and other strategic opportunities, and/or
fund its seasonal working capital requirements.
The Company’s capital allocation since 2020 is summarized below:
(in millions of $, except %)
5
M-05
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
M-06
2023-2025 FINANCIAL OBJECTIVES
The following is a summary of the Company’s 2023-2025 financial objectives:
(in millions of dollars, except percentages and ratios)
2023-2025 Objectives
Sales
approx. $3,600
EBITDA margin (1)
> 17%
Return to Shareholders: cumulative
> $500
Net Debt-to-EBITDA (1)
2.0x-2.5x
Excluding potential future acquisitions, total sales are expected to be approximately $3.6 billion by
December 31, 2025, representing a compound annual growth rate (“CAGR”) of 5.5% for the 2023 to 2025
period. For utility poles, the meaningful increases in infrastructure investments forecasted by utilities and the
longer-term sales contracts secured from new and existing customers support the Company’s confidence in a
sustained mid-single-digit sales growth for this product category. Given the stable maintenance-driven demand
for railway ties, the Company remains assured in its ability to consistently deliver at a minimum a low single-
digit sales growth for this product category. For residential lumber, sales are forecasted to remain in the
$600 million to $650 million target range for this product category, representing less than 20% of total sales.
Since 2023, the Company has delivered a significant improvement in EBITDA margin(1). It generated an
EBITDA margin(1) of 18.3% in 2023 and 18.2% in 2024 and expects to generate an above 17% margin in
2025. This reflects an 11% EBITDA CAGR for the 2023 to 2025 period.
The Company is on target to returning in excess of $500 million to shareholders through dividends and share
repurchases in the 2023 to 2025 period. As at December 31, 2024, the Company had returned to shareholders
$348 million out of the $500 million commitment.
The Company targets to maintain its net debt-to-EBITDA(1) in the range of 2.0x to 2.5x, but may deviate from
its leverage target to pursue acquisitions and other strategic opportunities, and/or fund its seasonal working
capital requirements. As at December 31, 2024, the Company’s net debt-to-EBITDA(1) stood slightly above the
target range at 2.6x, as the appreciation of the closing rate of the U.S. dollar relative to the Canadian dollar
resulted in a higher value of the Company’s net debt denominated in U.S. dollars, when expressed in
Canadian dollars.
The Company assumed that the Canadian dollar will trade, on average, at Can $1.36 per U.S. dollar for 2025.
(1) These indicated terms 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 section entitled “Non-GAAP and Other Financial Measures” of this MD&A for an
explanation of the non-GAAP and other financial measures used and presented by the Company and a reconciliation of non-GAAP financial
measures to the most directly comparable GAAP measures.
6
HIGHLIGHTS
OVERVIEW OF 2024
Sales in 2024 were up 5% to $3,469 million, compared to $3,319 million last year. Excluding the contribution
from the acquisition of the assets of Baldwin Pole and Piling Company, Inc., Baldwin Pole Mississippi, LLC and
Baldwin Pole & Piling, Iowa Corporation in July 2023 (collectively, “Baldwin”), and the positive effect of
currency conversion, sales were up $89 million, or 3%. The increase was driven by a 6% organic sales
growth(1) of the Company’s infrastructure businesses, namely utility poles, railway ties and industrial products,
partially offset by lower residential lumber and logs and lumber sales when compared to 2023. Infrastructure
sales benefited from favourable price adjustments across all product categories and higher railway ties
volumes but were attenuated by the slower pace of purchases and a deferral in the execution of projects by
utilities. Residential lumber sales were lower due to softer consumer demand when compared to last year, but
remained within the target range for this product category, at $614 million.
While operating income was relatively unchanged compared to last year, EBITDA(1) increased to $633 million
in 2024 compared to $608 million in 2023, largely due to the sales growth of the Company’s infrastructure
product categories. EBITDA margin(1) remained elevated at 18.2% in 2024, similar to the 18.3% margin
generated in 2023.
During the year ended December 31, 2024, Stella-Jones used the cash generated from operations of
$408 million to invest in its network as well as return $153 million to shareholders, through dividends and
share repurchases. In 2024, the Company invested a net amount of $88 million to maintain its assets and
enhance productivity, and $34 million to complete its growth investments for utility poles. Over the 2022 to
2024 period, approximately $130 million was invested in growth capital expenditures. The dividend paid in
2024 amounted to $1.12 per share, representing a 22% increase compared to 2023.
As at December 31, 2024, the Company maintained a healthy financial position. It had available liquidity of
$802 million and its net debt-to-EBITDA(1) stood at 2.6x. The appreciation of the closing rate of the U.S. dollar
relative to the Canadian dollar resulted in a higher value of the Company’s net debt denominated in U.S.
dollars, when expressed in Canadian dollars.
(1) These indicated terms 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 section entitled “Non-GAAP and Other Financial Measures” of this MD&A for an
explanation of the non-GAAP and other financial measures used and presented by the Company and a reconciliation of non-GAAP financial
measures to the most directly comparable GAAP measures.
7
M-07
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
M-08
FINANCIAL HIGHLIGHTS
Selected Key Indicators
(in millions of dollars except ratios and per share data)
2024
2023
2022
Operating results
Sales
3,469
3,319
3,065
Gross profit(1)
724
688
524
Gross profit margin(1)
20.9%
20.7%
17.1%
Operating income
503
499
359
Operating income margin(1)
14.5 %
15.0 %
11.7 %
EBITDA(1)
633
608
448
EBITDA margin(1)
18.2%
18.3%
14.6%
Net income
319
326
241
Earnings per share (“EPS”) - basic & diluted
5.66
5.62
3.93
Cash flows from (used in)
Operating activities
408
107
255
Financing activities
(221)
151
(101)
Investing activities
(137)
(258)
(154)
Financial Position
Inventories
1,759
1,580
1,238
Total assets
4,103
3,708
3,073
Long-term debt(2)
1,380
1,316
941
Lease liabilities(2)
323
294
167
Total non-current liabilities
1,876
1,672
1,257
Shareholders’ equity
1,941
1,652
1,557
Other data
Return on average equity(1)
17.8 %
20.3 %
16.0 %
Return on average capital employed(1)
13.7 %
15.8 %
13.4 %
Declared dividends per share
1.12
0.92
0.80
Working capital ratio(1)
7.48
5.07
6.11
Net debt-to-total capitalization(1)
0.46 :1
0.49 :1
0.42:1
Net debt-to-EBITDA(1)
2.6x
2.6x
2.5x
(1) These indicated terms 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 section entitled “Non-GAAP and Other Financial Measures” of this MD&A for an
explanation of the non-GAAP and other financial measures used and presented by the Company and a reconciliation of non-GAAP financial
measures to the most directly comparable GAAP measures.
(2) Including current portion.
8
NON-GAAP AND OTHER FINANCIAL MEASURES
This section includes information required by National Instrument 52-112 – Non-GAAP and Other Financial
Measures Disclosure in respect of “specified financial measures” (as defined therein).
The below-described non-GAAP financial measures, non-GAAP ratios and other financial measures have no
standardized meaning under GAAP and are not likely to be comparable to similar measures presented by
other issuers. The Company’s method of calculating these measures may differ from the methods used by
others, and, accordingly, the definition of these measures may not be comparable to similar measures
presented by other issuers. In addition, non-GAAP financial measures, non-GAAP ratios and other financial
measures should not be viewed as a substitute for the related financial information prepared in accordance
with GAAP.
Non-GAAP financial measures include:
•
Organic sales growth: Sales of a given period compared to sales of the comparative period,
excluding the effect of acquisitions and foreign currency changes
•
Gross profit: Sales less cost of sales
•
EBITDA: Operating income before depreciation of property, plant and equipment, depreciation of right-
of-use assets and amortization of intangible assets (also referred to as earnings before interest, taxes,
depreciation and amortization)
•
Capital employed: Total assets excluding cash and cash equivalents less current non-interest bearing
liabilities
•
Average capital employed: 12-month average of the capital employed balance at the beginning of
the12-month period and the quarter-end capital employed balances throughout the remainder of the
12-month period
•
Net debt: Sum of long-term debt and lease liabilities (including the current portion) less cash and cash
equivalents
Non-GAAP ratios include:
•
Organic sales growth percentage: Organic sales growth divided by sales for the corresponding
period
•
Gross profit margin: Gross profit divided by sales for the corresponding period
•
EBITDA margin: EBITDA divided by sales for the corresponding period
•
Return on average capital employed (“ROCE”): Trailing 12-month (“TTM”) operating income divided
by the average capital employed
•
Net debt-to-total capitalization: Net debt divided by the sum of net debt and shareholders’ equity
•
Net debt-to-EBITDA: Net debt divided by TTM EBITDA
Other financial measures include:
•
Operating income margin: Operating income divided by sales for the corresponding period
•
Return on average equity: TTM net income divided by the average shareholders’ equity (average of
the beginning and ending 12-month period)
•
Working capital ratio: Current assets divided by current liabilities
Management considers these non-GAAP and specified financial measures to be useful information to assist
knowledgeable investors to understand the Company’s financial position, operating results and cash flows as
they provide a supplemental measure of its performance. Management uses non-GAAP financial measures,
non-GAAP financial ratios and other financial measures in order to facilitate operating and financial
performance comparisons from period to period, to prepare annual budgets, to assess the Company’s ability
to meet future debt service, capital expenditure and working capital requirements, and to evaluate senior
management’s performance. More specifically:
•
Organic sales growth and organic sales growth percentage: The Company uses these measures
to analyze the level of activity excluding the effect of acquisitions and the impact of foreign exchange
fluctuations, in order to facilitate period-to-period comparisons. Management believes these measures
are used by investors and analysts to evaluate the Company's performance.
9
M-09
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
M-10
•
Gross profit and gross profit margin: The Company uses these financial measures to evaluate its
ongoing operational performance.
•
EBITDA and EBITDA margin: The Company believes these measures provide investors with useful
information because they are common industry measures used by investors and analysts to measure
a company’s ability to service debt and to meet other payment obligations, or as a common valuation
measurement. These measures are also key metrics of the Company's operational and financial
performance and are used to evaluate senior management’s performance.
•
Average capital employed: The Company uses the average capital employed to evaluate and
monitor how much it is investing in its business.
•
ROCE: The Company uses ROCE as a performance indicator to measure the efficiency of its invested
capital and to evaluate senior management’s performance.
•
Net debt, net debt-to-EBITDA and net debt-to-total capitalization: The Company believes these
measures are indicators of the financial leverage of the Company.
The following tables present the reconciliations of non-GAAP financial measures to their most comparable
GAAP measures.
Reconciliation of Operating Income to EBITDA
(in millions of dollars)
Three-month periods ended
December 31,
Years ended
December 31,
2024
2023
2024
2023
2022
Operating income
81
89
503
499
359
Depreciation and amortization
34
31
130
109
89
EBITDA
115
120
633
608
448
Reconciliation of Average Capital Employed
(in millions of dollars)
Years ended December 31,
2024
2023
2022
Average total assets
3,940
3,407
2,885
Less:
Average cash and cash equivalents
10
—
—
Average current liabilities
328
376
254
Add:
Average current portion of lease liabilities
58
46
38
Average current portion of long-term debt
21
82
7
Average capital employed
3,681
3,159
2,676
Operating income (TTM)
503
499
359
ROCE
13.7 %
15.8 %
13.4 %
Reconciliation of Long-Term Debt to Net Debt
(in millions of dollars)
Years ended December 31,
2024
2023
2022
Long-term debt, including current portion
1,380
1,316
941
Add:
Lease liabilities, including current portion
323
294
167
Less:
Cash and cash equivalents
50
—
—
Net Debt
1,653
1,610
1,108
EBITDA (TTM)
633
608
448
Net Debt-to-EBITDA
2.6 x
2.6 x
2.5 x
10
FOREIGN EXCHANGE
The table below shows average and closing exchange rates applicable to Stella-Jones’ quarters for the years
2024 and 2023. Average rates are used to translate sales and expenses for the periods mentioned, while
closing rates translate assets and liabilities of foreign operations and monetary assets and liabilities of the
Canadian operations denominated in U.S. dollars.
US$/Can$ rate
2024
2023
Average
Closing
Average
Closing
First Quarter
1.35
1.36
1.35
1.35
Second Quarter
1.37
1.37
1.34
1.32
Third Quarter
1.36
1.35
1.34
1.35
Fourth Quarter
1.40
1.44
1.36
1.32
Fiscal Year
1.37
1.44
1.35
1.32
•
Average rate: The appreciation of the U.S. dollar relative to the Canadian dollar during 2024 compared
to 2023 resulted in a positive impact on sales and an unfavourable impact on cost of sales.
•
Closing rate: The appreciation of the value of the U.S. dollar relative to the Canadian dollar as at
December 31, 2024, compared to December 31, 2023 resulted in a higher value of assets and
liabilities denominated in U.S. dollars, when expressed in Canadian dollars.
11
M-11
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
M-12
OPERATING RESULTS
Sales
Sales for the year ended December 31, 2024 reached $3,469 million, up $150 million, versus sales of $3,319
million in 2023. Excluding the contribution from the acquisition of the Baldwin assets of $25 million and the
currency conversion effect of $36 million, pressure-treated wood sales rose $110 million, or 3%. Infrastructure
sales grew organically by $144 million or 6%, while residential lumber sales decreased by $34 million.
Favourable pricing across all infrastructure product categories and higher railway ties volumes were partially
offset by lower volumes for utility poles and residential lumber. The decrease in logs and lumber sales
compared to last year was largely attributable to lower logs sales.
Sales
(in millions of dollars, except
percentages)
Utility
Poles
Railway
Ties
Residential
Lumber
Industrial
Products
Total
Pressure-
Treated
Wood
Logs &
Lumber
Consolidated
Sales
2023
1,571
828
645
148
3,192
127
3,319
Acquisitions
25
—
—
—
25
—
25
FX impact
21
11
3
1
36
—
36
Organic growth
88
51
(34)
5
110
(21)
89
2024
1,705
890
614
154
3,363
106
3,469
Organic growth %
6%
6%
(5%)
3%
3%
(17%)
3%
Sales by Product Category
(% of sales)
12
Utility poles
UTILITY POLES SALES
(in millions of $)
Utility poles sales increased to $1,705 million in 2024, compared to sales of
$1,571 million in 2023. Excluding the contribution from the acquisition of assets
of Baldwin in July 2023 and the currency conversion effect, utility poles sales
increased by $88 million, or 6%, driven by sales price adjustments to cover
increased costs. This increase was offset in part by lower volumes when
compared to last year. Incremental multi-year commitments were secured from
new and existing customers but volumes were impacted by the slower pace of
purchases and a deferral in the execution of projects by utilities, largely
influenced by economic factors, including inflation and utilities’ supply chain
constraints, as well as timing of utilities’ rate-based funding. Utility poles sales
accounted for 49% of the Company’s total sales in 2024.
Railway ties
RAILWAY TIES SALES
(in millions of $)
Railway ties sales were $890 million in 2024, compared to sales of $828 million
in 2023. Excluding the currency conversion effect, railway ties sales increased
$51 million, or 6%. The increase was attributable to higher volumes, mainly for
non-Class 1 business due to the replenished level of railway ties inventory, as
well as improved pricing, when compared to last year. Railway ties sales
accounted for 26% of the Company’s total sales in 2024.
Residential lumber
RESIDENTIAL LUMBER
SALES
(in millions of $)
Sales in the residential lumber category decreased to the lower end of the
$600 to $650 million target range, at $614 million in 2024, compared to sales of
$645 million in 2023. Excluding the currency conversion effect, residential
lumber sales decreased $34 million, or 5%, all explained by lower sales
volumes due to softer consumer demand. The average market price of lumber
remained relatively unchanged in 2024 when compared to 2023. Residential
lumber sales accounted for 18% of the Company’s total sales in 2024.
Industrial products
INDUSTRIAL
PRODUCTS SALES
(in millions of $)
Industrial product sales were $154 million in 2024 compared to sales of $148
million in 2023. Excluding the currency conversion effect, industrial product
sales increased five million dollars, or 3%, mainly driven by higher sales for
railway bridges and crossings. Industrial product sales represented 4% of the
Company’s total sales in 2024.
13
M-13
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
M-14
Logs and lumber
LOGS AND LUMBER
SALES
(in millions of $)
Sales in the logs and lumber product category were $106 million in 2024, down
compared to $127 million in 2023. In the course of procuring logs for utility
poles and lumber for its residential lumber program, logs unsuitable for use as
utility poles and excess lumber are obtained and resold. The decrease in sales
was explained by less logs sales activity. Logs and lumber sales represented
3% of the Company’s total sales in 2024.
Sales by Geographic Region
Sales in the United States amounted to $2,515 million, or 72% of sales in 2024, up $59 million, or 2%,
compared to sales of $2,456 million in 2023. The increase was explained by higher pricing, particularly for
utility poles, the appreciation of the value of the U.S. dollar relative to the Canadian dollar compared to 2023
and the contribution from the acquisition of the Baldwin assets, offset in part by lower volumes for all product
categories, except railway ties.
Sales in Canada amounted to $954 million, or 28% of sales in 2024, up $91 million, or 11%, compared to sales
of $863 million in 2023. The increase was attributable to pricing and volume gains for utility poles and railway
ties, partially offset by lower residential lumber and logs and lumber sales.
Cost of sales
Cost of sales, including depreciation of property, plant and equipment, right-of-use assets as well as
amortization of intangible assets, was $2,745 million, or 79.1% of sales, compared to cost of sales of $2,631
million, or 79.3% of sales, in 2023. The increase in absolute dollars was explained by higher input costs, an
increase in railway ties sales volumes, offset in part by lower utility poles, residential lumber and logs and
lumber volumes. The additional cost of sales attributable to the acquisition of Baldwin and the appreciation of
the U.S. dollar also contributed to the higher cost of sales versus 2023.
Total depreciation and amortization was $130 million in 2024, with $115 million recorded as cost of sales,
compared to $109 million last year, with $94 million recorded as cost of sales. The increase was largely
explained by the depreciation of the right-of-use assets and capital projects added in 2023 and 2024.
Gross profit
Gross profit was $724 million in 2024, compared to $688 million in 2023, representing a margin of 20.9% and
20.7% respectively. The increase in gross profit in absolute dollars was largely due to favourable price
adjustments to cover increased costs for the Company’s infrastructure product categories and higher railway
ties volumes, partially offset by lower sales volumes for utility poles and residential lumber. The acquisition of
the Baldwin assets in 2023, and the positive impact of the currency conversion also contributed to the higher
gross profit for the year ended December 31, 2024.
Selling and administrative
Selling and administrative expenses for 2024 amounted to $206 million, compared to $181 million in the prior
year, including depreciation and amortization of $15 million in 2024 and 2023. The increase in selling and
administrative expenses was mainly attributable to higher compensation expense and consulting fees, as well
as an increase in information technology-related costs. As a percentage of sales, selling and administrative
expense, excluding depreciation and amortization, represented 5.5% of sales in 2024 compared to 5.0% in
2023.
14
Other losses, net
Other losses, net for 2024 consisted mainly of site remediation provisions of $10 million, largely attributable to
two facilities, one of which was damaged by fire in 2023. Losses related to the retirement of idled equipment of
five million dollars were also recorded as “Other losses, net” for 2024.
In 2023, the Company recognized a nine million dollar non-cash write-down of its Silver Springs, Nevada,
facility damaged by fire and two million dollars of clean-up costs, with a corresponding insurance recovery. The
Company also recorded site remediation provisions and environmental-related clean-up costs, net of
insurance recovery, of six million dollars, largely related to the preservative release at one of its facilities, and
two million dollars of losses related to the retirement of idled equipment.
Financial expenses
Financial expenses amounted to $88 million in 2024, up from $68 million last year. The increase in financial
expenses was explained by a higher debt level, mainly to support the Company’s growth. The average cost of
borrowing for 2024 was relatively unchanged versus 2023, as the higher cost of borrowing in the first half of
2024 was offset by a lower borrowing rate in the latter part of the year, when compared to 2023.
Income before income taxes and income tax expense
Income before income taxes was $415 million, or 12.0% of sales in 2024 versus $431 million, or 13.0% of
sales in 2023. The provision for income taxes totaled $96 million in 2024 compared to $105 million in 2023,
representing an effective tax rate of approximately 23% in 2024 and 24% last year. The lower effective tax rate
for 2024 was mainly attributable to a change in the mix of income from various jurisdictions.
Net income
Net income in 2024 was $319 million, compared to net income of $326 million in 2023. Despite the lower net
income, earnings per share in 2024 was higher at $5.66 versus $5.62 in 2023 due to the continued repurchase
of shares through the Company’s normal course issuer bids.
15
M-15
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
M-16
QUARTERLY RESULTS
The Company’s sales follow a seasonal pattern, with utility poles, railway ties, and industrial products
shipments stronger in the second and third quarters to provide industrial end users with products for their
summer maintenance projects. Residential lumber sales also follow a similar seasonal pattern. In the fall and
winter seasons, there tends to be less activity; as a result, the first and fourth quarters are typically
characterized by relatively lower sales. The table below sets forth selected financial information for the
Company’s last eight quarters:
2024
For the quarters ended
(in millions of dollars, except EPS)
March 31
June 30
Sept. 30
Dec. 31
Total
Sales
775
1,049
915
730
3,469
Operating income
124
168
130
81
503
EBITDA
156
200
162
115
633
Net income
77
110
80
52
319
EPS - basic and diluted (1)
1.36
1.94
1.42
0.93
5.66
2023
For the quarters ended
(in millions of dollars, except EPS)
March 31
June 30
Sept. 30
Dec. 31
Total
Sales
710
972
949
688
3,319
Operating income
95
149
166
89
499
EBITDA
120
175
193
120
608
Net income
60
100
110
56
326
EPS - basic and diluted (1)
1.03
1.72
1.91
0.98
5.62
(1) Quarterly EPS may not add to year-to-date EPS due to rounding
FOURTH QUARTER RESULTS
Highlights
Selected Key Indicators
(in millions of dollars except ratios and per share data)
Q4-2024
Q4-2023
Variation ($)
Variation (%)
Operating results
Sales
730
688
42
6%
Gross profit
138
137
1
1%
Gross profit margin
18.9%
19.9%
n/a
(100 bps)
Operating income
81
89
(8)
(9%)
Operating income margin
11.1%
12.9%
n/a
(180 bps)
EBITDA
115
120
(5)
(4%)
EBITDA margin
15.8%
17.4%
n/a
(160 bps)
Net income
52
56
(4)
(7%)
EPS – basic & diluted
0.93
0.98
(0.05)
(5%)
16
Operating Results
Sales for the fourth quarter of 2024 amounted to $730 million, up 6% from sales of $688 million for the same
period in 2023. Excluding the currency conversion of $14 million, pressure-treated wood sales rose
$31 million, or 5% due to higher railway ties sales attributable to an increase in Class 1 volumes and improved
residential lumber sales, while utility poles sales were relatively unchanged. Lower logs and lumber sales were
driven by a decrease in log sales activity, compared to the fourth quarter last year.
Sales
(in millions of dollars, except
percentages)
Utility
Poles
Railway
Ties
Residential
Lumber
Industrial
Products
Total
Pressure-
Treated
Wood
Logs &
Lumber
Consolidated
Sales
Q4-2023
383
165
82
27
657
31
688
FX impact
8
4
1
1
14
—
14
Organic growth
(6)
24
10
3
31
(3)
28
Q4-2024
385
193
93
31
702
28
730
Organic growth %
(2%)
15%
12%
11%
5%
(10%)
4%
Utility poles sales totaled $385 million, compared to $383 million in the same period last year. Excluding the
currency conversion effect, sales decreased by 2%, due to lower volumes from non-contract business, offset
in large part by favourable price adjustments to cover increased costs. Sales of railway ties amounted to $193
million, compared to $165 million in the same period last year. Excluding the currency conversion effect,
railway ties sales rose 15%, largely explained by the timing of Class 1 shipments. For the year, Class 1
volumes increased modestly when compared to 2023. Residential lumber sales totaled $93 million, up from
$82 million of sales generated in the same period in 2023, reflecting a 12% organic sales growth. The increase
in residential lumber sales stemmed from favourable pricing attributable to the increase in the market price of
lumber, as well as higher sales volumes, when compared to the same period last year. Industrial products
sales amounted to $31 million, up from $27 million last year. The organic sales growth of 11% was mainly
attributable to higher sales for railway bridges and crossings. Logs and lumber sales totaled $28 million, down
10% compared to the same period last year.
Gross profit was $138 million in the fourth quarter of 2024, relatively unchanged compared to gross profit of
$137 million in the fourth quarter of 2023. As a percentage of sales, gross profit decreased from 19.9% in the
fourth quarter of 2023 to 18.9% in the fourth quarter of 2024 due to a less favourable sales mix.
Net income for the period amounted to $52 million, or $0.93 per share, compared with $56 million, or $0.98 per
share, in the corresponding period of 2023.
17
M-17
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
M-18
STATEMENT OF FINANCIAL POSITION
As a majority of the Company’s assets and liabilities are denominated in U.S. dollars, exchange rate variations
may significantly affect their value. The appreciation of the value of the U.S. dollar relative to the Canadian
dollar as at December 31, 2024, compared to December 31, 2023 (see “Foreign Exchange section”), resulted
in a higher value of assets and liabilities denominated in U.S. dollars, when expressed in Canadian dollars.
Assets
As at December 31, 2024, total assets stood at $4,103 million versus $3,708 million as at December 31, 2023.
The increase in total assets largely reflected an increase in inventories, property, plant and equipment and the
currency translation effect on U.S. dollar denominated assets. Note that the following table provides
information on assets using select line items from the consolidated statements of financial position.
Assets
(in millions of dollars)
As at
December 31, 2024
As at
December 31, 2023
Variance
Cash and cash equivalents
50
—
50
Accounts receivable
277
308
(31)
Inventories
1,759
1,580
179
Other
53
59
(6)
Total current assets
2,139
1,947
192
Property, plant and equipment
1,048
906
142
Right-of-use assets
311
285
26
Intangible assets
170
169
1
Goodwill
406
375
31
Other
29
26
3
Total non-current assets
1,964
1,761
203
Total assets
4,103
3,708
395
Accounts receivable were $277 million as at December 31, 2024, compared to $308 million as at
December 31, 2023. The decrease was largely attributable to a reduction in the days of sales outstanding in
trade receivables, when compared to the same period last year, partially offset by the effect of currency
translation of U.S. dollar denominated accounts receivables. In the normal course of business, the Company
has entered into facilities with certain financial institutions whereby it can sell, without credit recourse, eligible
trade receivables to the concerned financial institutions. Accounts receivable are net of the trade receivables
sold during the year.
Inventories stood at $1,759 million as at December 31, 2024, up from $1,580 million as at December 31, 2023.
The increase in inventories was largely explained by the higher average cost of inventory and the effect of
currency translation of U.S. dollar denominated inventories of about $100 million.
Given the long periods required to air-season wood, which can occasionally exceed nine months before a sale
is concluded, inventories are a significant component of working capital and the turnover is relatively low. In
addition, significant raw material and finished goods inventory are required at certain times of the year to
support the residential lumber product category. The Company maintains solid relationships and enters into
long-term contracts with customers to better ascertain inventory requirements. Management continuously
monitors the levels of inventory and market demand for its products. Production is adjusted accordingly to
optimize efficiency and capacity utilization.
Property, plant and equipment stood at $1,048 million as at December 31, 2024, compared with $906 million
as at December 31, 2023. The increase reflected the purchase of property, plant and equipment of
$134 million during 2024 and the effect of currency translation of U.S. dollar denominated property, plant and
equipment of about $60 million, partially offset by the depreciation expense of $46 million for the year.
18
Right-of-use assets totaled $311 million as at December 31, 2024, compared to $285 million as at
December 31, 2023. The increase reflected the additions of right-of-use assets, largely land and rolling stock,
of $76 million, and the effect of U.S. dollar denominated right-of-use assets, offset by the depreciation expense
of $66 million for the year.
Intangible assets and goodwill totaled $170 million and $406 million, respectively, as at December 31, 2024.
Intangible assets consist mainly of customer relationships, a creosote registration and software costs. As at
December 31, 2023, intangible assets and goodwill were $169 million and $375 million, respectively. The
intangible assets remained relatively stable as software expenditures of nine million dollars and the effect of
U.S. dollar denominated intangible assets were offset by the amortization expense of $18 million. The increase
in goodwill was explained by the effect of currency translation on US-based goodwill.
Liabilities
As at December 31, 2024, Stella-Jones’ total liabilities stood at $2,162 million, up from $2,056 million as at
December 31, 2023. The increase in total liabilities largely reflected the currency translation effect on U.S.
dollar denominated liabilities. Note that the following table provides information on liabilities using select line
items from the consolidated statements of financial position.
Liabilities
(in millions of dollars)
As at
December 31, 2024
As at
December 31, 2023
Variance
Accounts payable and accrued liabilities
180
204
(24)
Current portion of long-term debt
1
100
(99)
Current portion of lease liabilities
64
54
10
Other
41
26
15
Total current liabilities
286
384
(98)
Long-term debt
1,379
1,216
163
Lease liabilities
259
240
19
Deferred income taxes
197
175
22
Other
41
41
—
Total non-current liabilities
1,876
1,672
204
Total liabilities
2,162
2,056
106
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Long-Term Debt
The Company’s long-term debt, including the current portion, increased to $1,380 million as at
December 31, 2024 from $1,316 million as at December 31, 2023. During the year ended December 31, 2024,
the Company reduced its net borrowings by six million dollars, but the appreciation of the closing rate of the
U.S. dollar relative to the Canadian dollar increased the long-term debt denominated in U.S. dollar when
expressed in Canadian dollars by $72 million. The reduction in net borrowings in 2024 included the US$75
million repayment of unsecured senior notes, classified as current portion of long-term as at December 31,
2023.
Long-Term Debt
(in millions of dollars)
As at
December 31, 2024
As at
December 31, 2023
Unsecured revolving credit facilities
295
750
Unsecured term loan facilities
576
364
Unsecured senior notes
508
198
Other
1
4
Total Long-Term Debt
1,380
1,316
On December 20, 2024, the Company amended and restated its syndicated credit agreement in order to,
among other things, (i) increase the amount available under the unsecured revolving credit facility from
US$400 million to US$600 million; (ii) extend the maturity date to December 20, 2029; and (iii) increase the
required level of net funded debt-to-EBITDA ratio to 3.75:1.00. The amended syndicated credit agreement also
includes a reset of the existing accordion feature whereby the Company may request an increase in an
aggregate amount of US$400 million, subject to lenders’ approval.
In October 2024, the Company completed a private placement of $400 million aggregate principal amount of
unsecured senior notes due October 1st, 2031, bearing interest at the rate of 4.312% per annum, payable
semi-annually until maturity. The notes are ranked pari passu with all other unsecured and unsubordinated
obligations of the Company. DBRS Limited assigned a rating of BBB with a stable trend to the Company’s
$400 million senior unsecured notes. The Company used the net proceeds from the notes to repay existing
indebtedness under its revolving credit facilities.
As at December 31, 2024, the Company’s net debt-to-EBITDA ratio stood at 2.6x and was in full compliance
with its debt covenants, reporting requirements and financial ratios.
Shareholders’ Equity
Shareholders’ equity stood at $1,941 million as at December 31, 2024, compared to $1,652 million as at
December 31, 2023.
Shareholders’ Equity
(in millions of dollars)
As at
December 31, 2024
As at
December 31, 2023
Variance
Capital stock
188
189
(1)
Retained earnings
1,498
1,329
169
Accumulated other comprehensive income
255
134
121
Total shareholders’ equity
1,941
1,652
289
The increase in shareholders’ equity as at December 31, 2024 was attributable to net income of $319 million
and a $121 million increase in accumulated other comprehensive income, mainly related to the currency
translation of foreign operations, partially offset by $90 million of share repurchases and $63 million of
dividends.
20
On November 6, 2023, the TSX accepted the Company’s Notice of Intention to Make a Normal Course Issuer
Bid (“NCIB”) to purchase for cancellation up to 2,500,000 common shares during the 12-month period
commencing November 14, 2023 and ending November 13, 2024, representing approximately 5.0% of the
public float of its common shares. The Company repurchased 1,192,595 common shares for cancellation in
consideration of $100 million, under this NCIB.
On November 5, 2024, the TSX accepted the Company’s Notice of Intention to Make a NCIB to purchase for
cancellation up to 2,500,000 common shares during the 12-month period commencing November 14, 2024
and ending November 13, 2025, representing approximately 4.5% of the common shares outstanding.
In 2024, the Company repurchased 1,078,577 common shares for cancellation in consideration of $90 million
under its NCIBs then in effect.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth summarized cash flow components for the years indicated:
Summary of cash flows
(in millions of dollars)
Years ended December 31,
2024
2023
Operating activities
408
107
Financing activities
(221)
151
Investing activities
(137)
(258)
Net change in cash and cash equivalents during the year
50
—
Cash and cash equivalents - Beginning of year
—
—
Cash and cash equivalents – End of year
50
—
The Company believes that its cash flow from operations and available credit facilities are adequate to finance
its business plans, meet its working capital requirements and maintain its assets. As at December 31, 2024,
the Company had $802 million of available liquidity, including $752 million (US$523 million) available under its
revolving credit facilities.
Cash flows from operating activities
Cash flows from operating activities amounted to $408 million in 2024, compared to $107 million in 2023,
largely reflecting favourable non-cash working capital movements. Following an investment in inventory of
$353 million in 2023, to support the anticipated demand growth for utility poles and to replenish railway ties
inventories, the net increase in inventory in 2024 was reduced to $82 million. Cash flows from operating
activities before changes in non-cash working capital components and interest and income taxes paid was
$637 million in 2024, compared to $619 million in 2023. Changes in non-cash working capital components
decreased liquidity by $57 million in 2024, driven by the increase in inventory.
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The following table provides information on cash flows from operating activities from the consolidated
statements of cash flows.
Cash flows from operating activities
(in millions of dollars)
Years ended December 31,
2024
2023
Net income
319
326
Depreciation and amortization
130
109
Financial expenses
88
68
Income tax expense
96
105
Other
4
11
Cash flows from operating activities before changes in non-cash
working capital components and interest and income taxes paid
637
619
Accounts receivable
56
(7)
Inventories
(82)
(353)
Income taxes receivable
—
(2)
Other current assets
9
8
Accounts payable and accrued liabilities
(40)
9
Changes in non-cash working capital components
(57)
(345)
Interest paid
(85)
(68)
Income taxes paid
(87)
(99)
Cash flows from operating activities
408
107
Cash flows (used in) from financing activities
Financing activities in 2024 decreased cash flows by $221 million, compared to an increase of $151 million in
2023. During the year ended December 31, 2024, the Company issued $400 million of senior unsecured notes
(the “Notes”), borrowed $168 million (US$125 million) under its U.S. Farm Credit term loan facility (“Term
Loan”), and used the net proceeds from the Notes and Term Loan to repay $471 million of indebtedness under
its unsecured revolving credit facilities and $102 million (US$75 million) of the unsecured senior notes issued
to certain U.S. investors. In addition, in 2024, the Company repaid lease liabilities of $62 million, paid
dividends of $63 million, in line with its capital allocation policy, and repurchased shares for $90 million. In
2023, the Company increased net borrowings under its credit facilities by $394 million to finance growth
investments and increase inventory levels, repaid lease liabilities of $50 million and returned $195 million to
shareholders.
The following table provides information on cash flows (used in) from financing activities using select line items
from the consolidated statements of cash flows.
Cash flows (used in) from financing activities
(in millions of dollars)
Years ended December 31,
2024
2023
Net change in revolving credit facilities
(471)
362
Net proceeds from long-term debt
465
32
Repayment of lease liabilities
(62)
(50)
Dividends on common shares
(63)
(53)
Repurchase of common shares
(90)
(142)
Other
—
2
Cash flows (used in) from financing activities
(221)
151
22
Cash flows used in investing activities
Investing activities used liquidity of $137 million in 2024, mainly explained by the purchase of property, plant
and equipment, including $34 million of utility poles growth capital expenditures. In 2023, investing activities
totaled $258 million and primarily consisted of the purchase of property, plant and equipment, including
$60 million of utility poles growth capital expenditures, and the acquisition of substantially all the assets of
IndusTREE Pole & Piling, LLC, Balfour Pole Co., LLC and Baldwin.
The following table provides information on cash flows used in investing activities from the consolidated
statements of cash flows.
Cash flows used in investing activities
(in millions of dollars)
Years ended December 31,
2024
2023
Business combinations
(4)
(93)
Purchase of property, plant and equipment
(132)
(155)
Property insurance proceeds
10
—
Additions of intangible assets
(11)
(10)
Cash flows used in investing activities
(137)
(258)
Financial obligations
The following table details the maturities of the financial obligations as at December 31, 2024:
Financial obligations
(in millions of dollars)
Carrying
Amount
Contractual
Cash flows
Less than
1 year
Years 2-3
Years 4-5
More than
5 years
Accounts payable and accrued
liabilities
180
180
180
—
—
—
Long-term debt obligations*
1,380
1,710
62
299
686
663
Minimum payment under lease
liabilities*
323
384
74
128
65
117
Financial obligations
1,883
2,274
316
427
751
780
* Includes interest payments. Interest on variable interest debt is assumed to remain unchanged from the rates in effect as at
December 31, 2024.
SHARE AND STOCK OPTION INFORMATION
As at December 31, 2024, the capital stock issued and outstanding of the Company consisted of 55,824,953
common shares (56,866,712 as at December 31, 2023).
The following table presents the outstanding capital stock activity for the year ended December 31, 2024:
Number of shares
Year ended December 31, 2024
Balance – Beginning of year
56,866,712
Common shares repurchased
(1,078,577)
Stock option exercised
15,000
Employee share purchase plans
21,818
Balance – End of year
55,824,953
As at February 25, 2025, the capital stock issued and outstanding consisted of 55,705,521 common shares.
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As at December 31, 2024, the number of outstanding and exercisable options to acquire common shares
issued under the Company’s Stock Option Plan was 5,000 (December 31, 2023 – 20,000). As at
February 25, 2025, the number of outstanding and exercisable options was 5,000.
DIVIDENDS
In 2024, the Company’s Board of Directors declared the following quarterly dividends:
Declared
Record Date
Payable Date
Dividend
$
February 28, 2024
April 1, 2024
April 19, 2024
0.28
May 7, 2024
June 3, 2024
June 21, 2024
0.28
August 6, 2024
September 3, 2024
September 23, 2024
0.28
November 5, 2024
December 2, 2024
December 20, 2024
0.28
The declaration, amount and date of any future dividends will continue to be considered by the Board of
Directors of the Company based on the Company’s capital allocation strategy. There can be no assurance as
to the amount or timing of such dividends in the future.
COMMITMENTS AND CONTINGENCIES
The Company is, from time to time, involved in various claims and legal proceedings arising in the ordinary
course of business. The Company believes that a final determination of these proceedings cannot be made at
this time but should not materially affect the Company’s cash flows, financial position or results of operations.
The Company has issued guarantees under letters of credit and various bid and performance bonds for a total
of $68 million as at December 31, 2024 (2023 – $48 million). The Company does not believe these guarantees
are likely to be called on and, as such, no provisions have been recorded in the consolidated financial
statements. The Company has also entered into a ten-year agreement to purchase renewable energy
certificates for a total commitment of eight million dollars (2023 – nil).
The Company’s operations are subject to Canadian federal and provincial as well as U.S. federal and state
environmental laws and regulations governing, among other matters, air emissions, waste management,
wastewater effluent discharges and use of antimicrobial pesticide products. The Company takes measures to
comply with such laws and regulations. However, the measures taken are subject to the uncertainties of
changing legal requirements, enforcement practices and developing technological processes.
SUBSEQUENT EVENTS
a) On February 4, 2025, the Company amended the U.S. Farm Credit Agreement in order to, among other
things, extend the term of the Revolving Credit Facility of US$150 million from March 3, 2028 to
February 4, 2030 and increase the required level of net funded debt-to-EBITDA ratio to 3.75:1.00.
b) On February 26, 2025, the Board of Directors declared a quarterly dividend of $0.31 per common share
payable on April 18, 2025 to shareholders of record at the close of business on April 1, 2025. This dividend is
designated to be an eligible dividend.
24
RISKS AND UNCERTAINTIES
The Company is exposed to risks and uncertainties that, if not properly mitigated, could materially affect its
business, financial position, future results, reputation, as well as the market price of its common shares. The
Board of Directors requires that the Company’s management identify and properly manage the principal risks
related to the Company’s business operations. The Company has put in place policies and procedures to
manage, on an ongoing basis, its principal risks and uncertainties and mitigate their impact, but the Company
cannot provide assurances that any such efforts will be successful.
The principal risks and uncertainties to which the Company is exposed are described below. Additional risks
and uncertainties not presently known to the Company, or that the Company currently deems immaterial, may
also materially affect its business, financial position and future results.
Operational Risks
Dependence on Major Customers
The Company is dependent on major customers for a significant portion of its sales, and the loss of one or
more of its major customers could result in a substantial reduction in its results. For the year ended
December 31, 2024, the Company’s top 10 customers accounted for 40% of its sales. During this same
period, the Company’s largest customer accounted for 14% of total sales and is associated with the residential
lumber product category, while the second largest customer accounted for 4% of total sales and is associated
with the railway ties product category.
Availability and Cost of Raw Materials
Management considers that the Company may be affected by potential fluctuations in wood supply and prices.
While the Company has entered into long-term cutting licenses and benefits from long-standing relationships
with private woodland owners and other suppliers, there can be no assurance that such licenses will be
respected or renewed on expiry, or that its suppliers will continue to provide sufficient timber to the Company.
Increasing governance of forest management may also impact wood supply. In certain regions, like British
Columbia, Canada, the Company is developing long-term business relationships with Indigenous communities,
but there is no assurance that it will succeed in securing the available wood.
There are a limited number of suppliers for certain preservatives that the Company employs in its production
process, which lessens the availability of alternate sources of supply in the event of unforeseen shortages or
disruptions of production. Certain suppliers may also reduce or cease production of specific preservatives,
while changes in legislation may require the application of alternative preservatives to those historically
utilized. Although the Company does not have direct suppliers based in Russia or Ukraine, further escalation
of this conflict may also increase supply chain disruptions, creating availability challenges and requiring the
Company to evaluate substitute products that are reasonably priced, safe, effective and acceptable to the
Company’s customers. While the Company is mitigating this risk by researching, identifying and securing
alternate suppliers and preservatives outside of its traditional sources of supply, there can be no assurance
that it will be able to secure the sufficient supply of all materials required to manufacture its products, which in
turn could adversely impact the Company’s results of operations.
Countries impose, modify and remove tariffs and other trade restrictions in response to a diverse array of
factors, including global and national economic and political conditions. In these circumstances, the Company
cannot predict future developments regarding tariffs and other trade restrictions or quantify their impact. The
imposition of tariffs could disrupt established supply chains and increase the cost of the Company’s raw
materials, which could adversely affect its results of operations. While several agreements with the Company’s
customers provide for sales price indexation based on fluctuations in raw materials costs and certain industrial
price indices, the impact on the Company’s results of operations will be influenced by its ability to pass on
costs related to tariffs and to pass them on in a timely manner.
Operational Disruption
The Company’s operations could be disrupted by natural or human-induced disasters. The magnitude of the
impact on results will depend on certain factors, including the nature of the disruption, its duration and the
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location affected by the disrupting event. While the Company has implemented a business continuity plan and
holds insurance policies to mitigate the impact of most catastrophic events, the occurrence of business
disruptions could, among other impacts, harm the Company’s financial position and results of operations,
increase its operating costs, make it difficult or impossible to provide products to customers or to receive raw
material from suppliers, or require substantial expenditures and recovery time in order to fully resume
operations.
Pandemic, Epidemic or Outbreak of Infectious Disease
The outbreak of a disease or virus could create significant volatility and uncertainty and economic disruption
and can pose the risk that the employees, suppliers, customers and business partners may be prevented from
conducting business activities. It may also result in governments worldwide enacting emergency preventive
measures and restrictions. These emergency measures and restrictions may cause material disruptions to the
Company’s operations and those of its suppliers or customers, which in turn, could adversely impact the
business, financial position, results of operations and cash flows of the Company.
Climate Change
The effects of global climate change are increasing the severity and frequency of natural threats on the
Company's business and may result in increased operational and capital costs. Some of the more significant
climate-related risks that the Company has identified include 1) increased costs as a result of damage to one
or more of the Company’s facilities and/or equipment and to those of its suppliers and customers and
2) increased production downtime and costs due to longer-term changes in climate patterns such as chronic
heat waves. Measures taken to mitigate climate-related risks include business continuity and disaster recovery
plans and strategies. The magnitude of the effects of climate change could be unpredictable and therefore, the
Company's plans may not successfully mitigate the consequences of a natural disaster, which could adversely
impact the business, financial position, results of operations and cash flows of the Company.
In addition to the physical risks associated with changes in climate conditions, there is the risk of governmental
responses to such changes. The effects of global climate change, including complying with evolving climate
change regulations and transitioning to a low carbon economy, could require substantial expenditures, result in
increased operating costs and reduce the availability of fibre as harvestable land may be set aside for carbon
mitigation and offsets.
Implementation of Environmental, Social and Governance (“ESG”) Initiatives and Standards
The expectations for the rapid implementation of initiatives related to ESG matters are increasingly high. In its
efforts to improve its sustainability performance, the Company developed an organization-wide ESG strategy
which contains certain goals and targets. These goals and targets reflect the Company’s current plans and
aspirations, are based on available data and estimates, and it is not guaranteed that the Company will be able
to achieve them. Failure to adequately update, accomplish or accurately track and report on these goals and
targets on a timely basis, or at all, could represent a competitive disadvantage and a reputation and business
risk.
Emerging ESG regulations and standards may also increase the Company’s disclosure and reporting
obligations. Failure to implement detailed and solid data gathering and analysis processes with effective
controls to comply with regulations and expectations of stakeholders, could impact the Company’s ability to
provide accurate, complete, reliable and timely reporting.
Reliance on Key Personnel
The Company’s senior management and other key employees have extensive experience in the industry and
with the business, suppliers, products and customers. The loss of senior management knowledge and
expertise as a result of the loss of one or more members of the core management team, or the departure of
key employees with knowledge in engineering, forestry, wood treating and other specialized areas could
negatively affect the Company’s ability to develop and pursue its business strategies, which could adversely
affect its business and operating results.
26
Recruitment, Retention and Management of Qualified Workforce
The Company’s ability to build upon its record of performance and continue to achieve sustainable growth are
dependent, to a significant extent, on its ability to recruit, develop and retain quality personnel, develop sound
strategies for succession and maintain good relations with its employees. Social and demographic trends, and
changes in employees' lifestyles and expectations, can make it more challenging to hire and retain personnel.
Difficulty in attracting qualified employees and retaining valuable internal expertise, or the occurrence of work
stoppages could lead to operational disruptions or increased costs.
Cybersecurity and Data Protection
The Company relies on information technology to securely process, transmit and store electronic data in its
daily business activities. Despite its security design and controls, and those of third-party providers, the
Company’s information technology and infrastructure may be vulnerable to cyber incidents. Cyber threats vary
in technique and sources, including through the use of emerging artificial intelligence technologies, are
persistent, and are increasingly more targeted and difficult to detect and prevent. Cyber attacks and security
breaches could include unauthorized attempts to access, disable, improperly modify or degrade the
Company’s information technology systems, networks and websites, the introduction of computer viruses and
other malicious codes, and fraudulent “phishing” emails that seek to misappropriate data and information or
install malware onto users’ computers. Any such breach could result in operational disruption and increased
costs or the misappropriation of sensitive data that could subject the Company to litigation and have a
negative impact on its reputation or an impact to customers or suppliers. To limit exposure to incidents that
may affect confidentiality, integrity and availability of information, the Company has introduced information
security policies, procedures and technical controls and it routinely engages a third party to assess the
maturity of its information security program against the National Institute of Standards and Technology (“NIST”)
Cybersecurity Framework. All employees receive security awareness training including communication of
processes for reporting a potential security incident. The Company has a Cyber Incident Response Plan in
place which provides a documented framework for handling high severity security and privacy incidents and
facilitates coordination across multiple parts of the Company and with external expertise when necessary.
Additionally, the Company has existing procedures to determine the potential materiality of a cybersecurity
incident. These procedures include reporting protocols to and oversight from our Board of Directors. The
Company routinely performs simulations and drills at both a technical and management level. Such measures
may not be adequate or effective to prevent or identify or mitigate attacks by hackers or breaches caused by
employee error, malfeasance or other disruptions, which could cause damage and could adversely affect the
Company’s business and operating results. In addition, the Company relies on information technology systems
to operate, and any disruption to such systems could cause a disruption to daily operations while the systems
are being repaired or updated.
Enterprise Resource Planning (“ERP”) Implementation
The Company is in the process of deploying a new ERP system. Such a change involves detailed planning,
transformation of current business and financial processes, as well as substantial testing and employee
training. The Company began the roll-out in 2021, with the goal of being fully operational across the
organization by 2025. During the deployment process, the Company could experience disruptions to business
information systems and operations. Any disruptions could adversely affect the Company’s ability to process
transactions, provide accurate, timely and reliable reports on financial and operating results as well as assess
the effectiveness of internal controls over financial reporting and disclosure controls and procedures. In
addition, it is possible that the deployment process may exceed the expected time frame and budget, and
there can be no assurance that the system will be beneficial to the extent anticipated. The Company has
adopted a phased approach and believes it is taking the necessary steps, including deploying both internal
resources and third-party consultants to mitigate the implementation risk.
Strategic Risks
Political and Economic Conditions
A negative change in political conditions or political instability, including significant civil unrest, acts of war or
terrorist activities, and adverse economic conditions, may affect most or all the markets the Company serves,
impacting costs, selling prices and demand for its products, increase disruptions in supply chains, and
adversely affect its financial position and operating results. These events may also impact the financial
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condition of one or more of the Company’s key suppliers, which could affect its ability to secure raw materials
and components to meet its customers’ demand for its products.
Risk Related to Acquisitions
As part of its growth strategy, the Company intends to acquire businesses where such transactions are
economically and strategically justified. There can be no assurance that the Company will succeed in
effectively managing the integration of businesses which it might acquire. If the expected synergies do not
materialize, or if the Company fails to successfully integrate such new businesses into its existing operations,
this could adversely impact the Company’s business, financial position and operating results. The Company
may also incur costs and direct Management’s attention to potential acquisitions which may never be
consummated.
In addition, although the Company performs due diligence investigations in connection with its acquisitions, an
acquired business could have liabilities that the Company fails or is unable to uncover prior to acquisition and
for which the Company may be responsible. Such liabilities could adversely impact the Company’s financial
position, operating results, and cash flows.
Financial Risks
Currency
The Company’s financial results are reported in Canadian dollars but a significant portion of its sales,
operating expenses and capital expenditures are realized in U.S. dollars. For financial reporting purposes, any
change in the value of the Canadian dollar against the U.S. dollar during a given financial reporting period
would result in variations of the Company’s operating results and financial condition, which could be
significant.
Interest Rate
The Company is exposed to interest rate fluctuations. The Company maintains a combination of fixed rate and
variable rate indebtedness and may, if applicable, hedge the exposure to variable interest rates with various
derivative instruments. As at December 31, 2024, 68% of the Company’s indebtedness bore interest at fixed
rates, therefore reducing the Company’s exposure to interest rate risk. The Company also enters into interest
rate swap agreements in order to reduce the impact of fluctuating interest rates on its indebtedness, subject to
variable interest rates. These swap agreements require the periodic exchange of payments without the
exchange of the notional principal amount on which the payments are based. The Company designates its
interest rate hedge agreements as cash flow hedges of the underlying debt. Interest expense on the debt is
adjusted to include the payments made or received under the interest rate swap agreements. However, if
interest rates increase, the debt service obligations on the variable rate indebtedness of the Company would
increase even though the amount borrowed remained the same, and this could have an adverse effect on the
Company’s profitability, cash flows and financial position.
Availability of Credit
The agreements governing the Company’s credit facilities and senior notes contain certain restrictive
covenants that impose operating and financial restrictions and could limit the Company’s ability to engage in
activities that might be in its long-term best interests. In addition, a breach of the covenants under the
Company’s credit facilities and senior notes could result in an event of default, which could allow lenders to
accelerate the repayment of the debt. In this event, the Company may seek to refinance its indebtedness, but
be unable to do so on commercially reasonable terms. As a result, the Company could be limited in how it
conducts its business, be unable to compete effectively or take advantage of new business opportunities.
Customers’ Credit
The Company carries a substantial level of trade accounts receivable on its statement of financial position.
This value is spread among numerous contracts and clients. Trade accounts receivable include an element of
credit risk should the counterparty be unable to meet its obligations. Although the Company reduces this risk
by dealing primarily with large-scale utility providers, Class 1 railroad operators and large retailers, there can
be no assurance that outstanding accounts receivable will be paid on a timely basis or at all.
28
Insurance
The Company maintains property and casualty commercial insurance policies that are in accordance with
customary industry practice and the Company’s specific risk profile. Such insurance may not cover all risks
associated with the hazards of its business and is subject to limitations, including self-insured retentions,
deductibles, co-insurance, coverage exclusions, and maximum liabilities covered. The Company may incur
losses beyond the limits or outside the coverage of its insurance policies, including liabilities for environmental
compliance and remediation, losses from a material disruption at its manufacturing facilities, damage to the
Company’s customer relationships caused by such liabilities and/or disruptions, and first and third party losses
due to cyber risks. In addition, from time to time, various types of insurance coverage for companies in the
Company’s industry have not been available on commercially acceptable terms, or in some cases, have not
been available at all. In the future, the Company may not be able to obtain coverage at current levels, and its
premiums may increase significantly on coverage that it maintains.
Corporate Tax
In estimating the Company’s income tax payable, Management uses accounting principles to determine
income tax positions that are likely to be accepted by applicable tax authorities. However, there is no
assurance that tax benefits or tax liability will not materially differ from estimates or expectations. The tax
legislation, regulation and interpretation that apply to the Company’s operations are continually changing. In
addition, future tax benefits and liabilities are dependent on factors that are inherently uncertain and subject to
change, including future earnings, future tax rates and anticipated business in the various jurisdictions in which
the Company operates. Moreover, the Company’s tax returns are continually subject to review by applicable
tax authorities. These tax authorities determine the actual amounts of taxes payable or receivable, any future
tax benefits or liabilities and the income tax expense that the Company may ultimately recognize. Such
determinations may become final and binding on the Company. Any of the above factors could have an
adverse effect on net income or cash flows.
Legal and Compliance Risks
Environmental Compliance
The Company is subject to a variety of environmental laws and regulations, including those relating to:
•
emissions to the air;
•
discharges into water;
•
releases of hazardous and toxic substances;
•
remediation of contaminated sites; and
•
use of antimicrobial pesticide products authorized in the United States under the Federal Insecticide,
Fungicide, and Rodenticide Act of the U.S. Environmental Protection Agency’s regulation and in
Canada under the Health Canada Pest Management Regulatory Agency and its Pest Control Products
Act.
These environmental laws and regulations require the Company to obtain various environmental registrations,
licenses, permits and other approvals, as well as carry out inspections, compliance testing and meet timely
reporting requirements in order to operate its manufacturing and operating facilities.
Compliance with these environmental laws and regulations will continue to affect the Company’s operations by
imposing operating and maintenance costs and capital expenditures. Failure to comply could result in civil or
criminal enforcement actions, which could result, among others, in the payment of substantial fines, often
calculated on a daily basis, or in extreme cases, the disruption or suspension of operations at the affected
facility.
Under various federal, provincial, state and local laws and regulations, the Company could, as the owner,
lessor or operator, be liable for the costs of removal or remediation of contamination at its sites or neighboring
properties, even in circumstances where the Company did not cause or otherwise contribute to the
contamination. The remediation costs and other costs required to clean up or treat contaminated sites could
be substantial. However, in certain cases, the Company benefits from indemnities from the former owners of
its sites. Contamination on and from the Company’s sites may subject it to liability to third parties or
29
M-29
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
M-30
governmental authorities for injuries to persons, property or the environment and could adversely affect the
Company’s ability to sell or rent its properties or to borrow money using such properties as collateral.
Increased regulatory activity and the possibility of major changes in environmental laws and regulations,
including changes in the interpretation or application thereof, are other risks faced by the Company. While it is
not possible to predict the outcome and nature of these changes, they could substantially increase the
Company’s capital expenditures and compliance costs at the facilities affected or could change the availability
or pricing of certain products such as preservatives purchased and used by the Company.
While the Company has been party to environmental litigation which has included, among others, claims for
adverse physical effects and diminution of property value, the outcomes and associated costs have not been
material. There is, however, no guarantee that this will continue to be the case in the future, as the result of
disputes regarding environmental matters and conclusions of environmental litigation cannot be predicted.
The Company’s business has grown, and its image strengthened, in large part by its consistent production and
delivery of high-quality products, while maintaining a high level of environmental responsibility. Claims of
irresponsible practices by regulatory authorities, communities or customers could harm the reputation of the
Company. Adverse publicity resulting from actual or perceived violations of environmental laws, regulations or
industry practices could negatively impact customer loyalty, reduce demand, lead to a weakening of
confidence in the marketplace and ultimately, a reduction in the Company’s share price. These effects could
materialize even if the allegations are not valid, the Company is fully compliant with applicable laws and
regulations and the Company is not found liable.
Privacy Laws and Regulations
The Company collects, processes and stores proprietary information relating to the Company’s business and
personal information relating to employees, customers and vendors. The Company is subject to numerous
laws and regulations designed to protect information, such as the Canada’s Federal Personal Information
Protection and Electronic Documents Act and substantially similar equivalents at the provincial or state level
including An Act to Modernize Legislation Provisions Respecting the Protection of Personal Information in
Quebec and the California Consumer Privacy Act. Privacy laws and regulations are increasing in number and
complexity and are being adopted and amended with greater frequency, which results in greater regulatory
compliance risk and costs to prevent events related to confidential data. The potential financial penalties for
non-compliance with these laws and regulations have significantly increased. Any security breach, improper
use and other types of unauthorized access or misappropriation of such information could not only lead to
regulatory penalties, audits or investigations by various government agencies relating to compliance with
applicable laws, but also expose the Company to a reputational disadvantage risk.
Litigation
The Company is subject to the risk of litigation in the ordinary course of business by employees, customers,
suppliers, competitors, shareholders, government agencies, or others, through private actions, class actions,
administrative proceedings, regulatory actions or other litigation. The outcome of litigation is difficult to assess
or quantify. Claimants in these types of lawsuits or claims may seek recovery of very large or indeterminate
amounts, and the magnitude of the potential loss relating to these lawsuits or claims may remain unknown for
substantial periods of time. Although the final outcome cannot be predicted with any degree of certainty, the
Company regularly assesses the status of these matters and establishes provisions based on the assessment
of the probable outcome. If the assessment is not correct, the Company may not have recorded adequate
provisions for such losses and the Company’s financial position, operating results and cash flows could be
adversely impacted. Regardless of outcome, litigation could result in substantial costs to the Company and
divert Management’s attention and resources away from the day-to-day operations of the Company’s
business.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company uses derivative instruments to provide economic hedges to mitigate various risks. The fair
values of these instruments represent the amount of the consideration that could be exchanged in an arm’s
length transaction between willing parties who are under no compulsion to act. The fair value of these
30
derivatives is determined using prices in active markets, where available. When no such market is available,
valuation techniques are applied such as discounted cash flow analysis. The valuation technique incorporates
all factors that would be considered in setting a price, including the Company’s own credit risk, as well as the
credit risk of the counterparty.
Interest Rate Risk Management
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. The Company enters into both fixed and variable rate debt. The
risk management objective is to minimize the potential for changes in interest rates to cause adverse changes
in cash flows to the Company. The Company enters into interest rate swap agreements in order to reduce the
impact of fluctuating interest rates on its long-term debt. As at December 31, 2024, the Company had two
interest rate swap agreements hedging $252 million (US$175 million) in debts and having December 2026 and
June 2028 as maturity dates. These instruments are presented at fair value and designated as cash flow
hedges. The ratio, as at December 31, 2024, of fixed and floating debt was 68% and 32%, respectively,
including the effects of interest rate swap positions (46% and 54%, respectively, as at December 31, 2023).
Foreign Exchange Risk Management
A large portion of the Company's consolidated revenue and expenses are received or denominated in the
functional currency of the business units operating in the markets in which it does business. Accordingly, the
Company’s sensitivity to variations in foreign exchange rates is economically limited. The Company’s main
source of foreign exchange risk resides in the Canadian operations' business transactions denominated in
U.S. dollars. The Company’s objective in managing its foreign exchange risk is to minimize its exposure to
foreign currency cash flows and operations, by transacting with third parties in the functional currency of the
business units to the maximum extent possible and through the use of foreign exchange forward contracts. As
at December 31, 2024, the Company had no foreign exchange forward contract agreements in place.
MATERIAL
ACCOUNTING
POLICIES
AND
CRITICAL
ACCOUNTING
ESTIMATES
The Company’s material accounting policies and critical accounting estimates and judgements are
respectively described in Note 2 and in Note 3 to the December 31, 2024 and 2023 audited consolidated
financial statements.
The Company prepares its consolidated financial statements in accordance with IFRS Accounting Standards.
The preparation of consolidated financial statements in conformity with IFRS Accounting Standards requires
Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Significant items subject to estimates and assumptions
include estimated useful life of assets, recoverability of long-lived assets and goodwill and determination of the
fair value of the assets acquired and liabilities assumed in the context of an acquisition. Management also
makes estimates and assumptions in the context of business combination mainly with sales forecast, margin
forecast and discount rate. It is possible that actual results could differ from those estimates, and such
differences could be material. Estimates are reviewed periodically and, as adjustments become necessary,
they are reported in the consolidated statement of income in the period in which they become known.
New Accounting Standards Announced but not yet Adopted
A number of new standards and amendments to standards are effective for the annual reporting period
beginning January 1, 2026 or after. The Company is currently assessing the impact of these new standards
and amendments on its consolidated financial statements.
31
M-31
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
M-32
DISCLOSURE CONTROLS AND PROCEDURES
The Company maintains appropriate information systems, procedures and controls to ensure that information
used internally and disclosed externally is complete, accurate, reliable and timely. The disclosure controls and
procedures (“DC&P”) are designed to provide reasonable assurance that information required to be disclosed
in the annual filings, interim filings or other reports filed under securities legislation is recorded, processed,
summarized and reported within the time periods specified in the securities legislation and include controls and
procedures designed to ensure that information required to be disclosed is accumulated and communicated to
Management, including its certifying officers, as appropriate to allow timely decisions regarding required
disclosure.
The President and Chief Executive Officer and the Senior Vice-President and Chief Financial Officer of the
Company have evaluated, or caused the evaluation of, under their direct supervision, the design and operating
effectiveness of the Company’s DC&P (as defined in Regulation 52-109 - Certification of Disclosure in Issuer’s
Annual and Interim Filings) as at December 31, 2024 and have concluded that such DC&P were designed and
operating effectively.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal controls over financial reporting
(“ICFR”) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with IFRS Accounting Standards.
Management has evaluated the design and operating effectiveness of its ICFR as defined in Regulation
52-109 – Certification of Disclosure in Issuer’s Annual and Interim Filings. The evaluation was based on the
criteria established in the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). This evaluation was performed by the President and
Chief Executive Officer and the Senior Vice-President and Chief Financial Officer of the Company with the
assistance of other Company Management and staff to the extent deemed necessary. Based on this
evaluation, the President and Chief Executive Officer and the Senior Vice-President and Chief Financial
Officer concluded that the ICFR were appropriately designed and operating effectively, as at
December 31, 2024.
In spite of its evaluation, Management does recognize that any controls and procedures, no matter how well
designed and operated, can only provide reasonable assurance and not absolute assurance of achieving the
desired control objectives.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Stella-Jones Inc. is taking a phased approach to its migration to a new ERP system. In order to maintain
appropriate internal controls over financial reporting in the product categories that have migrated to the new
ERP system, relevant changes have been made.
There were no other changes made to the design of ICFR during the period from October 1, 2024 to
December 31, 2024 that have materially affected or are reasonably likely to materially affect the Company's
ICFR.
February 26, 2025
32
M-33
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
M-34
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
(in millions of Canadian dollars)
CONSOLIDATED
FINANCIAL
STATEMENTS
F-01
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F- 0 2
Stella-Jones Inc.
Consolidated Financial Statements
December 31, 2024 and 2023
December 31, 2024 and 2023
Management’s Statement of Responsibility for Financial Information
The consolidated financial statements are the responsibility of Management, and have been prepared in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board. Where necessary, Management has made judgments and estimates of the outcome of
events and transactions, with due consideration given to materiality.
The Company maintains a system of internal controls to provide reasonable assurance as to the reliability of
the financial records and safeguarding of its assets. The consolidated financial statements have been
audited by the Company’s independent auditors, PricewaterhouseCoopers LLP, and they have issued their
report thereon.
The Board of Directors is responsible for overseeing Management in the performance of its responsibilities
for financial reporting. The Board of Directors exercises its responsibilities through the Audit Committee,
which is comprised of four independent directors. The Audit Committee meets from time to time with
Management and the Company’s independent auditors to review the consolidated financial statements and
matters relating to the audit. The Company’s independent auditors have full and free access to the Audit
Committee. The consolidated financial statements have been reviewed by the Audit Committee, who
recommended their approval by the Board of Directors.
(s) Eric Vachon
(s) Silvana Travaglini
Eric Vachon, CPA Silvana Travaglini, CPA
President and Chief Executive Officer Senior Vice-President and Chief Financial Officer
Saint-Laurent, Québec
February 26, 2025
Stella-Jones Inc.
Consolidated Financial Statements
F-03
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-04
PricewaterhouseCoopers LLP
1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1
T.: +1 514 205 5000, F.: +1 514 876 1502, Fax to mail: ca_montreal_main_fax@pwc.com
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Independent auditor’s report
To the Shareholders of Stella-Jones Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Stella-Jones Inc. and its subsidiaries (together, the Company) as at
December 31, 2024 and 2023, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS Accounting Standards).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of financial position as at December 31, 2024 and 2023;
the consolidated statements of change in shareholders’ equity for the years then ended;
the consolidated statements of income for the years then ended;
the consolidated statements of comprehensive income for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, comprising material accounting policy information
and other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2024. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Accuracy and existence of inventories
Refer to note 2 – Material accounting policies and
note 6 – Inventories to the consolidated financial
statements.
The Company’s inventories totalled $1,759 million
as at December 31, 2024. Inventories held in its
network across North America are comprised of
raw materials and finished goods. Raw materials
are valued at the lower of weighted average cost
and net realizable value. Finished goods are
valued at the lower of weighted average cost and
net realizable value and include the cost of raw
materials, other direct costs and manufacturing
overhead expenses. Net realizable value is the
estimated selling price less costs necessary to
make the sale.
We considered this a key audit matter due to the
magnitude of the inventories balance, the number
of inventory locations across the Company’s
network and the audit effort involved in testing the
inventories balance.
Our approach to addressing the matter included
the following procedures, among others:
Tested the operating effectiveness of controls
related to the matching of invoices, purchase
orders and receiving documents.
For a selection of locations of inventory counts
performed by management prior to year-end,
observed the inventory count procedures and
performed independent test counts for a
sample of inventory items.
Tested the inventories activity in the
intervening period between the count date and
the year-end date.
For a sample of raw materials, tested the cost
by agreeing to source documents as
applicable.
For a sample of inventory items for raw
materials and finished goods, recalculated the
weighted average cost.
For a sample of finished goods, tested the
cost of transferred materials from raw
materials to finished goods, by agreeing the
cost transferred to the carrying cost of the
items previously classified in raw materials.
Tested the allocation of other direct standard
costs attributed to finished goods during the
year, by comparing the other direct standard
costs for a sample of finished goods to the
direct standard cost list.
F-05
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-06
Key audit matter
How our audit addressed the key audit matter
For a portion of inventory items, tested the
reasonability of the allocation of the
manufacturing overhead at year-end by
comparing to the prior year’s allocations.
Assessed whether variances related to other
direct and manufacturing overhead standard
costs needed to be capitalized into finished
goods to approximate actual cost.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and our auditor’s report thereon, included in the annual
report, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard. When we read the information, other
than the consolidated financial statements and our auditor’s report thereon, included in the annual report,
if we conclude that there is a material misstatement therein, we are required to communicate the matter to
those charged with governance.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS Accounting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
F-07
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-08
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business units within the Company as a basis for forming an opinion on
the consolidated financial statements. We are responsible for the direction, supervision and review of
the audit work performed for purposes of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Gregory Tremellen.
/s/PricewaterhouseCoopers LLP1
Montréal, Quebec
February 26, 2025
1 CPA auditor, public accountancy permit No. A119714
(in millions of Canadian dollars)
Note
2024
2023
Assets
Current assets
Cash and cash equivalents
50
—
Accounts receivable
5
277
308
Inventories
6
1,759
1,580
Income taxes receivable
11
11
Other current assets
42
48
2,139
1,947
Non-current assets
Property, plant and equipment
7
1,048
906
Right-of-use assets
8
311
285
Intangible assets
9
170
169
Goodwill
9
406
375
Derivative financial instruments
19
21
21
Other non-current assets
8
5
4,103
3,708
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued liabilities
10
180
204
Deferred revenue
17
—
Current portion of long-term debt
11
1
100
Current portion of lease liabilities
8
64
54
Current portion of provisions and other long-term liabilities
12
24
26
286
384
Non-current liabilities
Long-term debt
11
1,379
1,216
Lease liabilities
8
259
240
Deferred income taxes
16
197
175
Provisions and other long-term liabilities
12
37
31
Employee future benefits
17
4
10
2,162
2,056
Shareholders’ equity
Capital stock
14
188
189
Retained earnings
1,498
1,329
Accumulated other comprehensive income
255
134
1,941
1,652
4,103
3,708
Commitments and contingencies
18
Subsequent events
23
Approved by the Board of Directors,
(s) Katherine A. Lehman (s) Karen Laflamme
Katherine A. Lehman
Karen Laflamme, FCPA, ASC
Director
Director
Stella-Jones Inc.
Consolidated Statements of Financial Position
As at December 31, 2024 and 2023
The accompanying notes are an integral part of these consolidated financial statements.
F-09
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-10
(in millions of Canadian dollars)
Accumulated other comprehensive income
Capital
stock
Retained
earnings
Foreign
currency
translation
adjustment
Translation
of long-term
debts
designated
as net
investment
hedges
Unrealized
gains on cash
flow hedges
Total
Total
shareholders’
equity
Balance – January 1, 2024
189
1,329
224
(105)
15
134
1,652
Comprehensive income (loss)
Net income
—
319
—
—
—
—
319
Other comprehensive income
(loss)
—
1
143
(22)
—
121
122
Comprehensive income (loss)
—
320
143
(22)
—
121
441
Dividends on common shares
—
(63)
—
—
—
—
(63)
Stock options exercised
1
—
—
—
—
—
1
Employee share purchase plans
2
—
—
—
—
—
2
Repurchase of common shares
including related taxes (note 14)
(4)
(88)
—
—
—
—
(92)
(1)
(151)
—
—
—
—
(152)
Balance – December 31, 2024
188
1,498
367
(127)
15
255
1,941
Stella-Jones Inc.
Consolidated Statements of Change in Shareholders’ Equity
For the years ended December 31, 2024 and 2023
The accompanying notes are an integral part of these consolidated financial statements.
(in millions of Canadian dollars)
Accumulated other comprehensive income
Capital
stock
Retained
earnings
Foreign
currency
translation
adjustment
Translation
of long-term
debts
designated
as net
investment
hedges
Unrealized
gains (losses)
on cash flow
hedges
Total
Total
shareholders’
equity
Balance – January 1, 2023
194
1,192
261
(111)
21
171
1,557
Comprehensive income (loss)
Net income
—
326
—
—
—
—
326
Other comprehensive (loss)
income
—
(2)
(37)
6
(6)
(37)
(39)
Comprehensive income (loss)
—
324
(37)
6
(6)
(37)
287
Dividends on common shares
—
(53)
—
—
—
—
(53)
Stock options exercised
1
—
—
—
—
—
1
Employee share purchase plans
2
—
—
—
—
—
2
Repurchase of common shares
(note 14)
(8)
(134)
—
—
—
—
(142)
(5)
(187)
—
—
—
—
(192)
Balance – December 31, 2023
189
1,329
224
(105)
15
134
1,652
Stella-Jones Inc.
Consolidated Statements of Change in Shareholders’ Equity...Continued
For the years ended December 31, 2024 and 2023
The accompanying notes are an integral part of these consolidated financial statements.
F-11
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-12
(in millions of Canadian dollars, except earnings per common share)
Note
2024
2023
Sales
3,469
3,319
Expenses
Cost of sales (including depreciation and amortization of $115 (2023 - $94))
2,745
2,631
Selling and administrative (including depreciation and amortization of $15
(2023 - $15))
206
181
Other losses, net
15
8
15
2,966
2,820
Operating income
503
499
Financial expenses
15
88
68
Income before income taxes
415
431
Income tax expense
Current
16
86
83
Deferred
16
10
22
96
105
Net income
319
326
Basic and diluted earnings per common share
14
5.66
5.62
Stella-Jones Inc.
Consolidated Statements of Income
For the years ended December 31, 2024 and 2023
The accompanying notes are an integral part of these consolidated financial statements.
(in millions of Canadian dollars)
2024
2023
Net income
319
326
Other comprehensive income (loss)
Items that may subsequently be reclassified to net income
Gains (losses) on translation of financial statements of foreign operation
143
(37)
(Losses) gains on translation of long-term debt designated as hedges of net
investment in foreign operations
(22)
6
Change in fair value of derivatives designated as cash flow hedges
—
(8)
Income tax on change in fair value of derivatives designated as cash flow hedges
—
2
Items that will not subsequently be reclassified to net income
Remeasurements of post-retirement benefit obligations
1
(2)
122
(39)
Comprehensive income
441
287
Stella-Jones Inc.
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2024 and 2023
The accompanying notes are an integral part of these consolidated financial statements.
F-13
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-14
(in millions of Canadian dollars)
Note
2024
2023
Cash flows from (used in)
Operating activities
Net income
319
326
Adjustments for
Depreciation of property, plant and equipment
7
46
40
Depreciation of right-of-use assets
8
66
53
Amortization of intangible assets
9
18
16
Financial expenses
15
88
68
Income tax expense
16
96
105
Other
4
11
637
619
Changes in non-cash working capital components
Accounts receivable
56
(7)
Inventories
(82)
(353)
Income taxes receivable
—
(2)
Other current assets
9
8
Accounts payable and accrued liabilities
(40)
9
(57)
(345)
Interest paid
(85)
(68)
Income taxes paid
(87)
(99)
408
107
Financing activities
Net change in revolving credit facilities
11
(471)
362
Proceeds from long-term debt
11
568
33
Repayment of long-term debt
11
(103)
(1)
Repayment of lease liabilities
8
(62)
(50)
Dividends on common shares
(63)
(53)
Repurchase of common shares
14
(90)
(142)
Other
—
2
(221)
151
Investing activities
Business combinations
4
(4)
(93)
Purchase of property, plant and equipment
7
(132)
(155)
Property insurance proceeds
10
—
Additions of intangible assets
9
(11)
(10)
(137)
(258)
Net change in cash and cash equivalents during the year
50
—
Cash and cash equivalents – Beginning of year
—
—
Cash and cash equivalents – End of year
50
—
Stella-Jones Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2024 and 2023
The accompanying notes are an integral part of these consolidated financial statements.
1
Description of the business
Stella-Jones Inc. (with its subsidiaries, either individually or collectively, referred to as the “Company”) is a
leading North American manufacturer of products focused on supporting infrastructure that are essential to
the delivery of electrical distribution and transmission, and the operation and maintenance of railway
transportation systems. The Company supplies the continent’s major electrical utilities companies with
treated wood utility poles and North America’s Class 1, short line and commercial railroad operators with
treated wood railway ties and timbers. The Company also supports infrastructure with industrial products,
namely timbers for railway bridges, crossings and construction, marine and foundation pilings, and coal tar-
based products. Additionally, the Company manufactures and distributes premium treated residential lumber
and accessories to Canadian and American retailers for outdoor applications, with a significant portion of the
business devoted to servicing Canadian customers through its national manufacturing and distribution
network. The Company has treating facilities across Canada and the United States and sells its products
primarily in these two countries. The Company’s headquarters are located at 3100 de la Côte-Vertu Blvd., in
Saint-Laurent, Quebec, Canada. The Company is incorporated under the Canada Business Corporations
Act, and its common shares are listed on the Toronto Stock Exchange (“TSX”) under the stock symbol SJ.
2
Material accounting policies
Basis of presentation
The Company prepares its consolidated financial statements in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board (“IFRS Accounting
Standards”).
These consolidated financial statements were approved by the Board of Directors on February 26, 2025.
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for
derivative financial instruments and certain long-term liabilities which are measured at fair value. The
Company has consistently applied the same accounting policies for all periods presented, unless otherwise
stated.
Principles of consolidation
The consolidated financial statements include the accounts of Stella-Jones Inc. and its controlled
subsidiaries. Intercompany transactions and balances between these companies have been eliminated. All
consolidated subsidiaries are wholly owned. The significant subsidiaries within the legal structure of the
Company are as follows:
Subsidiary
Parent
Country of
incorporation
Stella-Jones U.S. Holding Corporation
Stella-Jones Inc.
United States
Stella-Jones Corporation
Stella-Jones U.S. Holding Corporation
United States
The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. The existence and
effect of potential voting rights that are currently exercisable or convertible are considered when assessing
whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which
control is transferred to the Company. They are de-consolidated from the date that control ceases.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
1
F-15
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F-16
Business combinations
The Company accounts for business combinations using the acquisition method when the acquired set of
activities and assets meets the definition of a business and control is transferred to the Company. In
determining whether a particular set of activities and assets is a business, the Company assesses whether
the set of assets and activities acquired includes, at a minimum, an input and substantive process and
whether the acquired set has the ability to produce outputs.
The consideration transferred for the business acquired is the fair value of the assets transferred, the
liabilities assumed, and the equity interests issued by the Company. The consideration transferred also
includes the fair value of any asset or liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date. Acquisition-related costs are expensed as
incurred.
The excess of the aggregate of the consideration transferred, the fair value of any non-controlling interest in
the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair
value of the identifiable assets acquired and liabilities assumed is recorded as goodwill. If those amounts are
less than the fair value of the net assets of the business acquired, the difference is recognized directly in the
consolidated statement of income as a bargain purchase gain. Where settlement of any part of cash
consideration is deferred, the amounts payable in the future are discounted to their present value as at the
date of exchange. The discount rate used is the Company’s incremental borrowing rate, being the rate at
which a similar borrowing could be obtained from an independent financier under comparable terms and
conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial
liability are subsequently remeasured to fair value, with changes in fair value recognized in the consolidated
statement of income.
Accounting policies of the subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Company.
Foreign currency translation
a)
Functional and presentation currency
Items included in the financial statements of each of the Company’s entities are measured using the
currency of the primary economic environment in which the entity operates (the “functional currency”).
The consolidated financial statements are presented in Canadian dollars, which is the Company’s
functional and presentation currency. All amounts have been rounded to the nearest million, unless
otherwise indicated.
b)
Foreign currency transactions
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Revenues and expenses denominated in a foreign currency
are translated by applying the monthly average exchange rates. Monetary assets and liabilities
denominated in foreign currencies are translated at the rate in effect at the consolidated statement of
financial position date. Non-monetary assets and liabilities denominated in foreign currencies that are
measured at cost are translated at historical exchange rates. Non-monetary assets and liabilities
denominated in foreign currencies that are measured at fair value are translated to the functional
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
2
currency at the exchange rate at the date that the fair value was determined.
Foreign currency differences are generally recognized in the consolidated statement of income within
other losses (gains), net. They are deferred in accumulated other comprehensive income (loss) in
shareholders’ equity if they relate to qualifying cash flow hedges.
c)
Foreign operations
The financial statements of operations that have a functional currency different from that of the Company
are translated using the rate in effect at the consolidated statement of financial position date for assets
and liabilities, and the monthly average exchange rates during the year for revenues and expenses.
Adjustments arising from this translation are recorded in accumulated other comprehensive income
(loss) in shareholders’ equity. Goodwill and fair value adjustments arising on the acquisition of a foreign
operation are treated as assets and liabilities of the foreign operation and translated at the rate in effect
at the consolidated statement of financial position date.
d)
Hedges of net investments in foreign operations
Foreign currency differences arising on the translation of financial liabilities designated as a hedge of net
investment in foreign operations are recognized within equity in other comprehensive income (loss) to
the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are
recognized in the consolidated statement of income, within other losses (gains), net. When the hedged
portion of a net investment (the subsidiary) is disposed of, the relevant amount in equity is transferred to
the consolidated statement of income as part of the gain or loss on disposal.
Revenue recognition
The Company sells treated and untreated wood products (the “Products”), as well as wood treating services.
Revenue from the sale of Products is recognized when the Company satisfies a performance obligation by
transferring a promised Product to a customer. Products are considered to be transferred once the customer
takes control of them, being either at the Company’s manufacturing site or at the customer’s location.
Control of the Products refers to the ability to direct its use and obtain substantially all the remaining benefits
from the Product.
The Company offers to treat wood products owned by third parties. Revenue from these treating services is
recognized using the point in time criteria since there is a short manufacturing timeframe to treat wood
products.
Product sales can be subject to retrospective volume discounts based on aggregate sales over a 12-month
period, per certain contractual conditions. Revenue from these sales is recognized based on the price
specified in the contract, net of the estimated volume discounts. The Company’s significant experience is
used to estimate and provide for the discounts, using the expected value method, and revenue is only
recognized to the extent that it is highly probable that a reversal will not occur. A liability is recognized for
expected volume discounts payable to customers in relation to sales transacted to the end of the reporting
period.
Product sales may also be subject to retrospective price discounts based on aggregate sales over a 12-
month period, according to certain contractual conditions. Revenue from these sales is recognized based on
the expected average sales price over the specified period. Accumulated experience is used to estimate and
provide for the price discounts, using the expected value method, and revenue is only recognized to the
extent that it is highly probable that specified contractual conditions will be met. The customer is invoiced at
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
3
F-17
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-18
the contract price and a liability is recognized to adjust to the average price.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, bank balances and short-term liquid investments with
initial maturities of three months or less.
Accounts receivable
Trade receivables are amounts due from customers from the sale of products or services rendered in the
ordinary course of business. Trade receivables are classified as current assets if payment is due within 12
months or less. Trade receivables are recognized initially at fair value and subsequently measured at
amortized cost, less credit loss allowance.
Inventories
Inventories of raw materials are valued at the lower of weighted average cost and net realizable value.
Finished goods are valued at the lower of weighted average cost and net realizable value and include the
cost of raw materials, other direct costs and manufacturing overhead expenses. Net realizable value is the
estimated selling price less costs necessary to make the sale.
Property, plant and equipment
Property, plant and equipment are recorded at cost, including borrowing costs incurred during the
construction period, less accumulated depreciation and impairment. The Company allocates the amount
initially recognized in respect of an item of property, plant and equipment to its significant parts, and
depreciates separately each such part. Depreciation is calculated on a straight-line basis using rates based
on the estimated useful lives of the assets.
Useful life
Buildings
7 to 60 years
Production equipment
5 to 60 years
Rolling stock
3 to 20 years
Office equipment
2 to 10 years
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each
reporting period. The depreciation expense is included in cost of sales in the consolidated statement of
income.
Financial expenses
Finance expenses include interest expense on long-term debt and other financial charges and interest
expense on lease liabilities. Financial expenses are recognized in the consolidated statement of income in
the period in which they are incurred.
Leases
The Company leases certain property, plant and equipment and recognizes a right-of-use asset and liability
at the lease commencement date. Right-of-use assets represent the right to use an underlying asset for the
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
4
term of the lease, and the related liabilities represent the obligation to make the lease payments arising from
the lease. Right-of-use assets and the related liabilities are recognized at the lease commencement date
based on the present value of the lease payments over the term of the lease, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing
rate. Renewal and termination options are included in the lease terms when it is reasonably certain that they
will be exercised.
Lease payments comprise of fixed payments, including in-substance fixed payments, the exercise price
under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional
renewal period that the Company is reasonably certain to exercise and penalties for early termination of a
lease if the Company is reasonably certain to terminate. Each lease payment is allocated between the
liability and finance cost. The interest element of the finance cost is charged to the consolidated statement of
income over the lease term so as to produce a constant periodic rate of interest on the remaining balance of
the liability for each period.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement
date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the
Company by the end of the lease term or the cost of the right-of-use asset reflects that the Company will
exercise a purchase option. In that case, the right-of-use asset will be depreciated over the useful life of the
underlying asset, which is determined on the same basis as those of property and equipment. The
depreciation expense is included in cost of sales and selling and administrative expense in the consolidated
statement of income.
The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that
have a lease-term of less than 12 months and leases of low-value assets. Payments associated with short-
term leases and low-value assets are charged to the consolidated statement of income on a straight-line
basis over the term of the lease.
Intangible assets
Intangible assets with finite useful lives are recorded at cost and are amortized over their useful lives.
Intangible assets with indefinite useful lives are recorded at cost and are not amortized. The amortization
method and estimate of the useful life of an intangible asset are reviewed on an annual basis.
Method
Useful life
Customer relationships
Straight-line
10 to 12 years
Customer relationships
Declining balance
4% to 20%
Software
Straight-line
5 to 10 years
Creosote registration
-
Indefinite
Development costs that are directly attributable to the design, development, implementation, and testing of
identifiable software products are recognized as software if certain criteria are met, including technical
feasibility and intent and ability to develop and use the software to generate probable future economic
benefits; otherwise they are expensed as incurred. Configuration or customization costs in a cloud
computing arrangement that do not meet capitalization criteria are expensed and presented in the
consolidated statement of income. Directly attributable costs that are capitalized include software related,
employee and third-party development costs.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
5
F-19
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-20
The amortization expense is included in cost of sales and selling and administrative expense in the
consolidated statement of income.
The creosote registration is subject to an annual impairment test or more frequently if events or changes in
circumstances indicate that it might be impaired.
Goodwill
Goodwill is not amortized and tested annually for impairment, or more frequently, whenever indicators of
potential impairment exist. Impairment losses on goodwill are not reversed. For the purpose of impairment
testing, goodwill is allocated to cash-generating units (“CGUs”) or groups of CGUs that are expected to
benefit from the business combination in which the goodwill arose. The Company defines CGUs as either
plants specialized in the treatment of utility poles and residential lumber - U.S., specialized in the treatment
of residential lumber - Canada, and specialized in the treatment of railway ties.
Impairment
The carrying values of non-financial assets with finite lives, such as property, plant and equipment and
intangible assets with finite useful lives, are assessed for impairment whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable. Long-lived assets that are not
amortized are tested at least annually for impairment or when events or changes in circumstances warrant
such consideration. For the purpose of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (CGUs).
Impairments are recorded when the recoverable amounts of assets are less than their carrying amounts.
The recoverable amount is the higher of an asset’s fair value less cost of disposal and its value in use (being
the present value of the expected future cash flows of the relevant asset or CGU).
Non-financial assets other than goodwill that have suffered impairment are reviewed for possible reversal of
the impairment when events or changes in circumstances warrant such consideration.
Provisions
Provisions for site remediation and other provisions are recognized when the Company has a legal or
constructive obligation as a result of past events, when it is probable that an outflow of resources will be
required to settle the obligation and when a reliable estimate can be made of the amount of the obligation. If
some or all of the expenditure required to settle a provision is expected to be reimbursed by another party,
the reimbursement is recorded in the consolidated statement of financial position as a separate asset, but
only if it is virtually certain that reimbursement will be received.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessments of the time value of money and the
risks specific to the obligation. The increase in the provision due to passage of time is recognized as a
financial expense.
The Company considers the current portion of the provision to be an obligation whose settlement is
expected to occur within the next 12 months.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
6
Site remediation obligations
Site remediation obligations relate to the discounted present value of estimated future expenditures
associated with the obligations of restoring the environmental integrity of certain properties. The Company
reviews estimates of future site remediation expenditures on an ongoing basis and records any revisions,
along with the accretion expense on existing obligations, in other losses (gains), net in the consolidated
statement of income.
At each reporting date, the liability is remeasured for changes in discount rates and in the estimate of the
amount, timing and cost of the work to be carried out.
Income taxes
The income tax expense for the period is the tax payable on the current year’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at
the end of the reporting period in the countries where the Company operates and generates taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
Deferred income tax is recognized using the liability method on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill.
Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects neither accounting
nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantially enacted by the end of the reporting period and are expected to apply when the
related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized only if it is probable that future taxable amounts will be available to utilize
those temporary differences and losses.
Current and deferred tax is recognized in the consolidated statement of income, except to the extent that it
relates to items recognized in other comprehensive income (loss) or directly in equity. In this case, the tax is
also recognized in other comprehensive income (loss) or directly in equity, respectively.
Employee future benefits
Defined benefit pension plan
The Company accrues obligations and related costs under defined benefit pension plans, net of plan assets.
The cost of pensions earned by employees is actuarially determined using the projected unit credit method
and Management’s best estimate of expected plan investment performance, salary escalation, retirement
ages of employees and discount rates on obligations. Past service costs from plan amendments are
recognized in the consolidated statement of income when incurred. Remeasurements consisting of actuarial
gains and losses, the actual return on plan assets (excluding the net interest component) and any change in
the asset ceiling are charged or credited to other comprehensive income (loss). These amounts are
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
7
F-21
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-22
recognized immediately in retained earnings without recycling to the consolidated statement of income in
subsequent periods.
Other post-employment benefit program
The Company provides other post-employment benefits to certain retirees. The entitlement to these benefits
is usually conditional on the employee remaining in service up to retirement age and the completion of a
minimum service period. The expected costs of these benefits are attributed from the date when service by
the employee first leads to benefits under the plan, until the date when further service by the employee will
lead to no material amount of further benefits. The cost of future benefits earned by employees is
established by actuarial calculations using the projected benefit method pro-rated on years of service based
on Management’s best estimate of economic and demographic assumptions. Actuarial gains and losses
arising from experience adjustments and changes in actuarial assumptions are charged or credited to other
comprehensive income (loss) in the period in which they arise and are recognized immediately in retained
earnings without recycling to the consolidated statement of income in subsequent periods.
Share-based payments
The Company operates a number of equity-settled and cash-settled share-based compensation plans under
which it receives services from employees and non-executive directors as consideration for equity
instruments of the Company or cash payments. Equity-settled share-based payments are comprised of the
stock option plan and cash-settled share-based payments include restricted stock units (“RSUs”),
performance stock units (“PSUs”) and deferred share units (“DSUs”).
Equity-settled plan
The Company accounts for stock options granted using the fair value method. Under this method,
compensation expense for stock options granted is measured at fair value at the grant date using the Black-
Scholes option pricing model and is recognized in the consolidated statement of income over the vesting
period of the options granted, with a corresponding credit to contributed surplus. For options with graded
vesting, each tranche is considered a separate grant with a different vesting date and fair value. Any
consideration paid on the exercise of stock options is credited to capital stock together with any related
share-based compensation expense included in contributed surplus.
Cash-settled plan
The Company has liability-based awards, RSUs, PSUs and DSUs, which are initially measured at fair value
at the grant date using an option pricing model. Until the liability is settled, the fair value of that liability is
remeasured at each reporting date, with changes in fair value recognized in the consolidated statement of
income. The compensation expenses are recognized in the consolidated statement of income over the
vesting periods, based on the fair value of the awards at the end of each reporting period. Where RSUs and
PSUs are forfeited due to a failure by the employee to satisfy the service conditions, any expenses
previously recognized in relation to such units are reversed effective from the date of the forfeiture.
Financial instruments
The Company recognizes a financial asset or a financial liability in its consolidated statement of financial
position when it becomes party to the contractual provisions of the instrument. At initial recognition, the
Company measures a financial asset or a financial liability at its fair value plus or minus, in the case of a
financial asset or a financial liability not at fair value through profit or loss, transaction costs that are directly
attributable to the acquisition or issue of the financial asset or the financial liability.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
8
Financial assets
The Company will classify financial assets as subsequently measured at amortized cost, fair value through
other comprehensive income or fair value through profit or loss, based on its business model for managing
the financial asset and the financial asset’s contractual cash flow characteristics. The three categories are
defined as follows:
a)
Amortized cost - a financial asset is measured at amortized cost if both of the following conditions are
met:
–
the asset is held within a business model whose objective is to hold assets in order to collect
contractual cash flows; and
–
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
b)
Fair value through other comprehensive income - financial assets are classified and measured at fair
value through other comprehensive income if they are held in a business model whose objective is
achieved by both collecting contractual cash flows and selling financial assets, where those cash flows
represent solely payments of principal and interest.
c)
Fair value through profit or loss - any financial assets that are not held in one of the two business models
mentioned in a) and b) are measured at fair value through profit or loss.
If the Company changes its business model for managing financial assets it must reclassify all affected
financial assets.
The Company’s financial assets are comprised of cash and cash equivalents, accounts receivable and
derivative financial instruments. Cash and cash equivalents and accounts receivable are measured at
amortized cost.
Derivative financial instruments that are not designated as hedging instruments are measured at fair value
through profit or loss. Derivative financial instruments that are designated as hedging instruments are
measured at fair value through other comprehensive income.
A financial asset is derecognized when the Company has transferred its rights to receive cash flows from the
asset and has transferred substantially all the risks and rewards of the asset or the contractual rights to the
cash flows from the financial asset expire.
When the transfer of a trade receivable results in the derecognition of the asset, the corresponding cash
proceeds are classified as cash flows from operating activities.
Financial liabilities
The Company’s financial liabilities include accounts payable and accrued liabilities, long-term debt and
derivative financial instruments. Accounts payable and accrued liabilities and long-term debt are measured
at amortized cost. Derivative financial instruments that are not designated as hedging instruments are
initially recognized at fair value and are re-measured at each reporting date with any changes therein
recognized in profit or loss. After initial recognition, an entity cannot reclassify any financial liability.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
9
F-23
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
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The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled,
or expire. The Company also derecognizes a financial liability when its terms are modified and the cash
flows of the modified liability are substantially different, in which case a new financial liability based on the
modified terms is recognized at fair value. On derecognition of a financial liability, the difference between the
carrying amount extinguished and the consideration paid is recognized in the consolidated statement of
income.
Impairment
The Company assesses, on a forward-looking basis, the expected credit losses associated with its financial
assets carried at amortized cost. The impairment methodology applied depends on whether there has been
a significant increase in credit risk. For trade receivables, the Company applies the simplified approach
permitted by IFRS 9, Financial Instruments, which requires expected lifetime losses to be recognized from
initial recognition of the receivables.
Hedging transactions
As part of its hedging strategy, the Company considers derivative financial instruments such as foreign
exchange forward contracts to limit its exposure under contracted cash inflows of sales denominated in U.S.
dollars. The Company also considers interest rate swap agreements in order to reduce the impact of
fluctuating interest rates on its long-term debt. At inception of designated hedging relationships, the
Company documents the risk management objective and strategy for undertaking the hedge. The Company
also documents the economic relationship between the hedged item and the hedging instrument. These
derivative financial instruments are treated as cash flow hedges for accounting purposes and are fair valued
through other comprehensive income.
The effective portion of changes in the fair value of derivative instruments that are designated and qualify as
cash flow hedges is recognized in the cash flow hedge reserve within equity. The gain or loss relating to the
ineffective portion is recognized immediately in the consolidated statement of income, within other losses
(gains), net.
When forward contracts are used to hedge forecast transactions, the Company generally designates only
the change in fair value of the forward contract related to the spot component as the hedging instrument.
Gains or losses relating to the effective portion of the change in the spot component of the forward contracts
are recognized in the cash flow hedge reserve within equity. The change in the forward element of the
contract that relates to the hedged item is recognized within other comprehensive income (loss) in the costs
of hedging reserve within equity. In some cases, the Company may designate the full change in fair value of
the forward contract (including forward points) as the hedging instrument. In such cases, the gains or losses
relating to the effective portion of the change in fair value of the entire forward contract are recognized in the
cash flow hedge reserve within equity. Amounts accumulated in equity are reclassified in the periods when
the hedged item affects profit or loss.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria
for hedge accounting, any cumulative deferred gain or loss and deferred costs of hedging in equity at that
time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer
expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are
immediately reclassified to the consolidated statement of income.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
10
Earnings per share
Basic earnings per share is calculated by dividing the net income for the period attributable to the common
shareholders of the Company by the weighted average number of common shares outstanding during the
year.
Diluted earnings per share is calculated using the treasury stock method. Under this method, earnings per
share data are computed as if the options were exercised at the beginning of the year (or at the time of
issuance, if later) and as if the funds obtained from exercise were used to purchase common shares of the
Company at the average market price during the period.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker, who is responsible for allocating resources
and assessing performance of the operating segments, has been identified as the senior management team,
which makes strategic and operational decisions.
Accounting pronouncements not yet adopted
The following amendments and new standard were issued by the International Accounting Standards Board
(“IASB”) and were not yet adopted in preparing the consolidated financial statements.
Amendments to IFRS 9 and IFRS 7
In May 2024, the IASB issued Amendments to the Classification and Measurement of Financial Instruments,
which amended IFRS 9 and IFRS 7, to clarify when a financial asset or a financial liability is recognized and
derecognized and to introduce an accounting policy choice to derecognize financial liabilities settled using
an electronic payment system before the settlement date. The amendments also clarify the classification of
financial assets with environmental, social and governance (“ESG”)-linked features, non-recourse loans and
contractually linked instruments, and introduce disclosure requirements for financial instruments with
contingent features and equity instruments classified at fair value through other comprehensive income.
The amendments are effective for annual reporting periods beginning on or after January 1, 2026, with
earlier application permitted. The Company is currently assessing the impact of these amendments on its
consolidated financial statements.
Presentation and Disclosure in Financial Statements – IFRS 18
In April 2024, the IASB issued IFRS 18, Presentation and Disclosure in Financial Statements, which
replaces IAS 1, Presentation of Financial Statements. IFRS 18 introduces three sets of new requirements to
improve companies' reporting of financial performance and give investors a better basis for analyzing and
comparing companies:
–
improved comparability in the statement of income by introducing three defined categories for
income and expenses (operating, investing and financing) and requiring companies to provide new
defined subtotals, including operating profit;
–
enhanced transparency of management-defined performance measures by requiring companies to
disclose explanations of those company-specific measures that are related to the statement of
income; and
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
11
F-25
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-26
–
enhanced guidance on how companies group information in the financial statements, including
guidance on whether information is included in the primary financial statements or is further
disaggregated in the notes.
IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027, with earlier
application permitted. The Company is currently assessing the impact of the new standard on its
consolidated financial statements.
3
Critical accounting estimates and significant judgements
The preparation of consolidated financial statements in conformity with IFRS Accounting Standards requires
Management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Significant items subject to estimates and
assumptions include the estimated useful life of assets, recoverability of long-lived assets and goodwill and
determination of the fair value of the assets acquired and liabilities assumed in the context of an acquisition.
Management also makes estimates and assumptions in the context of business combination mainly with
sales forecast, margin forecast and discount rate. It is possible that actual results could differ from those
estimates, and such differences could be material. Estimates are reviewed periodically and, as adjustments
become necessary, they are reported in the consolidated statement of income in the period in which they
become known.
4
Business combination
On July 14, 2023, the Company acquired assets of the wood utility pole manufacturing business of Baldwin
Pole and Piling Company, Inc., Baldwin Pole Mississippi, LLC and Baldwin Pole & Piling, Iowa Corporation
for a total consideration of $64 million (US$49 million).
As required by IFRS 3, the provisional fair values have been reassessed in light of information obtained
during the measurement period following the acquisition. In 2024, the Company finalized the assessment of
the fair values of the assets acquired and liabilities assumed related to this acquisition. The final
determination of the fair values did not require any significant adjustments to the preliminary assessments.
5
Accounts receivable
(Amounts in millions of Canadian dollars)
2024
2023
Trade receivables
247
270
Less: Credit loss allowance
(1)
—
Trade receivables
246
270
Other receivables
31
38
277
308
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
12
The aging of gross trade receivables at each reporting date was as follows:
(Amounts in millions of Canadian dollars)
2024
2023
Current
202
191
Past due 1-30 days
17
42
Past due 31-60 days
9
14
Past due more than 60 days
19
23
247
270
In the normal course of its business, the Company has entered into facilities with certain financial institutions
whereby it can sell, without credit recourse, eligible receivables to the concerned financial institutions.
6
Inventories
(Amounts in millions of Canadian dollars)
2024
2023
Raw materials
1,047
988
Finished goods
712
592
1,759
1,580
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
13
F-27
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-28
7
Property, plant and equipment
(Amounts in millions of Canadian
dollars)
Land Buildings
Production
equipment
Rolling
stock
Others
Total
As at January 1, 2023
Cost
68
179
681
35
18
981
Accumulated depreciation
—
(39)
(156)
(19)
(12)
(226)
Net book amount
68
140
525
16
6
755
Year ended December 31, 2023
Opening net book amount
68
140
525
16
6
755
Business combination
5
9
43
6
—
63
Additions
3
21
124
5
1
154
Disposals / impairments
—
(2)
(9)
(1)
—
(12)
Depreciation
—
(6)
(28)
(5)
(1)
(40)
Exchange differences
—
(3)
(11)
—
—
(14)
Closing net book amount
76
159
644
21
6
906
As at December 31, 2023
Cost
76
202
823
44
19
1,164
Accumulated depreciation
—
(43)
(179)
(23)
(13)
(258)
Net book amount
76
159
644
21
6
906
Year ended December 31, 2024
Opening net book amount
76
159
644
21
6
906
Additions
3
44
83
4
—
134
Disposals / impairments
—
—
(4)
(1)
—
(5)
Reclassification between categories
—
4
(4)
—
—
—
Depreciation
—
(7)
(33)
(5)
(1)
(46)
Exchange differences
4
11
43
1
—
59
Closing net book amount
83
211
729
20
5
1,048
As at December 31, 2024
Cost
83
265
950
48
19
1,365
Accumulated depreciation
—
(54)
(221)
(28)
(14)
(317)
Net book amount
83
211
729
20
5
1,048
As at December 31, 2024, $10 million is included in accounts payable and accrued liabilities for the
purchases of property and equipment (December 31, 2023 – eight million dollars).
As at December 31, 2024, $110 million (Buildings – $51 million and Production equipment – $59 million) of
property
and
equipment
was
under
construction
and
not
yet
subject
to
depreciation
(December 31, 2023 – $95 million (Buildings – $22 million dollars and Production equipment – $73 million)).
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
14
8
Leases
The consolidated statement of financial position shows the following amounts relating to leases:
(Amounts in millions of Canadian dollars)
2024
2023
Right-of use assets
Rolling stock
245
227
Land
62
54
Other assets
4
4
311
285
Lease liabilities
Current lease liabilities
64
54
Non-current lease liabilities
259
240
323
294
The following table provides a reconciliation of the right-of-use assets, presented in the consolidated
statements of financial position for the years ended December 31, 2024 and 2023:
Right-of-use assets
(Amounts in millions of Canadian dollars)
Rolling stock
Land
Other assets
Total
As at January 1, 2023
128
28
4
160
Additions
145
32
—
177
Terminations
(1)
—
—
(1)
Depreciation
(45)
(6)
(2)
(53)
Remeasurement
4
—
2
6
Exchange differences
(4)
—
—
(4)
As at December 31, 2023
227
54
4
285
Additions
58
18
—
76
Terminations
(1)
(4)
—
(5)
Depreciation
(56)
(9)
(1)
(66)
Remeasurement
—
1
1
2
Exchange differences
17
2
—
19
As at December 31, 2024
245
62
4
311
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
15
F-29
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-30
The following table provides a reconciliation of the lease liabilities, presented in the consolidated statements
of financial position for the years ended December 31, 2024 and 2023:
Lease liabilities
(Amounts in millions of Canadian dollars)
Rolling stock
Land
Other assets
Total
As at January 1, 2023
131
32
4
167
Payments under lease agreements
(49)
(6)
(2)
(57)
Finance costs
6
1
—
7
Additions
145
32
—
177
Terminations
(1)
—
—
(1)
Remeasurement
4
—
2
6
Exchange differences
(4)
(1)
—
(5)
As at December 31, 2023
232
58
4
294
Payments under lease agreements
(62)
(10)
(1)
(73)
Finance costs
8
3
—
11
Additions
58
18
—
76
Terminations
(1)
(5)
—
(6)
Remeasurement
—
1
1
2
Exchange differences
17
2
—
19
As at December 31, 2024
252
67
4
323
The Company leases various rolling stock (mobile equipment, road vehicles and rail cars), land and other
assets. Leases are typically made for fixed periods of one to 10 years and may have extension options that
are considered when it is reasonably certain that the option will be exercised.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and
conditions. The lease agreements do not impose any covenants, but leased assets may not be used as
security for borrowing purposes.
Extension and termination options are included in a number of leases across the Company. These terms are
used to maximize operational flexibility in terms of managing contracts. The majority of extension and
termination options held are exercisable only by the Company and not by the respective lessor.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
16
9
Intangible assets and goodwill
The net book amount of these intangible assets and goodwill was as follows:
Intangible assets
(Amounts in millions of Canadian
dollars)
Customer
relationships
Creosote
registration
Software
Others
Total
Goodwill
As at January 1, 2023
Cost
178
42
51
17
288
369
Accumulated amortization
(93)
—
(13)
(11)
(117)
—
Net book amount
85
42
38
6
171
369
Year ended December 31, 2023
Opening net book balance
85
42
38
6
171
369
Business combination
7
—
—
—
7
14
Additions
—
—
9
1
10
—
Amortization
(10)
—
(6)
—
(16)
—
Exchange differences
(2)
(1)
—
—
(3)
(8)
Closing net book amount
80
41
41
7
169
375
As at December 31, 2023
Cost
181
41
61
18
301
375
Accumulated amortization
(101)
—
(20)
(11)
(132)
—
Net book amount
80
41
41
7
169
375
Year ended December 31, 2024
Opening net book balance
80
41
41
7
169
375
Additions
—
—
9
1
10
—
Amortization
(10)
—
(7)
(1)
(18)
—
Exchange differences
6
3
—
—
9
31
Closing net book amount
76
44
43
7
170
406
As at December 31, 2024
Cost
195
44
67
19
325
406
Accumulated amortization
(119)
—
(24)
(12)
(155)
—
Net book amount
76
44
43
7
170
406
Customer relationships comprise long-term agreements with certain customers and ongoing business
relationships. The acquisition cost was established based on future benefits associated with these
relationships.
Impairment tests for goodwill
Goodwill is allocated for impairment testing purposes to CGUs which reflect how it is monitored for internal
management purposes.
The recoverable amount of a CGU is determined based on fair value less cost to dispose (“FVLCTD”)
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
17
F-31
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-32
calculations. The fair value measurement was categorized as a Level 3 fair value based on the inputs in the
valuation technique used. FVLCTD calculations use cash flow projections covering a five-year period that
are based on the latest financial budgets for revenue and cost as approved by senior management. Cash
flow projections beyond five years are based on a growth rate not exceeding gross domestic product for the
respective countries. Two percent growth rates are assumed in perpetuity. Post-tax cash flow projections are
discounted using a real post-tax discount rate of 8%, that is based on past experience, and industry average
weighted average cost of capital. The assumptions used in calculating FVLCTD have considered the current
economic environment.
During the year ended December 31, 2024, the CGU for the plants specialized in the treatment of utility
poles and residential lumber was split into two CGUs: plants specialized in the treatment of utility poles and
residential lumber - U.S. and plants specialized in the treatment of residential lumber - Canada. The change
in CGU structure was made to reflect the operational changes made to convert plants from multiproduct to
single product manufacturing plants. Comparatives figures presented in the table below have been adjusted
to conform to the current year’s presentation.
The carrying value of goodwill is allocated to the following CGUs:
CGUs
(Amounts in millions of Canadian dollars)
2024
2023
Plants specialized in the treatment of utility poles and residential lumber - U.S.
238
220
Plants specialized in the treatment of railway ties
162
149
Plants specialized in the treatment of residential lumber - Canada
6
6
406
375
Impairment tests for intangible assets with indefinite useful life
The only intangible asset with indefinite useful life is the creosote registration. This registration provides the
Company with the right to produce and sell creosote out of its Memphis, Tennessee facility. The Company’s
approach to creosote supply is to produce a portion of its requirements and to buy the remainder on the
open market. As a result, the creosote registration procures the advantage of being able to produce, which is
less expensive than buying on the market.
The recoverable amount of the creosote registration is determined based on value-in-use calculations.
Value-in- use calculations use cash flow projections covering a five-year period that are based on the latest
financial budgets of cost savings as approved by senior management. No growth rate is assumed in the
cash flow projections beyond five years, given the commodity nature of the majority of the products (i.e.
volume growth is assumed to be offset by real price declines). Pre-tax cash flow projections are discounted
using a real pre-tax discount rate of 11%.
10 Accounts payable and accrued liabilities
(Amounts in millions of Canadian dollars)
2024
2023
Trade payables and accrued expenses
127
152
Other payables
53
52
180
204
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
18
11 Long-term debt
(Amounts in millions of Canadian dollars)
Maturity date
2024
2023
Unsecured:
Revolving credit facilities (a)(b)
2028-2029
295
750
Term loan facilities (b)
US$125, variable rate based on SOFR plus 1.725%
2028
180
166
US$100, fixed rates ranging from 3.27% to 4.47%, with
quarterly amortization payments starting in 2026
2029-2030
144
132
US$25, fixed rate of 4.52%
2029
36
33
US$150 (as at December 31, 2023 – US$25), variable rate
based on SOFR plus applicable margin
2030-2031
216
33
Senior notes (c)
$400, fixed rate of 4.312%
2031
400
—
US$75, fixed rate of 3.81%
2027
108
99
US$75, fixed rate of 3.54%
2024
—
99
Other(d)
3
4
1,382
1,316
Deferred financing costs
(2)
—
1,380
1,316
Less: Current portion of long-term debt
1
100
1,379
1,216
a)
Unsecured Syndicated Credit Facilities
The Company has unsecured credit facilities with a syndicate of lenders. On January 26, 2024, the
Company amended and restated the seventh amended and restated syndicated credit agreement in order
to, among other things, (i) increase the amount available under the unsecured revolving credit facility from
US$400 million to US$600 million; (ii) separate the unsecured revolving facility in two tranches with the
following maturities: US$475 million tranche with a maturity date of February 27, 2028, and US$125 million
tranche with a maturity date of February 27, 2026; (iii) increase the required level of net funded debt-to
earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio to 3.75:1.00 and (iv) replace
the Canadian Dollar Offered Rate (“CDOR”), with the Canadian Overnight Repo Rate Average (“CORRA”).
Revolving credit facility advances made prior to this amendment continued to apply CDOR until the end of
their term. The amended syndicated credit agreement also includes a reset of the existing accordion feature
whereby the Company may request an increase in an aggregate amount of US$300 million, subject to
lenders’ approval.
On December 20, 2024, the Company further amended and restated its syndicated credit agreement in
order to, among other things, combine into a single unsecured revolving credit facility the two tranches with a
maturity date of December 20, 2029, and reset the existing accordion feature whereby the Company may
request an increase in an aggregate amount of US$400 million, subject to lenders’ approval.
Borrowings under the syndicated credit facilities may be obtained in the form of prime rate loans, CORRA
loans, U.S. base rate loans, Secured Overnight Financing Rate (“SOFR”) loans and letters of credit. The
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
19
F-33
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-34
interest rate margin will range from 0.00% to 1.25% with respect to prime rate loans and U.S. base rate
loans and from 1.00% to 2.25% with respect to CORRA, SOFR loans and fees for letters of credit, in each
case based upon the Company’s net funded debt-to-EBITDA ratio.
As at December 31, 2024, under the Syndicated Credit Facilities, borrowings by Canadian entities
denominated in U.S. dollars represented $181 million (US$126 million) and were designated as hedges of
net investment in foreign operations.
b)
Unsecured Senior U.S. Farm Credit Facilities
The Company is party to a credit agreement with a syndicate of lenders within the farm credit system (the
“U.S. Farm Credit Agreement”) pursuant to which unsecured senior credit facilities in an aggregate amount
of up to US$550 million are available. The U.S. Farm Credit Agreement provides a term loan facility of up to
US$400 million (or, the “Term Loan Facility”), and a five-year revolving credit facility of up to US$150 million
with a maturity date of March 3, 2028 (or, the “Revolving Credit Facility”). The U.S. Farm Credit Agreement
also provides an uncommitted option to increase the unsecured senior credit facilities by up to an additional
US$150 million, subject to certain terms and conditions.
Interest rates under the Revolving Credit Facility are based, at the Company’s election, on either a floating
rate based on SOFR, or a base rate, in each case plus a margin over the index. The applicable margin
ranges from 0.5% to 1.25% for base rate loans, and from 1.5% to 2.25% for SOFR loans, in each case
based upon the Company’s net funded debt-to-EBITDA ratio.
The unsecured senior credit facilities were issued by a syndicate of lenders within the farm credit system
and are eligible for patronage refunds. Patronage refunds are distributions of profits from lenders in the farm
credit system, which are cooperatives that are required to distribute profits to their members. Patronage
distributions, in the form of cash, are received in the year after they were earned. Future refunds are
dependent on future farm credit lender profits, made at the discretion of each farm credit lender.
Loans under the U.S. Farm Credit Facilities, other than fixed rate term loans, may be prepaid from time to
time at the Company’s discretion without premium or penalty but subject to breakage costs, if any. If all or
any portion of a fixed rate term loan is prepaid, a prepayment premium may apply. Term loans amounts
repaid may not be subsequently re-borrowed. Principal amounts under the Revolving Credit Facility may be
drawn, repaid, and redrawn until March 3, 2028.
c) Unsecured Senior Notes
On October 1st, 2024, the Company completed a private placement of $400 million aggregate principal
amount of senior unsecured notes due October 1st, 2031, bearing interest at the rate of 4.312% per annum,
payable semi-annually until maturity. The notes rank pari passu with all other unsecured and unsubordinated
obligations of the Company.
On January 17, 2024, the Company repaid US$75 million of unsecured senior notes issued pursuant to a
private placement with certain U.S. investors. The remaining US$75 million of unsecured senior notes are
payable in a single installment at maturity on January 17, 2027 and are designated as hedges of net
investment in foreign operations.
d) Other notes payable
Other notes payable consists of a promissory note pursuant to a business acquisition in the amount of three
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
20
million dollars (US$2 million), secured by the land of the Company’s facility in Pineville.
In order to maintain in place the credit facilities, and private placement senior notes with certain U.S.
investors, the Company needs to comply with customary affirmative covenants, negative covenants,
reporting requirements and financial ratios. As at December 31, 2024, the Company was required to
maintain a net funded debt-to-EBITDA ratio of no more than 3.50:1.00, an interest coverage ratio equal to or
greater than 3.00:1.00 and a priority debt to equity ratio not more than 15%, which are measured on a
quarterly basis. The required level of net funded debt-to-EBITDA ratio was increased to 3.75:1.00
subsequent to year-end, following the amendment of the U.S. Farm Credit Agreement. As at December 31,
2024, the Company was in full compliance with these covenants, requirements and ratios.
The repayment requirements on the long-term debt as at December 31, 2024 are as follows:
(Amounts in millions of Canadian dollars)
Principal
2025
1
2026
34
2027
144
2028
216
2029
367
Thereafter
620
1,382
The aggregate fair value of the Company’s long-term debt was estimated at $1,368 million as at
December 31, 2024 (as at December 31, 2023 – $1,298 million) based on discounted future cash flows,
using interest rates available to the Company for issues with similar terms and average maturities.
Refer to Note 23 for a summary of events that occurred after the reporting period.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
21
F-35
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-36
12 Provisions and other long-term liabilities
Provisions
Other long-term liabilities
(Amounts in millions of Canadian
dollars)
Site
remediation
Others
Total
Share-
based
payment
plans
Others
Total
Grand
total
Balance as at January 1, 2023
18
4
22
9
4
13
35
Business combination
1
—
1
—
7
7
8
Additions
8
—
8
15
—
15
23
Payments
(3)
(3)
(6)
(3)
—
(3)
(9)
Balance as at December 31,
2023
24
1
25
21
11
32
57
Additions
10
1
11
14
—
14
25
Payments
(7)
(1)
(8)
(12)
(4)
(16)
(24)
Exchange differences
1
—
1
1
1
2
3
Balance as at December 31,
2024
28
1
29
24
8
32
61
Current portion
9
1
10
11
3
14
24
Non-current portion
19
—
19
13
5
18
37
28
1
29
24
8
32
61
The Company’s share-based payment plans consist of cash-settled restricted stock unit, performance stock
unit and deferred share unit plans.
Restricted stock units (“RSUs”) and Performance stock units (“PSUs”)
Under the Stock Unit Plan, RSUs and PSUs are granted to certain executives and key employees of the
Company. RSUs and PSUs entitle the holders to receive a cash payment equal to the average closing price
on the TSX of the Company’s common shares for the five trading days preceding the vesting date multiplied
by a factor which ranges from 0% to 200% based on the attainment of performance criteria and/or market
conditions set out pursuant to the plan, provided the individual is still employed by the Company at time of
vesting. RSUs vest ratably over a period of up to three years and PSUs are paid three years after the grant
date.
Changes in outstanding RSUs for the years ended December 31, are as follows:
2024
2023
RSUs outstanding - Beginning of year
129,438
122,315
Granted
118,688
65,479
Vested
(90,508)
(47,966)
Forfeited
(1,462)
(10,390)
RSUs outstanding - End of year
156,156
129,438
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
22
Changes in outstanding PSUs for the years ended December 31, are as follows:
2024
2023
PSUs outstanding - Beginning of year
97,072
69,337
Granted
59,348
38,517
Performance multiplier
26,543
—
Vested
(53,086)
—
Forfeited
(1,133)
(10,782)
PSUs outstanding - End of year
128,744
97,072
Deferred share units (“DSUs”)
DSUs entitle non-executive directors of the Company to receive a minimum participation amount in the form
of DSUs and they may elect to participate in the DSU plan for a portion of their Board fees. Such deferred
remuneration is converted to DSUs based on the average closing price of the Company’s common shares
on the TSX of the five trading days immediately preceding the date such awards are granted to the non-
employee director. DSUs are settled for cash only after a non-employee director ceases to act as a director.
Changes in outstanding DSUs for the years ended December 31, are as follows:
2024
2023
DSUs outstanding - Beginning of year
59,365
44,333
Granted
12,092
16,792
Settled
—
(1,760)
DSUs outstanding - End of year
71,457
59,365
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
23
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ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
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13 Cash flow information
The following table presents the movements in the liabilities from financing activities for the years ended
December 31, 2024 and 2023:
Liabilities from financing activities
(Amounts in millions of Canadian dollars)
Long-term
debt
Revolving
credit
facilities
Lease
liabilities
Total
Balance as at January 1, 2023
(547)
(394)
(167)
(1,108)
Cash flows, net
(32)
(362)
50
(344)
Lease additions
—
—
(177)
(177)
Other non-cash movements
—
—
(5)
(5)
Foreign exchange adjustments
13
6
5
24
Balance as at December 31, 2023
(566)
(750)
(294)
(1,610)
Cash flows, net
(463)
471
62
70
Lease additions
—
—
(76)
(76)
Other non-cash movements
—
—
4
4
Foreign exchange adjustments
(56)
(16)
(19)
(91)
Balance as at December 31, 2024
(1,085)
(295)
(323)
(1,703)
14 Capital stock and earnings per share
The following table provides the number of common shares outstanding for the years ended December 31:
2024
2023
Number of common shares outstanding – Beginning of year
56,866,712
59,115,959
Common shares repurchased
(1,078,577)
(2,286,484)
Stock option exercised
15,000
10,000
Employee share purchase plans
21,818
27,237
Number of common shares outstanding – End of year
55,824,953
56,866,712
a)
Capital stock
The Company is authorized to issue an unlimited number of common shares and an unlimited
number of preferred shares, issuable in series.
All issued shares are fully paid. The common shares provide for the right to receive notice of, attend
and vote at all meetings of shareholders and receive dividends, subject to the prior rights of the
preferred shares and any other shares ranking senior to the common shares. To date, the Company
has not issued any preferred shares.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
24
b)
Normal Course Issuer Bid (“NCIB”)
On November 6, 2023, the TSX accepted the Company’s Notice of Intention to Make a NCIB
(“Notice”) to purchase for cancellation up to 2,500,000 common shares during the 12-month period
commencing November 14, 2023 and ending November 13, 2024, representing approximately 5.0%
of the public float of its common shares.
On November 5, 2024, the TSX accepted the Company’s Notice to purchase for cancellation up to
2,500,000 common shares during the 12-month period commencing November 14, 2024 and ending
November 13, 2025, representing approximately 4.5% of the common shares outstanding.
During the year ended December 31, 2024, the Company repurchased for cancellation 1,078,577
common shares under its NCIBs then in effect (during the year ended December 31, 2023 -
2,286,484 common shares) for a total consideration of $90 million (during the year ended
December 31, 2023 - $142 million), representing an average price of $83.43 per common share (in
2023 - $61.89).
As at December 31, 2024, the Company’s capital stock was reduced by four million dollars (as at
December 31, 2023 – eight million dollars) and the retained earnings decreased by $88 million (as at
December 31, 2023 – $134 million), including two million dollars of related taxes
(December 31, 2023 – nil).
c)
Stock option plan
The Company has a stock option plan (the “Plan”) for directors, officers and employees whereby the
Board of Directors or a committee appointed for such purpose (“Committee”) may, from time to time,
grant to directors, officers or employees of the Company options to acquire common shares in such
numbers, for such terms and at such exercise prices as are determined by the Board of Directors or
such Committee.
The aggregate number of common shares in respect of which options may be granted is 4,800,000.
Each option shall be exercisable during a period established by the Board of Directors or Committee,
and the term of the option may not exceed 10 years. The Company has not granted any stock
options since 2015. The options outstanding under the Plan as at December 31, 2024 were granted
in November 2015 and expire in 2025.
During the year ended December 31, 2024, 15,000 ordinary shares were issued as a result of the
exercise of options arising from the share options granted in 2015 (December 31, 2023 - 10,000).
Options were exercised at the option value price of $49.01 per share.
As at December 31, 2024, the number of outstanding and exercisable options to acquire common
shares issued under the Company’s Plan was 5,000 (December 31, 2023 – 20,000), at a weighted
average exercise price of $49.01 (December 31, 2023 – $49.01).
d)
Employee share purchase plans
The aggregate number of common shares reserved for issuance under the Company’s employee
share purchase plans is 1,300,000.
Company employees who are Canadian residents are eligible to purchase common shares from the
Company at an amount equal to 90% of the market price. Employees who hold common shares in
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
25
F-39
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-40
the employee share purchase plan for 18 months following the date of acquisition of such shares
receive additional common shares of the Company equivalent to 10% of the amount of their
contributions made on the date of acquisition. In 2024, 12,786 common shares (2023 – 17,024) were
issued to Canadian resident employees at an average price of $70.26 per share (2023 – $55.18).
Company employees who are U.S. residents are eligible to purchase common shares from the
Company at market price. Employees who hold common shares in the employee share purchase
plan for 18 months following the date of acquisition of such shares receive additional common
shares of the Company equivalent to 10% of the amount of their contributions made on the date of
acquisition. In 2024, 9,032 common shares (2023 – 10,213) were issued to U.S. resident employees
at an average price of $76.79 per share (2023 – $60.08).
e)
Earnings per share
The following table provides the reconciliation between basic earnings per common share and
diluted earnings per common share:
(Amounts in millions of Canadian dollars, except per share
amounts)
2024
2023
Net income applicable to common shares
$319
$326
Weighted average number of common shares outstanding*
56,403
57,963
Effect of dilutive stock options*
4
6
Weighted average number of diluted common shares
outstanding*
56,407
57,969
Basic and diluted earnings per common share
$5.66
$5.62
* Number of shares is presented in thousands.
f)
Dividends
In 2024, the Company paid dividends of $63 million (2023 - $53 million), representing dividends
declared per common share of $1.12 (2023 - $0.92).
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
26
15 Expenses by nature
(Amounts in millions of Canadian dollars)
2024
2023
Raw materials and consumables
2,119
2,065
Employee benefit expenses
329
305
Freight
199
198
Depreciation and amortization
130
109
Expenses incurred in manufacturing process
96
75
Other expenses
93
68
2,966
2,820
(Amounts in millions of Canadian dollars)
2024
2023
Employee benefit expenses
Salaries, wages and benefits
300
280
Share-based compensation
14
13
Pension costs
2
2
Group registered retirement savings plans
13
10
329
305
Employee benefit expenses are included in cost of sales and selling and administrative expenses.
(Amounts in millions of Canadian dollars)
2024
2023
Financial expenses
Interest expense on long-term debt and other financial charges
77
61
Interest on lease liabilities
11
7
88
68
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
27
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16 Income taxes
(Amounts in millions of Canadian dollars)
2024
2023
Current income tax
Current tax on income for the year
99
93
Adjustments in respect of prior years
(11)
(10)
Changes in estimates related to prior years
(2)
—
Total current income tax
86
83
Deferred income tax
Origination and reversal of temporary differences
3
16
Impact of change in tax rate
(3)
(2)
Adjustments in respect of prior years
10
8
Total deferred income tax
10
22
Income tax expense
96
105
Reconciliation of effective income tax rate
(Amounts in millions of Canadian dollars)
2024
2023
Income before income tax
415
431
Canadian statutory rate (combined federal and provincial)
26.12 %
26.13 %
Income tax expense at that statutory rate
108
113
Tax effects of:
Rate differential between jurisdictions
(6)
(4)
Remeasurement of deferred income tax - change in tax rate
(3)
(2)
Adjustments in respect of prior years' tax expense
(1)
(2)
Changes in estimates related to prior years
(2)
—
Income tax expense
96
105
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
28
Deferred tax assets and liabilities
During the years ended December 31, 2024 and 2023, movements in temporary differences are as follows:
(Amounts in millions of
Canadian dollars)
As at
December 31,
2023
Recognized in
statement of
income
Recognized
in other
comprehensive
income
Recognized in
translation
adjustment
As at
December 31,
2024
Property, plant and
equipment (including
right-of-use assets)
(212)
(12)
—
(14)
(238)
Intangible assets
(51)
(1)
—
(4)
(56)
Financial Instruments
(5)
—
—
—
(5)
Lease liabilities
75
1
—
5
81
Reserves
18
3
—
1
22
Deferred pension
benefit
2
(1)
—
—
1
Others
(2)
—
—
—
(2)
Net deferred tax
liabilities
(175)
(10)
—
(12)
(197)
As at
December 31,
2022
Recognized in
statement of
income
Recognized
in other
comprehensive
income
Recognized in
translation
adjustment
As at
December 31,
2023
Property, plant and
equipment (including
right-of-use assets)
(158)
(58)
—
4
(212)
Intangible assets
(50)
(2)
—
1
(51)
Financial Instruments
(7)
—
2
—
(5)
Lease liabilities
42
34
—
(1)
75
Reserves
13
5
—
—
18
Deferred pension
benefit
2
—
—
—
2
Others
—
(1)
—
(1)
(2)
Net deferred tax
liabilities
(158)
(22)
2
3
(175)
As of December 31, 2024, the Company did not recognize deferred income tax assets of six million dollars
(as at December 31, 2023 – six million dollars) in respect of capital losses amounting to $47 million (as at
December 31, 2023 – $44 million) that can be carried forward indefinitely against future taxable capital
gains.
Deferred income tax liabilities have not been recognized for the withholding tax and other taxes that would
be payable on the unremitted earnings of certain subsidiaries. Such amounts are permanently reinvested.
Unremitted earnings totaled $1,465 million as at December 31, 2024 (as at December 31, 2023 – $1,182
million).
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
29
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ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-44
On June 19, 2024, Bill C-69 became substantively enacted for Canadian financial reporting purposes. Bill
C-69 includes the Pillar Two rules published by the Organisation for Economic Co-operation and
Development and applies to fiscal years beginning on or after December 31, 2023. The Pillar Two model
rules impose a 15% global minimum tax applicable to large multinational enterprises, to be applied in each
country. The Pillar Two rules did not have a material impact on the Company’s consolidated financial
statements.
17 Employee future benefits
The Company recognizes costs for several types of employee future benefits. For its Canadian operations,
the Company contributed to three defined benefit pension plans covering some salaried and non-union
hourly wage employees and to a multi-employer plan for certain hourly employees. During the year ended
December 31, 2024, the Company wound up of one of its defined benefit pension plans. Payments were
made to settle all the benefits in the plan which resulted in a gain on settlement of less than one million
dollars. As at December 31, 2024, the plan assets and projected benefit obligation for this plan were nil.
Other post-employment benefits are offered to a portion of retired employees and consist of group health
and dental care, life insurance and complementary retirement benefits. The defined benefit pension plans
and other post-employment benefits plan are closed to new participants.
For its U.S. operations, the Company’s wholly-owned subsidiary, Stella-Jones Corporation, contributes to
two defined benefit pension plans. Only one of these pension plans remains open to new participants.
All other active employees are entitled to a group registered retirement savings plan to which the Company
matches one and a half times the employee contribution. The Company’s contribution cannot exceed 6.0%
of the employee’s annual base salary.
The recognized costs for employee future benefits are as follows:
(Amounts in millions of Canadian dollars)
2024
2023
Contributions to group registered retirement savings plans
13
10
Defined benefit pension plans
1
1
Contributions to multi-employer plan
1
1
15
12
The net amount recognized on the consolidated statements of financial position is detailed as follows:
(Amounts in millions of Canadian dollars)
2024
2023
Employee future benefits
Non-current liabilities:
Net defined benefit pension liability
(2)
(8)
Other post-employment benefits liability
(2)
(2)
(4)
(10)
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
30
The Company’s Canadian defined benefit pension plans benefits are based on years of service and final
average earnings. The Stella-Jones Corporation defined benefit pension plans benefits consist of a flat dollar
amount payable monthly based on years of service. The other post-employment benefits plan is not funded.
The Company measures its accrued benefit obligations and the fair value of plan assets for accounting
purposes as at December 31 of each year.
There was no change in the accrued benefit obligation for the other post-employment benefits plan for the
year ended December 31, 2024 (for the year ended December 31, 2023 - nil).
The following table presents financial information related to the Company’s defined benefit pension plans,
other than the multi-employer defined benefit plan:
(Amounts in millions of Canadian dollars)
2024
2023
Accrued benefit obligation
Balance – Beginning of year
32
30
Current service cost
1
1
Interest cost
1
1
Benefits payments
(2)
(2)
Defined benefit obligation extinguished on settlement
(6)
—
Remeasurement adjustments
Changes in financial assumptions
(1)
2
Exchange difference
1
—
Balance – End of year
26
32
Plan assets
Fair value – Beginning of year
24
25
Interest income on plan assets
1
1
Return on plan asset excluding interest income
1
—
Employer’s contributions
5
1
Asset distributed on settlement
(5)
—
Effect of asset ceiling
—
(1)
Benefits paid
(2)
(2)
Fair value – End of year
24
24
Net benefit liability
(2)
(8)
Risks associated with the Company’s defined benefit plans are similar to those of typical benefit plans,
including market risk, interest rate risk, liquidity risk, credit risk, currency risk and longevity risk. The most
significant risks are the exposure to asset volatility and changes in bond yields. Weaker than expected
investment returns and a decrease in corporate bond yields will increase the net benefit liability and worsen
the plans’ funded position.
A 0.25% decrease in the discount rate would increase the defined benefit obligation as at December 31,
2024 by one million dollars.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
31
F-45
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-46
Expected contributions to the defined benefit pension plans for the year ending December 31, 2025 are one
million dollars.
The items of the Company’s defined benefit plans costs recognized during the year are as follows:
Consolidated statement of income
(Amounts in millions of Canadian dollars)
2024
2023
Current service cost
1
1
Interest cost
1
1
Interest income on plan assets
(1)
(1)
Total cost recognized
1
1
Consolidated statement of comprehensive income
Actuarial gains (losses)
1
(2)
Total recognized in other comprehensive income (loss) before income tax
1
(2)
Accumulated actuarial losses recognized in other comprehensive income
Balance of actuarial losses as at January 1
(3)
(1)
Net actuarial gains (losses) recognized in the year, net of tax
1
(2)
Balance of actuarial losses as at December 31
(2)
(3)
The significant weighted average assumptions used are as follows:
Defined benefit
Other post-employment
pension plans
plan
2024
2023
2024
2023
%
%
%
%
Accrued benefit obligation as at December 31
Discount rate
4.90
4.70
4.90
4.70
Rate of compensation increase
3.25
3.25
n/a
n/a
Benefit costs for the year ended December 31
Discount rate
4.70
5.10
4.70
5.10
The percentage of plan assets held by the defined benefit plans consists of the following as at December 31:
2024
2023
%
%
Listed equity securities
22
25
Listed debt securities
29
29
Guaranteed insurance contracts
36
31
Real assets
13
14
Short-term investments and cash
—
1
100 %
100 %
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
32
18 Commitments and contingencies
a)
The Company has issued guarantees under letters of credit and various bid and performance bonds for
a total of $68 million (2023 – $48 million). The Company does not believe these guarantees are likely to
be called on. As a result, no provisions have been recorded in the consolidated financial statements.
The Company has also entered into a ten-year agreement to purchase renewable energy certificates for
a total of eight million dollars (2023 – nil).
b)
The Company’s operations are subject to Canadian federal and provincial as well as U.S. federal and
state environmental laws and regulations governing, among other matters, air emissions, waste
management, wastewater effluent discharges and use of antimicrobial pesticide products. The Company
takes measures to comply with such laws and regulations. However, the measures taken are subject to
the uncertainties of changing legal requirements, enforcement practices and developing technological
processes.
19 Financial instruments and management of financial risk
Carrying values and fair values
The Company has determined that the fair value of its current financial assets and financial liabilities
approximates their carrying amounts as at the consolidated statement of financial position dates because of
the short-term maturity of those instruments. The fair values of the non-current receivables and interest-
bearing financial liabilities also approximate their carrying amounts unless otherwise disclosed elsewhere in
these consolidated financial statements.
The fair values of interest rate swap agreements have been determined and recorded using mark-to-market
values as at December 31, 2024 and 2023 from third parties. These types of measurement fall under Level 2
in the fair value hierarchy as per IFRS 7, Financial Instruments: Disclosures. A description of each level of
the hierarchy is as follows:
Level 1:
Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:
Inputs other than quoted prices included within Level 1 that are observable for these assets
or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3:
Inputs for the assets or liabilities that are not based on observable market data
(unobservable inputs).
The following table provides a summary of the fair values:
(Amounts in millions of Canadian dollars)
2024
2023
Non-current assets
Interest rate swap agreements
21
21
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by
failing to discharge an obligation. As at December 31, 2024, the Company’s credit exposure consists
primarily of the carrying amount of accounts receivable and derivative financial instruments.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
33
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ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-48
Credit risk associated with derivative financial instruments is minimized by dealing with creditworthy financial
institutions.
The Company’s exposure to credit risk for accounts receivable is influenced mainly by the individual
characteristics of each customer. Management believes that the credit risk is limited because the Company
deals primarily with large-scale utilities, Class 1 railroad operators and large retailers as well as other major
corporations.
Management has established a credit policy under which each new customer is analyzed individually for
creditworthiness before the Company’s standard payment and delivery terms and conditions are offered.
The Company’s review includes external ratings, where available, and credit references from other suppliers.
Purchase limits are established for each customer, which represent the maximum open amount not requiring
additional approval from Management. A monthly review of the accounts receivable aging is performed by
Management. Customers that fail to meet the Company’s benchmark creditworthiness may transact with the
Company only on a prepayment basis.
Note 5 provides details on the receivable aging for the years ended December 31, 2024 and 2023. The
Company’s largest customer had sales representing 14% of the total sales for the year ended
December 31, 2024 (for the year ended December 31, 2023 – 15%) and an account receivable balance of
$10 million as at December 31, 2024 (as at December 31, 2023 – nine million dollars). The sales for this
customer are included in the residential lumber product category.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.
The Company’s approach to managing liquidity is to ensure, on a long-term basis, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without
incurring losses or risking damage to its reputation.
The operating activities of the Company are the primary source of cash flows. The Company also has credit
facilities (Note 11) which can be used for working capital and general corporate requirements. As at
December 31, 2024, the Company had $802 million of available liquidity, including $752 million (US$523
million) under the Company’s credit facilities.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
34
The following table details the maturities of the financial liabilities as at December 31:
(Amounts in millions of Canadian dollars)
2024
Carrying
amount
Contractual
cash flows
Less than
1 year
Years
2 and 3
Years
4 and 5
More than
5 years
Accounts payable and accrued
liabilities
180
180
180
—
—
—
Long-term debt obligations*
1,380
1,710
62
299
686
663
Minimum payment under lease
liabilities*
323
384
74
128
65
117
1,883
2,274
316
427
751
780
2023
Carrying
amount
Contractual
cash flows
Less than
1 year
Years
2 and 3
Years
4 and 5
More than
5 years
Accounts payable and accrued
liabilities
204
204
204
—
—
—
Long-term debt obligations*
1,316
1,521
166
686
563
106
Minimum payment under lease
liabilities*
294
345
63
106
72
104
1,814
2,070
433
792
635
210
*Includes interest payments. Interest on variable interest debt is assumed to remain unchanged from the rates in
effect as at December 31, 2024 and December 31, 2023.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will
affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters while optimizing
the return on risk.
Currency risk
A large portion of the Company's consolidated revenue and expenses are received or denominated in the
functional currency of the business units operating in the markets in which it does business. Accordingly, the
Company’s sensitivity to variations in foreign exchange rates is economically limited. The Company’s main
source of foreign exchange risk resides in the Canadian operations' business transactions denominated in
U.S. dollars. The Company’s objective in managing its foreign exchange risk is to minimize its exposure to
foreign currency cash flows and operations, by transacting with third parties in the functional currency of the
business units to the maximum extent possible and through the use of foreign exchange forward contracts.
As at December 31, 2024, the Company had no foreign exchange forward contract agreements in place.
The following table provides information on the impact of a 10% strengthening of the U.S. dollar against the
Canadian dollar on net income and other comprehensive income (loss) for the years ended
December 31, 2024 and 2023. For a 10% weakening of the U.S. dollar against the Canadian dollar, there
would be an equal and opposite impact on net income and other comprehensive income (loss).
This analysis considers the impact of foreign exchange variance on current financial assets and current
financial liabilities denominated in U.S. dollars which are on the consolidated statement of financial position
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
35
F-49
ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
F-50
of the Canadian entities totaling four million dollars (seven million dollars as at December 31, 2023) and
six million dollars (eight million dollars as at December 31, 2023), respectively. The foreign exchange impact
for the U.S. dollar-denominated long-term debt, in the Canadian entities, has been included in the sensitivity
analysis for other comprehensive income (loss), as the long-term debt is designated as a hedge of net
investment in foreign operations (Note 11).
(Amounts in millions of Canadian dollars)
2024
2023
Decrease of net income
—
—
Decrease of other comprehensive income
29
22
Interest rate risk
The Company enters into interest rate swap agreements in order to reduce the impact of fluctuating interest
rates on its long-term debt. These swap agreements require the periodic exchange of payments without the
exchange of the notional principal amount on which the payments are based. As at December 31, 2024, the
Company has mitigated its exposure to interest rate risk on long-term debt after giving effect to its interest
rate swap agreements; 68% (2023 – 46%) of the Company’s long-term debt is at fixed rates.
The Company designates its interest rate swap agreements as cash flow hedges of the underlying debt.
Interest expense on the debt is adjusted to include the payments made or received under the interest rate
swap agreements. The cash flow hedge documentation allows the Company to substitute the underlying
debt as long as the hedge effectiveness is demonstrated. As at December 31, 2024, all cash flow hedges
were effective.
The following table summarizes the Company’s interest rate swap agreements as at December 31:
2024
2023
Notional
amount
Related debt
instrument
Fixed
rate
Effective date
Maturity date
Notional
equivalent
Notional
equivalent
%
CA$
CA$
US$50
Revolving credit facilities 0.796*
Dec. 2021
Dec. 2026
72
66
US$125
Term loan facility
1.0769**
July 2021
June 2028
180
166
* Plus applicable margin based on pricing grid included in the revolving credit agreements.
** Plus set margin of 1.725%.
During the year ended December 31, 2024, a 1% increase in interest rates would have increased interest
expense by eight million dollars and decreased the net income recognized in other comprehensive income
(loss) by approximately six million dollars. For a 1% decrease in the interest rates, there would be an
opposite impact on interest expense and other comprehensive income (loss).
20 Capital disclosures
The Company’s objective in managing capital is to ensure sufficient liquidity and financial flexibility to pursue
its organic growth strategy and undertake accretive acquisitions, while at the same time maintaining a
disciplined approach to financial leverage and management of financial risk. The Company manages its
capital structure and makes corresponding adjustments in light of changes in economic conditions and the
risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
36
may adjust the amount of dividends paid to shareholders, issue new shares or debt, acquire or sell assets,
reduce the amount of existing debt or repurchase shares.
The Company’s capital is composed of total debt, which includes lease liabilities, and shareholders’ equity,
which includes capital stock. The primary measure used by the Company to monitor its capital is the
leverage ratio, which it aims to maintain within a range of 2.0 to 2.5x. The leverage ratio is defined as net
debt divided by EBITDA. Net debt is the sum of total long-term debt and lease liabilities (including the
current portion) less cash and cash equivalents.
The Company uses its capital to finance working capital requirements, capital expenditures and acquisitions.
The Company currently funds these requirements out of its internally generated cash flows and its credit
facilities. However, future acquisitions and growth opportunities may require new sources of financing.
21 Related party transactions
Key management compensation
Key management includes Stella-Jones Inc.’s non-executive directors, President and Chief Executive Officer
and Senior Vice-Presidents. The compensation paid or payable to key management for services is as
follows:
(Amounts in millions of Canadian dollars)
2024
2023
Salaries, compensation and benefits
8
9
Share-based compensation
9
9
17
18
Under their respective employment agreements and assuming their termination for reasons other than
cause, illness, permanent incapacity, death or resignation occurred on December 31, 2024, the members of
key management would be entitled to receive potential incremental payouts representing approximately
$14 million.
22 Segment information
The Company operates within two business segments which are the production and sale of pressure-treated
wood and the procurement and sales of logs and lumber. The reportable segments are managed
independently as the operational processes and capital requirements are different.
The pressure-treated wood segment includes utility poles, railway ties, residential lumber and industrial
products.
The logs and lumber segment comprises of the sales of logs harvested in the course of the Company’s
procurement process that are determined to be unsuitable for use as utility poles. Also included in this
segment is the sale of excess lumber to local home-building markets. Assets and net income related to the
logs and lumber segment are nominal.
Operating plants are located in six Canadian provinces and 18 American states. The Company also operates
a large procurement and distribution network across North America.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
37
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F-52
Sales attributed to countries based on location of customer are as follows:
(Amounts in millions of Canadian dollars)
2024
2023
U.S.
2,515
2,456
Canada
954
863
3,469
3,319
Sales by product are as follows:
(Amounts in millions of Canadian dollars)
2024
2023
Utility poles
1,705
1,571
Railway ties
890
828
Residential lumber
614
645
Industrial products
154
148
Pressure-treated wood
3,363
3,192
Logs and lumber
106
127
3,469
3,319
Property, plant and equipment, right-of-use assets, intangible assets and goodwill attributed to the countries
based on location are as follows as at December 31:
(Amounts in millions of Canadian dollars)
2024
2023
Property, plant and equipment
U.S.
765
660
Canada
283
246
1,048
906
Right-of-use assets
U.S.
236
230
Canada
75
55
311
285
Intangible assets
U.S.
115
113
Canada
55
56
170
169
Goodwill
U.S.
385
354
Canada
21
21
406
375
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
38
23 Subsequent events
a) On February 4, 2025, the Company amended the U.S. Farm Credit Agreement in order to, among other
things, extend the term of the Revolving Credit Facility of US$150 million from March 3, 2028 to February 4,
2030 and increase the required level of net funded debt to EBITDA ratio to 3.75:1.00.
b) On February 26, 2025, the Board of Directors declared a quarterly dividend of $0.31 per common share
payable on April 18, 2025 to shareholders of record at the close of business on April 1, 2025.
Stella-Jones Inc.
Notes to Consolidated Financial Statements
December 31, 2024 and 2023
39
F-53
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ANNUAL REPORT FOR THE FIGHTING
AGAINST FORCED LABOUR AND CHILD
LABOUR IN SUPPLY CHAINS ACT (CANADA)
This report (the “Report”) is filed by Stella-Jones. Inc
(“Stella-Jones”) or (“the Company”) for the purposes
of meeting Stella-Jones’ obligations under Canada’s
Fighting Against Forced Labour and Child Labour
in Supply Chains Act (“the Act”). The Report outlines
the steps Stella-Jones has taken during the 2024 financial
year to identify, prevent, and reduce the risk that forced,
or child labour is used at any step in the production of
goods and services by Stella-Jones or in its supply chain.
SUBSECTION 11(3)(A)
STRUCTURE, ACTIVITIES AND SUPPLY CHAINS
Stella-Jones Inc., an entity incorporated under the Canada
Business Corporations Act, manufactures products for
the North American market with a focus on supporting
infrastructure essential to electrical distribution and
transmission and railway transportation systems. It supplies
the continent’s major electrical utilities with treated wood
utility poles and provides North America’s Class 1 short line
and commercial railroad operators with treated wood railway
ties and timbers. Stella-Jones also supports infrastructure
with industrial products, namely timbers for railway bridges,
crossings and construction, marine and foundation pilings,
and coal tar-based products. Additionally, the Company
manufactures and sells premium treated residential lumber
and accessories to Canadian and American retailers for
outdoor applications. In 2024, the total production volume
across all products was 109 million cubic feet.
The Company operates 44 wood treating plants and
a coal tar distillery. These facilities are located across
Canada and the United States and are complemented
by an extensive distribution network. As of December
31, 2024, the company’s workforce numbered 3,018
employees, with 919 located in Canada.
Wood fibre and treatment preservatives are the primary
materials used in the production processes. Wood fibre is
procured primarily in North America from government timber
sale programs, forest tenures, private woodland owners,
sawmills and lumber producers. In 2024, less than 1% of the
Company’s wood fibre purchase spend came from outside
North America, namely Europe. Treatment preservatives
are procured from North America and Europe, with vendors
sourcing some product components from overseas locations.
In addition to the trucking fleet managed by Stella-Jones,
the services of third-party logistics providers from the
United States and Canada are utilized both upstream
and downstream of the manufacturing process.
SECTION 11(3)(B)
POLICIES AND DUE DILIGENCE PROCESSES
Stella-Jones’ Human Rights (“Policy”) is available on Stella-
Jones’ website (www.stella-jones.com). Stella-Jones’ due
diligence processes that relate to forced labour and child
labour include:
•
Risk Assessment: Stella-Jones screens tier 1 suppliers
for human rights risks. This process includes a desktop
review of publicly available information and dedicated
risk discussions with the procurement, logistics, human
resources, and operations teams at Stella-Jones. A wide
range of sources were used for the desktop review
including industry and country level risks, the U.S
Department of Labor List of Goods from Child of Forced
Labor (2024), as well as publicly available policies and
reports from company websites. In 2024, 356 suppliers
representing 70% of total procurement spend were
screened through this risk assessment process.
•
Supplier Engagement: During 2024, Stella-Jones
engaged with suppliers that were identified as higher
risk through the risk assessment process. Engagement
included discussion on regulatory requirements and
Stella-Jones’ commitments towards human rights in our
supply chain. Suppliers signed a Stella-Jones -supplied
letter of certification that acknowledges their obligations
to prevent child and forced labour in their operations
and supply chain, and to notify Stella-Jones of any
non-compliance.
•
Reporting Channels: Stella-Jones’ third-party
anonymous reporting hotline is available to employees,
contractors, business partners and community members
to report matters of concern, including issues related
to forced labour and child labour. Additionally, in 2024
Stella-Jones established an additional risk tracking
process for employees to report concerns through
their line-managers for follow-up. In 2024, two concerns
related to human rights were submitted through this
new channel, with both risks investigated internally and
closed without the need for remediation.
•
Human Rights Compliance Program: In 2024,
the Company’s Human Rights Compliance Program
was approved by management. The program formalizes
the internal procedures, roles and responsibilities for
compliance with the Act.
SECTION 11(3)(C)
FORCED LABOUR AND CHILD LABOUR RISKS
Stella-Jones’ supply chain risks are more limited than
manufacturers with large global supply chains, with most
suppliers to Stella-Jones based locally in North America.
Stella-Jones has not identified any specific known or
confirmed occurrences of forced or child labour or other
human rights abuses within its supply chain. The following
is a list of the potential risks for Stella-Jones’ supply chain
or product categories:
•
Fibre Procurement: Forced labour has the potential
to be a risk for a small portion of the wood fibre supply
in the southern United States, where migrant labour
is employed on-site. Any fibre procured from overseas
locations has chain of custody certification which
requires compliance with the International Labour
Organisation (ILO) convention. Religious-based, family-
owned sawmills and timberlands may also use child
labour as permitted under the U.S. Fair Labor Standards
Act. Stella-Jones’ Human Rights Policy addresses this
by prohibiting the employment of individuals in violation
of applicable local minimum age laws.
•
Transportation: The third-party logistics providers,
particularly those in Southern California, who utilize
a migrant workforce and whose services are obtained
through the spot market have an increased risk of
forced labour.
•
Preservatives: Chemical product inputs sourced from
China, a location with a heightened risk for child and
forced labour, occurs in the treatment preservative
supply chain.
•
Third-Party Product Distribution: The residential
lumber accessories category has goods sourced from
international locations such as China, Mexico, Thailand,
Poland and the U.K. The suppliers used by Stella-Jones
have also implemented human rights due diligence
processes and report under the Act.
•
Equipment: The large mobile equipment used at
production facilities can be manufactured internationally,
which presents a limited amount of risk. Stella-Jones’
solar panel installations at our manufacturing facilities
use solar modules manufactured in the U.S. which has
reduced the risk of forced labour for these materials.
SECTION 11(3)(D)
REMEDIATION MEASURES
Stella-Jones has not identified any confirmed instances
of forced or child labour, and consequently, no remediation
measures have been taken.
SECTION 11(3)(E)
REMEDIATION OF LOSS OF INCOME
Stella-Jones has not identified any confirmed instances of
forced or child labour, and therefore, no measures have been
taken to remediate loss of income that result from measures
taken by Stella-Jones.
A-01
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SECTION 11(3)(F)
TRAINING
Human Rights training is delivered to all employees every
two years. The training is an internally-developed e-learning
module that is issued through the Company training platform.
The training’s completion is mandatory for all employees
involved in contracting and procurement decisions.
SECTION 11(3)(G)
ASSESSING EFFECTIVENESS
In 2024, the internal audit team at Stella-Jones undertook
the first audit of the Human Rights Compliance Program
against the requirements of the Act. The audit report was
presented to the Audit Committee of the Board of Directors
and responsibility assigned internally for all identified
findings or areas of improvement.
CHAIR OF THE BOARD ATTESTATION
In accordance with the requirements of the Supply
Chains Act, and in particular section 11 thereof, I attest
that I have reviewed the information contained in the
Report for the entity or entities listed above. Based on
my knowledge, and having exercised reasonable diligence,
I attest that the information in the Report is true, accurate
and complete in all material respects for the purposes of
the Act, for the reporting year listed above.
Katherine A. Lehman
Chair of the Board of Directors
February 26, 2025
I have the authority to bind Stella-Jones Inc.
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May 7, 2025 | 11:00 AM Eastern Daylight Time
ANNUAL MEETING OF
SHAREHOLDERS (HYBRID MEETING)
1250 René-Lévesque Blvd. West,
Suite 3610, Montreal, QC, H3B 4W8
IN PERSON
BY LIVE WEBCAST
https://meetings.lumiconnect.com/400-
203-666-026
Password: stella2025
CORPORATE
INFORMATION
Shares Listed: Toronto Stock Exchange
Ticker Symbol: SJ
Initial Public Offering: 1994
52-week high/low (Jan. 1 – Dec. 31, 2024):
$ 96.19 / $ 68.16
Share price at February 28, 2025:
$ 69.18
Common shares outstanding as at
December 31, 2024 (in thousands): 55,825
STOCK INFORMATION
The Board of Directors considers
a dividend on a quarterly basis,
based on the Company’s capital
allocation strategy.
On February 26, 2025, the Board
of Directors declared a quarterly
dividend of $ 0.31 per common share.
DIVIDEND POLICY
Computershare Investor Services Inc.
TRANSFER AGENT AND REGISTRAR
PricewaterhouseCoopers LLP.
AUDITORS
Fasken Martineau DuMoulin LLP
Dentons Cohen & Grigsby P.C.
LEGAL COUNSEL
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ST E L L A- J O N E S 2 0 2 4 A N N UA L R E P O RT
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stella-jones.com
stella-jones.com