Scienjoy Holding Corporation Price & Performance (SJ)

Please go ahead. You, Sylvie. Morning, everyone, and thank you for joining us today. With me on today's call is Sylvano Travalini, our Senior Vice President and Chief Financial Officer at Stella Jones. Earlier this morning, we issued our press release reporting our results, quarter and year end 2024. Along with our MD and A, can be found in the Investor Relations section of our website at wwwSEDAR+ As a reminder, all figures expressed on today's call are in Canadian dollars unless otherwise stated. Before we dive into our strategy and performance overview, I want to take a moment to acknowledge the communities our customers serve which were impacted by a number of natural disasters in the last year. In times of need, spare no efforts. Our focus is to help recovery efforts as quickly and efficiently as possible. Following the recent California wildfires, we engaged our emergency response program to swiftly support our customers. Our products play a vital role as the backbone of electrical infrastructure that delivers essential services across the continent. And we take pride in our role of helping connect communities. Turning now to our business update. In twenty twenty four, we delivered a solid performance despite some top line headwinds.

We grew sales for the twenty fourth consecutive year increased EBITDA and maintained an EBITDA margin of more than 18%. Additionally, we generated strong operating cash flows and maintained a disciplined capital allocation strategy. Which allowed us to continue investing in growth, while delivering on our commitment to return capital to our shareholders. This performance is a testament to the strength of our team to our ability to leverage our robust market trends for infrastructure business. 2024 set the stage for continued profitable growth thanks to a number of significant achievements. Over the last year, we expanded our customer base and secured several new long term contracts with utilities. Our promise to customers to deliver quality products on time is supported by our enhanced procurement and production capabilities and our extensive distribution network. With the addition of two new utility pole finished good yards, To better service our customers, we are continuously investing in ways to meet and exceed our customers' expectations. These initiatives align with our business strategy to secure long term commitment as we strive to be a partner of choice. To live up to our customer promise and deliver the highest level of service and quality, we are continually raising the bar to achieve operational excellence.

During the year, we completed our extensive utility pole growth CapEx program initiated in 2022. We now have a network footprint that is wider reaching and more flexible. Allowing us to be more competitive and to increase output as needed. This expansion has presented opportunities to improve operational efficiency and future proof our business for growth. On the railway tie side, we undertook meaningful actions to enhance our network. For instance, we invested in new treating assets and a drip pad at our facility in Winslow, Indiana. Which will allow us to consolidate capacity and further optimize our network. Set to continue into this year, we will pursue asset upgrades targeted at servicing key customers to better support the railway industry. And our residential lumber product category continued to serve its customers with leading service it is known for. Delivering above exceptional level of order fulfillment rates 2024, thanks in great part to investment in our distribution capabilities across Canada. Lastly, because of the value we delivered to customers and our operational efficiency gains, we have been able to maintain a solid EBITDA margin and generate strong operating cash flow. Our success as a company stems from a culture of growing and investing in all facets of our business.

This past year, we made significant strides towards the reduction of greenhouse gas emissions through a number of initiatives. For instance, we finalized our second solar panel in installation at our utility pole manufacturing facility in Cameron, Wisconsin which is expected to cover 48%. Of the facility's electrical consumption. Additionally, our initiative to cover nearly all of our scope two GHG emissions through an investment in renewable energy credits will allow us to get closer to our 2,030 emissions reduction objective of 32%. These accomplishments amongst others that demonstrate Telerjones' ongoing commitment to act responsibly as we progress towards our sustainability objectives and work to ensure the long term viability of our business. Turning now to our performance overview of our main product categories. Starting with utility poles, the favorable industry outlook for Polls remains unchanged. Strong demand drivers like aging infrastructure, grid resiliency requirements and energy transition continue to accelerate the need to upgrade existing infrastructure. In the current economic environment, utilities need to allocate capital to numerous CapEx needs and fine balance between service reliability and revenue generating projects. Our utility customers have reiterated the critical need for pole replacement and confirm their continued commitment to timely grid maintenance and upgrades.

Recent indications from contractors also suggest An uptick in project requests considering that projects can take a few quarters to materialize. As we turn to 2025, our volume growth expectation is unchanged at a mid single digit rate. We are encouraged by recent indications of more quoting activity, understanding that purchases can continue to be impacted by the uncertainty related to the current evolving economic landscape. In terms of pricing, there are indications that We expect this to lead to softer spot market pricing which should be mitigated by contractual price adjustment. [indiscernible] sales grew above our expectations in 2024. Marking the third consecutive year of achieving mid single digit sales growth. The category's strong performance in 2024 was a reflection of our unwavering focus on servicing Class one customers and robust commercial market demand. In 2024, our overall Class one volume increased despite the reduction in maintenance spend of some railroads. And we serviced the strong commercial demand by leveraging our robust inventory position. Looking ahead, will execute on opportunities to further grow our customer relationships as Class one customers look to Stella Jones for innovative solutions to help optimize their business model. We will also look to reset contract pricing and establish improved cost recovery and customer agreements to ensure costs are better incorporated in pass through clauses With these initiatives and the stable maintenance driven demand for railway We remain assured in this product category's ability to consistently deliver at least below single digit sales growth.

Residential lumber delivered a solid performance in 2024, reflecting the value driven dynamics of our customer base which provide relative steadiness and positive prospects for this business. With the resourcefulness of our procurement team offering we continue to achieve sales within the projected target range despite some macroeconomic headwinds. Lumber prices have shown an uptick in the second half of twenty twenty four and expected demand is trending favorably. Our forecast for residential lumber sales remain in the $600,000,000 to $650,000,000 target range as outlined in our financial objectives. With that, I will now ask Sylvana to provide a more detailed overview of our fourth quarter financial results.

Thank you, Eric, and good morning, everyone. As Eric stated at the top of the call, Stella Jones delivered another year of sales and EBITDA growth. Sales for the year were up 5% to $3,500,000,000 utility poles and railway ties. EBITDA increased to $633,000,000 compared to $6.00 $8,000,000 in 2023. And we maintained an EBITDA margin of over 18%. For the fourth quarter, sales were $730,000,000 an increase of 6% versus Q4 of twenty twenty three.

While utility pole sales were unchanged compared with the same period last year, Q4 sales benefited from the strong performance of railway ties and residential lumber. For utility poles, we generated $385,000,000 in sales in the fourth quarter compared to $383,000,000 in the same period last year. Favorable price adjustments were more than offset by lower volumes for non contract business. Similar to Q3, volumes from contract business were stable as we benefited from the contribution of newly secured business. But the non contract volumes were impacted by the continued softness in maintenance demand and the deferral of projects by utilities. Compared to Q4 last year, utility pole volumes were down 4%. Sales of railway ties were up 15% organically this quarter to $193,000,000 compared to $165,000,000 in the fourth quarter of last year. The increase was all attributed to more Class one volumes. For the year, the 6% organic sales growth for railway ties mainly stemmed from the strong non Class one market demand and our capacity service this market given the replenished level of our ties inventory. Class one volumes were up slightly year over year even as certain railroads reduced or internalized their annual Thai replacement program.

Residential lumber sales were also up 12% organically in the fourth quarter to $93,000,000 Q4 sales benefited from the increase in the market price of lumber as well as stronger consumer demand when compared to Q4 last year. We ended the year with sales of $614,000,000 within the $600,000,000 to $650,000,000 for this product category. Turning now to profitability. Q4 EBITDA decreased 4% to $150,000,000 or 15.8% of sales. Following a record 38% increase in EBITDA in Q4 last year. The decrease was explained by an unfavorable sales mix versus the same period in 2023, attributable to the lower relative proportion of utility pole sales. EBITDA was also impacted by non recurring expenses recorded in other losses. For the year, EBITDA improved by 4% largely explained by the organic sales growth of the company's infrastructure product categories. Turning to cash flows. Q4 cash flows contributed to the strong full year of cash generated from operations of $4.00 $8,000,000 and free cash flow of $275,000,000 In 2024, we deployed cash generated to invest in our network complete our growth CapEx program as well as to shareholders. Returning capital to shareholders is a core foundation In 2024, we increased the dividend payout by 22% to $1.12 And yesterday, the Board of Directors announced an 11% increase in the company's quarterly dividend to $0.31 per share.

This marks our twenty first consecutive annual dividend increase which speaks to our overall confidence in the long term fundamentals of our business.

During the quarter, we initiated another normal course issuer bid as part of our strategy to return capital to shareholders. So far as at December 31, including dividends, we returned $348,000,000 to shareholders out of the $500,000,000 committed the twenty twenty three to twenty twenty five period. In October, we bolstered our strong financial position and flexibility with an inaugural bond using the proceeds to repay the amounts outstanding on our revolving credit facilities. We ended the year with over $800,000,000 in available liquidity and a net debt to EBITDA ratio of 2.6x. The leverage ratio deviated slightly above our target range as the appreciation of the closing U. S. Dollar relative to the Canadian dollar resulted in a higher value of the company's net debt denominated in U. S. Dollars. With a focus on profitability, and working capital management, we expect to reduce the leverage ratio within the desired target range in 2025.

In summary, with the strength of our business, our healthy financial position and strong cash generating ability Stella Jones is well positioned for continued growth and success 2025. I will now turn the call back to Eric for his closing remarks. Thank you, Sylvana.

I am enthusiastic about where we stand today. We continue to invest strategically raise the bar on operational excellence enhance our presence in the markets we serve invest in securing new business and allocate capital prudently. All as part of our strategy to remain a leading actor in our space. In sum, the actions we undertook in 2024 have for improved performance in 2025 and beyond. We are excited about the long term growth prospect of the infrastructure markets we serve. Utilities CapEx spending is expected to remain elevated for many years to come. Our utility pole business is well positioned to benefit from this multiyear secular growth. Standing at the end of three years of capital investments focused on growing utility pole capacity and upgrading network assets we continue to optimize operations and welcome new business For railway ties, our strong competitive advantages and customer centric innovation are expected help us execute on opportunities that will drive increased profitability. We are open to considering capital projects that would offer value for our customers helping further our position as a supplier of choice. Acquisitions have always been a keystone of Stella Jones' growth strategy. We will continue to and it will continue to be a priority.

In our efforts to continue to position ourselves as a partner of choice, we'll be looking to build even stronger customer relationships by expanding our infrastructure product offering. We will be highly discerning on our selection prioritizing opportunities that enhance our market and product reach contribute to earnings growth and ensure a healthy return on invested capital. As mentioned at our last call, we are confident that in 2025, we can realize accretive acquisitions that will drive higher sales and profitability. As we enter the final year of We remain dedicated to maintaining our investment grade leverage ratio and disciplined capital allocation strategy. In 2025, we will continue to lead our business with discipline to deliver value to our shareholders and we look forward to providing a new three year plan in the second half of the year. Before concluding, I want to note that the potential exposure to tariffs is limited.

Given our North American presence, majority of Telagun's products manufactured are sold domestically with minimal cross border transactions. We are nevertheless staying informed on developments and will be proactively and we'll be proactive in mitigating any potential impact. As always, Stella Jones' enduring resilience and lie in the strength and dedication of our more than 3,000 employees across North America, who I wish to thank once again for ensuring Cellagold is and remains the backbone of solid infrastructures for stronger communities. This concludes today's prepared remarks. I will now open the line for questions.

Thank you. And our first question will be from Hamed Fotel at CIBC Capital Markets.

Hi, good morning.

Eric, last quarter you indicated you expected pull growth going forward in the 6% to 7% range. The wording today seemed to reference mid single digit growth Does that suggest some further moderation in your demand expectations No, Hamir. Essentially mid single digit can be in that range of that the numbers you just quoted, the 6%, let's say. Okay. Okay. Perfect. And then Eric, you referenced looking at expanding the offering for infrastructure customers.

Can you sort of elaborate more on what potential products that could include and perhaps a sort of potential sales stream, some of these markets could represent.

Right. Well, not ready to disclose to that level of detail, Hamir, but there's been several quarters now that we've been referring to expanding our product offering.

It's been several quarters that we have been working with our Board and exploring different markets and what would be potentially good addressable markets for Stella Jones. We continue to focus on supporting the utility rail industry And as I mentioned, we're at the point now that we're actually in discussion with potential targets. Obviously, when you look at where our customers spend, if you think about utilities, obviously, I've always referred to three buckets, the generating assets, the transmission and the distribution. Hard for me to far from even that I want you to think that we'd be beginning in generating assets. So transmission or hardware that supports our customers' needs with this definitely be a good place for us to go. When I think about the rail industry, our customers keep referring to us expanding our capabilities either it be with end of life solutions or composite type product to be able to properly respond to the requirements of the engineering department. So I guess that's a bit more color.

Okay, great. Thanks, Eric. And just last question I had. Tariff related. On the res lumber side, if we did see the SBS lumber price in The U. S. Go up, call it 25% if tariffs come into Do you think the untreated lumber prices in Canada remains unaffected or would you expect it to move kind of dollar for dollar with The U. S. Price?

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

Fair enough.

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

Hey, thanks for hopping on and good morning. Good morning, James.

Yes. I was just wondering if you can provide a little bit more EBITDA range for 2025. I know you reiterated your longer term target. They kind of give us a floor but consensus is kind of trending quite a bit ahead of that. Anything more specific you can provide there? And I guess consensus is that $630,000,000 for 2025. Is that a number you're comfortable with Well, I'll answer in terms of percentages. And then I'll let you you forecast where you think our sales can land. So you're right, we are very confident with our floor at 17 We're now two years achieving the 18% level. It would be in the range of what is achievable this year. Obviously, there's lots of uncertainty in the markets right now. So I guess I'm leaving that door open to give us to work through a couple of quarters and see how this year goes and how the different how the economic environment will adjust. But yes, I guess that would be my thought. We were maintaining our confidence that supporting at least the 17%. And as I referred it in my script, we were working on operational efficiencies. We're working on opportunities to make sure that we can hold the highest margin possible that our business can.

I appreciate the color. And then then a question on the Thai business.

A few potential moving parts here. You mentioned the timing of railway tie shipments kind of helped Q4. We have potential some headwinds from our CP. Further utilizing their KCS facility. And then on the other side potential from some pricing increases as you negotiate some contracts with Class one rails So within all that going on, how should we think about your sales growth on this high side Preferred for 2025. After that, I can turn the line over. Thank you.

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

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

Yes. Good morning, everyone.

Just to come back on the utility pole, with respect to the mid single digit growth, you mentioned that it's most [indiscernible] 2024, you were it was still very decent.

So I'm just wondering what makes you confident that the volume can be in the mid single digit in 2025 given and just wondering about the [indiscernible] whether it should be more skewed toward the second half of twenty twenty five given the tough compare for the first half.

That's a good point. Thank you, Benoit. So Maybe just for the general audience, we did readjust our guidance last year. So we did have softer volumes in Q3 and slightly softer volumes again in Q4. We adjusted our guidance and was shooting for that mid single digits going forward. So we're confirming and reiterating our views this morning with our demand for our customers for the coming year, there are some strong demand for the maintenance and replacement program. We do have some new customers that I mentioned in my note for 2025, which will contribute to that.

To date, we've seen some healthy activity in certain markets, Texas, for example, where oilfield seems to be to projects in the oilfield seems to be going strong. And we're seeing increased quoting activity. So all of that together, we still feel that it's a good target for us to achieve and to strive for. Could it be skewed a bit more to the back later half of the year?

I want to say yes. We've had a harsher winter so far this year. It has slowed down to some extent in the Northern Part Of North America. But as spring kicks in, I would expect things to resolve itself and hopefully also economic uncertainty or unknowns would be appeased in the next few months and we'd have a better understanding of the landscape for the balance of the year.

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

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

Okay, that's great. And maybe last one for me. In terms of capital allocation, you've been disciplined You are increasing the dividend by 11%. So it implies that there's about $85,000,000 of buyback in order to [indiscernible] below 2022, 2023. We are mindful of the leverage ratio that went up because the FX but you also talk about M and A opportunities. So I would be curious to get more color about the size of the M and A opportunities that you're looking at right now and given that on the utility side that you've been talking about the transmission and hardware I'm just mindful about the tariff whether it's something you should be taking into account and maybe waiting to see more clarity before going into those [indiscernible] All right. Thank you. But I'd love to unpack there in your question and I'm going to turn the the major points. So with regard to the size of M and A, we're not going outside our traditional range. So it's always been between the the $40,000,000 to $140,000,000 $150,000,000 million dollars and so we're so there's a wide range of targets that we have opportunities to consider. So I think for now that's what it looks like.

You're right in asking the question. There could be some more sizable into the future, but I think what we're looking for today is good investment with good return on capital, solid management team, and strong knowledge of the business to help us continue to grow it. With regards to your question on tariffs, obviously, it is top of mind as we do due diligence where our where the raw materials are sourced, where are they shipped to, what is the distribution landscape and what is that elastic city of or sensitivity to pricing for customers. Are there pass through clauses? And what is the perception of the market if there is some some pricing adjustments for these products?

So my assumption looking at these M and As is that whatever tariffs may do there will be a pass through and the cost will be borne by end customer.

Okay. Thank you very much for the time.

My pleasure, Benoit. Thank you. Next question will be from Michael Tuccolme at TD Cowen.

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

So it was the comment was for the overall utility poles. [indiscernible] Okay, perfect.

And then as we look forward, again, from an outlook perspective on goals for organic growth talking about mid single digit sounds like it's mainly volume. But can we sort of unpack that? And can you talk a little bit about what your expectations are both contract market versus non contract and then both from a volume and pricing perspective, like how you're thinking about it all gets you to this sort of mid single digit [indiscernible] So I want to well, let's start that, I mean, I do think we would expect some volume gains from the contract customers. In better part actually sits have a long term relationship with them and we have ongoing discussions The spot market piece, there's always demand. It just depends on how tight the pricing is going to get and how much do we want to chase those projects if we feel that they are going to come in a lower margin piece. So that's why we're trying to to balance it out. So my preference is to work with our ongoing customers. We work very hard to build a very extensive list of customers with very longer term contracts. We definitely need to make sure we service them.

They're very generous in sharing information. With us. And then obviously, the spot market, which we also have great relationships, could be a bit softer now. But not least, I also want to remind you that we do have a couple of new customers this year that transitioned to long term agreement as well. Not supplied by Teladome last year and there will be 25 So it's two years in a row now that we've actually had the opportunity to increase our customer list So the demand is obviously think about our results, fluctuating, but the good news is that keep securing customers and winning the confidence of the industry as our ability to service them.

So for me, it's all a very positive sentiment. Okay.

That's helpful. In the past, you've talked about the spot market for utility pools being roughly 30% of the business, I think, and the balance contracted. It sounds like that can move around depending on what's happening within the market. But is that still sort of the right roughly the right range to think about between the in terms of the mix between the two? I would say a bit lower. It's probably closer to 25 at this point, Michael, as as I mentioned, we've been increasing our engagements or promise to customers with long term agreements. So the Okay.

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

So you're right to comment with about the general industry and It's more a sentiment than an actual facts of the industry does not have and so like if you look at the railway tie association, you see that the ties maintained in last year were actually slightly up. So that I can now again see how well we track versus that. When I think about the utility pole business, we don't necessarily see that, but we do know that there's obviously there's some new capacity available in the market. So there's at least one more When you treating facility that our competitor built, last year that is online, my understanding is they do have healthy level of inventory So I guess that's my and it is also the case for ourselves. We will be looking to rationalize our inventories in the course of the year. So that's where my sentiment is coming from. I think it's pretty well based, but I don't again have can't provide any strong or solid facts to that effect. Okay. That's helpful. And then just sort of to more housekeeping items, I guess. First off, 2025 CapEx expectations, what would those be?

So anywhere between $75,000,000 and $85,000,000 is what we noted for our regular CapEx spend.

Okay. And then the other losses line that I think you referred to, I think it was commented around the fourth quarter, but It was a little higher in the fourth quarter. Versus last year's fourth quarter and then also on a full year basis $15,000,000 I know you don't normalize or adjust for these things, but can you Just explain what exactly is running through that line why it was a bit higher and is that likely to be coming back down in 2025?

So they're mostly all I call, one time or non recurring events. Michael, part of that is we have some waste disposal at one of our facilities in in Nevada that had a fire last year. And as we are cleaning up debris and putting them aside since the debris was in contact with preservative products, it needs to be disposed in a particular way. So now that we've sort of readjusted the facility and sort of finished our the renovation or fixing up the repairing the damage that we end up with with products to dispose. So we moved through a remediation provision if you want or disposal provision. So that's part of that. So then you got some more color to add there.

Yes. The only other big items in there are basic some some as Eric said, as we continue to optimize our facility, some of the older assets that we're no longer wanting to use are being written off. So that's the other part of the other losses. Which which adds to the amounts of about $5,000,000 of that was in the total $15,000,000 Okay. That's helpful. I mean, I guess hard to predict is it reasonable to think that it's not any higher than it was in 2024 next year or into 2025?

We don't say that The overall should definitely be lower. I think it was kind of [indiscernible] and some of the It's been a while since we we've seen a bigger number in the others. But as every year we do the exercise of looking at our assets or different one time events. We rationalize and we optimize how we do things and it's just to move better forward, I guess. But yes, I would I mean, to predict the future, but I would think it wouldn't be higher in 2025. You there. Thank you. Thank you.

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

Hi, Erica. I just want to come back to you on the [indiscernible] as kind of contract renewals play out to better reflect some of the cost inflation. What percent of the Class one business typically comes up for renewals in any given year? And then as part of this sort of margin improvement are you considering perhaps transitioning some of those relationships back to maybe a treated service mall? That's a great question. Well, the first part of your question, in the next twenty four months, we got four Class one contract renewals that are coming up.

To actually got pushed out. We're actually to be renewed last year, got pushed out of this year. And then I've got hundred. So next twenty four months, we've got four contract renewals negotiate. And after that to the second part of your question, A lot of things are on the table, yes. Moving part of the volume to trading services is definitely an option. As I said, there are some customers that are looking for optimizing their role in activities and there might be a role for us to play there. So we're definitely looking on how we could invest capital and what kind of return we can get to that. And obviously, always in the servicing our customers, but also getting a greater share of their annual maintenance.

So a lot of a lot of work ahead of us in the next twenty four months, but very exciting times, I think, where we have opportunities to to leverage the good work that we've done and maybe Maybe Q4 was a small indication of the confidence of certain Class one customers in Stella Jones with that additional volume. But that's how I'm viewing the situation.

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

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

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

So we always have the opportunity to do substitution within species. So if there is some headwind, we can definitely transfer back to some Canadian native species. Then we would also need to take a look at closer look at the length of the Canadian government is going to put forward. So my understanding is the U. S. Government is just going to do a blanket tariff, Canada and with what we saw back in early February, Canada had issued a list of products and our whole products were not subject to those tariffs. Now, we'll have to see what's going to come up in the next few weeks. So we have options that, as I mentioned, we're going to mitigate any any potential situation. We're also taking opportunity now in the last several weeks to move products in the proper geographic regions to help us support probably the next several months.

So even if tariffs comes into effect in, I don't know, in a month, or when they come into effect, we will have a few more months to readjust and think through our strategy to supply our customers. So we have many options to mitigate those tariffs And again, it's not a significant part of the business that gets moved cross border. So it's It would be material to any extent.

Okay, great. That's all I had. Thanks.

Thank you, Amir. Next, we have a follow-up from Michael Tupholme at TD Cowen. Please go ahead.

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

Right.

So obviously, I don't will not comment on Q1 results this morning, Michael, but winter is a good indication of a bit of a slower base. Especially much harsher winter than we've seen in Canada in pre [indiscernible] previous years. So I would expect let's say, Q1 to be either in line or maybe slightly softer than last year. Perfect. Thank you.

My pleasure, Mike. We have no further questions in the queue. Thank you.

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

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