Stella-Jones Inc.

Thank you, Julianne. And good morning, everyone.

Welcome to today’s call to discuss Stella-Jones’s fourth quarter and year end 2021 results. Joining me on the call is Silvana Travaglini, CFO of Stella-Jones.

Earlier today, the company issued its quarterly earnings release and its Q4 results. It along with our MD&A can also be found on the Stella-Jones website at www.stella-jones.com in the Investor Relations section, and has also been posted on SEDAR today as well.

As a reminder, all figures expressed in today’s call are in Canadian dollars, unless otherwise stated. I will begin today’s call with an overview of our year.

Then I will turn it over to Silvana to review or fourth quarter and year end results. We will conclude the call with closing remarks and the Q&A session.

Stella-Jones had a record performance in 2021. Our team expertly navigated through complex procurement challenges and leverage its strength in fiber sourcing and customer service to deliver another successful year.

We increased our sales for a record 21st consecutive year to CAD 2.75 billion. Net income improved to CAD 227 million, an increase of 8% over the strong 2020 results.

EBITDA reached a record high of CAD 400 million, driven by increased sales across all product categories. Cash generated in 2021 totaled CAD 251 million, a 41% year-over-year increase.

We returned CAD 155 million of that cash to shareholders and today announced an 18th consecutive year of increased dividends. Over the last three years, we have returned CAD 365 million to shareholders.

Our consistent success is founded on a well-executed and deliberate strategy of industry consolidation. Since 2003, we have made more than 20 acquisitions, including the most recent acquisitions of Cahaba Pressure Treated Forest Products and Cahaba Timber.

This consolidation effort has added to our product offerings and capacity, reinforced the reliability of our raw material sourcing, strengthened our management team and expanded our customer base. We expect to fully leverage the added capacity for the acquisition of Cahaba Pressure and Cahaba Timber to respond to the growing treated wood Utility Pole demand and to be immediately accretive to earnings.

As I mentioned at the start of the call, much of our success can be attributed to our great team. And I would like to highlight some of their accomplishments this past year.

In Utility Poles, our seasoned procurement team successfully responded to the challenges of finding the appropriate mix, size and length and wood species to meet our customers’ needs. And we grew year-over-year sales organically by 9%.

And as the Utility Pole industry transitions away from the preservative Pentachlorophenol. We have been at the forefront of this evolution, cooperating closely with a skilled supplier to introduce DCOI as an oil borne preservative alternative.

With a mastered understanding of treating cycles for a wide range of wood preservatives, we are ready to make the investments necessary to convert our facilities to lead this transition. In our Railway Tie business, the strength of our procurement network has reinforced our ability to continuously meet customer needs.

On treated tie availability was tight in the second half of 2021 and we expect these headwinds to persist for the next few months. This tightness has led to a considerable fluctuation in raw material costs.

But our customer agreements allows us to recoup these costs, albeit on a delayed timeframe. In Residential Lumber, raw material prices saw their greatest volatility in history this past year, and that seems to be continuing so far in 2022.

In March 2021, lumber prices were about USD 850 per 1,000 board feet. By May prices more than doubled, and in July, these fell to nearly half of what it was in March.

Our team expertly navigated through this volatility, managing complex supplier and customer relationships to end the year with greater year-over-year sales and the appropriate level and cost of inventory to support demand going forward. We enter 2022 well positioned to continue meeting our customers’ needs.

Before I turn the call over to Silvana, let me highlight a change we’re making to our guidance. Those that follow our business know that Stella-Jones’s sales are primarily to critical infrastructure related businesses, namely Utility Poles, Railway Ties and Industrial Products.

While all product categories can be impacted by short-term fluctuations, the business is mostly based on replacement and maintenance-driven requirements, which are rooted in long-term planning. The company is shifting its guidance to a three-year outlook to correspond to this long-term horizon, and to better reflect the expected sales run rate for Residential Lumber and reduce the shorter-term impact of commodity prices.

With that, I will turn the call over to Silvana.

Thank you, Eric and good morning. Today, we reported net income for the fourth quarter of CAD 22 million or CAD 0.34 per share, compared to CAD 34 million or CAD 0.52 per share last year.

For the full year, net income was up 8% to CAD 227 million from CAD 210 million in 2020. Earnings per share was CAD 3.49, an increase of 12% compared to 2020.

During the fourth quarter of the current year, we generated sales of CAD 545 million, up from CAD 533 million for the same period in 2020. Excluding the contribution from the acquisition of Cahaba Pressure and Cahaba Timber, and the negative impact of the currency conversion, pressure-treated wood sales rose CAD 26 million or 5%.

This was mainly driven by higher volumes and pricing from Utility Poles, as well as improved pricing for Railway Ties. This growth was partially offset by lower demand for Residential Lumber.

The sales of Logs and Lumber were lower this quarter, mainly due to the lower market type of lumber. Sales for the year reached CAD 2.75 billion, up CAD 199 million, versus sales of CAD 2.55 billion in 2020.

Again, excluding Cahaba Pressure and Cahaba Timber, and the negative impact of the currency conversion of CAD 127 million, pressure-treated wood sales rose CAD 232 million or 10%. Sales of Utility Poles in the quarter were CAD 227 million, up from CAD 201 million from the same period last year.

Sales increased organically by 13%, primarily due to increased maintenance and project-related demand and higher pricing. For the full year, Utility Poles were CAD 925 million, up from CAD 888 million in 2020, representing organic sales growth of CAD 83 million or 9%.

This was driven by strong maintenance demand for distribution poles, favorable price adjustments in response to raw material cost increases and a better sales mix, including the impact of incremental sales of fire-resistant wrapped poles. Fourth quarter sales of Railway Ties were CAD 147 million in line with last year.

Excluding the negative currency conversion effect, Railway Ties rose 3%, mainly driven by improved pricing for both Class 1 and non-Class 1 business. For the year, sales of Railway Ties were CAD 700 million, down from CAD 733 million in 2020.

Excluding the currency conversion effect, sales increased CAD 30 million or 2%. This was largely attributable to higher non-Class 1 sales compared to 2020 as continued strong demand outweighed the pricing pressures in the first half of the year.

Sales for Class 1 customers remained relatively stable year-over-year. In our Residential Lumber category, sales in the fourth quarter were CAD 107 million, down from CAD 117 million in 2020, mainly due to lower sales volumes.

Despite the lower market price of lumber compared to Q4 of 2020, pricing for Residential Lumber remained unchanged. For the full year, Residential Lumber sales were CAD 773 million, up from CAD 665 million in 2020.

Excluding currency conversion effect, Residential Lumber sales increased CAD 127 million or 19%, driven by the exceptional rise in the market price of lumber in the first half of the year. Industrial Products sales were CAD 25 million in the quarter, slightly up compared to sales of CAD 23 million in the fourth quarter last year, primarily due to the mix of project-related bridge works.

For the full year, sales were CAD 121 million, mostly unchanged from CAD 119 million last year. Logs and Lumber were CAD 39 million in – Logs and Lumbers sales were CAD 39 million in the quarter, down 13% from last year, mainly due to the lower market price of lumber.

For the full year, sales were CAD 231 million, up 60% compared to 2020 due to the exceptional rise in the market price of lumber. Turning to profitability.

Gross profit was CAD 65 million in the fourth quarter of 2021, a decrease of CAD 20 million versus the same period last year. Margins were 11.9% in Q4 of 2021 and 15.9% in 2020.

The decrease was primarily attributable to the higher inventory costs of lumber at Residential Lumber at the end of the third quarter. Also, given the timeline in contractual price adjustments, the rise in costs during the quarter outpaced sales price increases across all product categories.

This further contributed to the lower gross profit in the fourth quarter, compared to the same period last year. For the full year, gross profit was CAD 456 million, compared to CAD 446 million in 2020, representing a margin of 16.6% and 17.5%, respectively.

A large part of Stella-Jones’s infrastructure-related sales are contractual, and include price adjustment mechanisms to cover increases in costs. In an increasing cost environment as in 2021, the time delayed to implement these price adjustments temporarily impacts margins unfavorably.

During 2021, we generated CAD 251 million of cash from operations, reflecting strong profitability and a decrease in working capital, while higher fiber costs increased inventory values across all product categories. This was offset by the significantly lower level of Railway Ties’ inventories given the tight market supply of untreated ties.

We used the cash generated to invest in capital expenditures and returned CAD 155 million to shareholders through the payment of dividends and share buybacks. In 2021, the dividend was CAD 0.72 per share, representing a 20% increase year-over-year, and we repurchased 2.4 million shares for CAD 108 million.

During the fourth quarter, we purchased Cahaba Pressure and Cahaba Timber for a total of CAD 129 million and financed these acquisitions to our existing credit facilities. As a result, the net debt to EBITDA ratio increased to 2.2 times as at December 31st, 2021, and we had available liquidity of CAD 329 million.

Given the company’s strong performance and consistent cash flow generation, subsequent to year end, the company requested and received approval from the TSX to amend its NCIB to increase the maximum number of common shares that may be repurchased from 4 million shares to 5 million shares. Yesterday, the Board of Directors declared a quarterly dividend of CAD 0.20 per common share, representing an increase of 11% over the previous quarterly dividend.

The dividend is payable on April 22nd, 2022 to shareholders of record at the close of business on April 4th. I will turn the call back to Eric for concluding remarks.

Thank you, Silvana. Over the next three years, we expect continued sales and EBITDA growth.

On a consolidated basis, we are projected to generate a sales CAGR in the mid-single digit range from pre-pandemic 2019 sales level, and we continue to target an EBITDA margin of approximately 15% for the 2022 to 2024 periods, more specifically by product category over the next three years. For Utility Poles, we will expand our capital expenditure program and invest an additional CAD 90 million to CAD 100 million to support the anticipated high-single digit organic growth.

Most of the additional CapEx will be invested in new upsized treating cylinders, drying capacity and pole peeling yards. For Railway Ties, we continue to project an organic growth in the low-single digit range.

For Residential Lumber, we anticipate stable long-term demand, but believe the market price of lumber will normalize from the unprecedented high prices in 2021. As a result, we expect the Residential Lumber sales to decrease compared to 2021.

We assume sales in the 2022 to 2024 period will be approximately 35% above 2019 pre-pandemic levels. The stability of our infrastructure-related businesses of Utility Poles, Railway Ties and Industrial Products mean we can project a significant growth in the total amount of capital we returned to shareholders.

Over the last three years, we’ve returned CAD 365 million. And we expect to grow that to a cumulative CAD 500 million to CAD 600 million over the course of the next three years, an increase of over 50% versus the past three years.

For strategic acquisitions, we expect to use our strong balance sheet and increase our leverage in line with our capital allocation. This financial guidance reflects a solid base case, upon which the potential upside of acquisitions and infrastructure-related government spend would support further growth in our expected 2022 to 2024 results.

We are focused on pursuing acquisitions to complement our infrastructure-related product offering. And we plan to evaluate growth opportunities in adjacent businesses, where we can leverage our core knowledge and key attributes to generate continued strong cash flow.

Our efforts will be devoted to leveraging our solid business foundation to generate continued profitable growth and further solidify our leadership position in our core product categories, while exploring other growth opportunities. As we saw in 2021, our strategy has been successful, and we expect it to continue to drive our success in the years ahead.

Thank you very much. I will now ask the operator to open the call for your questions.

Hi. Good morning.

Good Morning, Hamir.

The Res Lumber annual sales guidance of 35% above 2019 levels over the next three years. How much of that is volume uplift from 2019?

And how much is priced?

Yeah. It’s a minimal uplift on volume, Hamir.

Slightly up.

Okay. So mainly price.

And then, Eric I want to turn to cost inflation that we’re seeing for chemicals, freight and labor. I know some of the chemical inputs you know you might have some contracts protecting you this year.

But can you speak to how much of the different cost inflation buckets you’re seeing is covered by the indexing arrangements that you have in ties and poles? And then do you have any plans for additional pricing action to recoup any shortfall there?

Yeah, certainly. So that’s a great question, right.

Like any other industry right now, you know we’re seeing all of these – the effect of inflation. So, I guess hard to answer your question, perhaps by product categories.

For Railway Ties you know there are pass throughs for obviously cost of fiber. But we also have inflationary adjustments as well as any inflation impact that would have on preservatives, for example.

With regards to – excuse me, for our Utility Poles, the fiber obviously is covered by the annual contracts, oil prices as well. But that would be on an annual basis.

So that’s a bit of a different dynamics there. And you know keep in mind that, our oil board preservatives obviously use the oil so that the oil components where we would see price increases.

But in all cases you know it might lag a bit, but will get covered. And I think an example of that is what we saw actually in Q4 a bit of margin percentage compression there on those products.

But you know first quarter of this year, where we’re adjusting prices for both those product categories to recoup last year’s cost increases.

Great. Thanks, Eric.

That’s helpful. And Silvana, I’m just wondering with respect to CapEx for 2022 you know what sort of level should we expect there, given the increase that you’re expecting over the next three years?

Yeah. So as we mentioned you know we’re building on the CAD 50 million to CAD 60 million annually that we’ve given for the additional CAD 90 million to CAD 100 million, will be probably a large part of it in the next 12 months to 18 months.

So the additional one you could sort of frontload it over the next year and a half.

Okay, great. Thanks.

That’s all I had. I’ll get back in the queue.

Thank you.

Thank you. Good morning.

Good morning, Mike.

Eric, the growth that you’ve talked about over the course of the three-year plan in ties and poles specifically, can you talk about how much of that growth you’re calling for is volume-driven versus what you might have assumed for pricing in those two product categories?

Yeah, certainly. So for Utility Poles, I would say you know greater than 50% over three years will be driven by volume, which explains our need to invest in the CapEx for over time for increased capacity.

For – Railway Ties you know I would say it’s probably 50:50 mix as well.

Okay, thank you. That’s helpful.

Just a clarification with respect to the overall sales CAGR in the mid-single digits you’ve talked about as part of the three-year outlook, just to be clear that – that’s excluding any acquisitions. Acquisitions would be upside to that?

Exactly, yes.

Okay. And then, can you – on the subject of acquisitions, can you comment on, I guess both aspects of what you’re talking about.

So specifically the pipeline as it relates to additional opportunities in the current core infrastructure-related product areas, as well as perhaps shed a bit more light on what you’re thinking with respect to possible adjacent businesses and what those kinds of opportunities could look like and what the timing around those kinds of opportunities could be as well?

Yes, right. So you know the comment is made to reassure everybody that there is the remaining pipeline, where first and foremost focus on completing the consolidation into a treating industry.

That is you know our base strategic plan. And as you know we’re addressing that project of completing our consolidation, we’re turning our minds to how we can better leverage you know customer base and then product offering.

So it’s still in its infancy in discussions, we’re exploring different avenues not ready to disclose much today. But I just wanted you know keep everybody’s – keep this on everybody’s radar that we are considering you know continued growth for our company.

Okay, that’s helpful. And then maybe just to clarify, though, Eric on the sort of the tuck-in strategy you’ve been pursuing in your core – your existing core areas?

Is there anything you can say just about what the opportunity set there looks like right now?

Yeah. Well you know we – we’ve always said there’s CAD 200 million to CAD 300 million.

I think we’ve mentioned that in the past. You know we have our list of targets that we’re addressing, the timing of those is always uncertain obviously all family-owned businesses and the timing is not always ours to decide.

We’d like to say that we – would like to perhaps you know approach and accelerate some of those as you know we want to complete our installation project, but you know we need to be patient as we’ve always been.

Okay, thank you.

Yeah. Thanks very much.

Good morning, everyone.

Good morning, Walter.

So just coming back to the Rail Tie business in the low-single digit guidance. Just curious with all of the congestion going on right now.

And I’m looking at Burlington Northern’s plan just this morning on - Rail Tie purchase of CAD 2.7 million. You’re also looking at you know a fairly significant CAD 500 million in growth, where they’re talking about double tracking and triple tracking in some areas.

It’s a big focus on railroad expanding capacity here. And presumably, that will come both you know yes with steady replacement ties, but a lot of new purchasing as well.

Does your forecasts on the Rail Tie business take into consideration the possibility for some double track – double tracking, triple tracking and extensions in your forecasts? Or is it more based on what you’ve seen historically?

Such a great question. So, it’s not considering those additional projects.

So you know we’ve been reading about those as well. We haven’t seen anything sort of materialized or be hinted but obviously you know we are strong suppliers to all the Class 1s, we would definitely benefit from those opportunities.

You know maybe there to add a bit of color. You know we were talking about that mid – single digit growth that’s over to the three-year period, right.

I – you could expect with increasing cost of material this year to see you know sort of that contribute to sales growth, but keep in mind, it doesn’t always trickle all the way down to the bottom line as we keep seeing the Railroad Tie costs continue to increase. But then when the time comes, if Railway Tie prices pull back you know we’ll be adjusting process – prices downward.

So a lot happening in that underlying assumption of that mid-single digit growth. But short answer to your question is, no, we have not included any further expansion of rail networks.

Okay. And then just discussing broadly now, a lot of the customers that you have are seeing significant opportunity to reprice their service in light of some of the outsized demand they’re seeing, and in many cases, restructure the nature of how they negotiate contracts, much to their advantage given the outsized demand for those transportation services.

Is that resulting in you, at any cases, looking at different ways to restructure your contract to take advantage as well of the – you know, the downstream benefit that your customers are getting? And the increased negotiating leverage they have with their own customers to achieve the same for your company as you negotiate with some of your clients both you know certainly on transportation, but could that apply as well to your utilities business – Utility Pole business as well?

Right. So as you know a very large percentage of our Utilities and Railway Tie business are under long-term agreements.

So obviously we need to honor those agreements. But you’re completely right, that our – we keep educating our customers on the pressures we’re seeing with regards to raw materials and you know oil prices and freight prices and so on.

So as you know we negotiate price adjustments, we definitely have that opportunity to pass along those costs. Actually we’re going to renegotiate or revisit the contracts.

But the discussion dynamics are definitely in favor you know our ability let’s say to put forward the price increases to cover our costs, we’re definitely you know the largest North American supplier for Railway Ties and Utility Poles. Customers appreciate the level of service we bring them or our capacity to procure raw material and to deliver quality product.

And you know with that, they also acknowledge that you know they need to discuss with us and under – and we made sure to understand about the cost increases in our cost base. So, to your point you know I don’t say we’re – we have the upper hand into discussions, but where we definitely listen to when we had to have discussions with our customers.

Appreciate the time, Eric, as always, thanks very much.

Thank you, Walter.

Thank you. Just on the Utility Poles business, it doesn’t sound like the growth outlook you’re calling for really takes into account any opportunities associated with sort of above normal activity in terms of broadband network expansion and the likes.

So I guess the kinds of opportunities that could arise from the US infrastructure bill. So I guess, first of all, can you just confirm that?

But secondly, if I’m understanding that correctly, could you talk about – you know do you yet have any sense as to what sort of upside that could drive? And have you seen any evidence even if it’s just early evidence of any activity in that area that could begin to flow through to Stella-Jones?

Right. So, Mike to answer your question, we have not incorporated any assumption for increased spend that would be driven by government funding for example and so – and you referred to the US infrastructure bill.

So we haven’t had – we haven’t seen any sign of that in the US market yet. So that’s why we have not included it.

So, to your point, if those funds actually get you know freed up and programs are set up to be able to support infrastructure spend, obviously that would be you know an X in the wind column for us. In Canada, it’s a bit different dynamics.

We are hearing this – we are hearing and having discussions with customers about potential government funding – funded projects. But those are still early discussions, customers are inquiring about our capacity to produce to supply sourcing.

So we’re getting those types of inquiries. So it’s a – I guess it’s more of a scenario where customers are saying, well, if this happens you know Stella-Jones is our main supplier, will you be there to supply us if we increase you know X folds our demand, but it’s difficult to appreciate at this point and you know so the indications in the US are very you know very small if not at all for now.

But in Canada there are some discussions in different provinces.

Okay, appreciate the clarification. Thank you.

Thank you, Mike.

Yes, thank you very much. And good morning, everyone.

Just on the CapEx question, just to be clear, is it fair to expect over CAD 100 million of CapEx per year for 2022 and 2023, Silvana based on the earlier comments made?

I would not expect it to be that much in both years. But you know close enough to what you’re saying.

But I’m thinking probably you know the CAD 100 million is a fair assumption for 2022, but in 2023, perhaps a little bit less.

Okay, that’s great. And with respect to this strategy plan, what would be your expectation in terms of working capital consumption based on the revenue guidance?

So for the current year, it will really depend on the availability of the untreated ties as we mentioned, it’s fairly tight now. So if there is more availability starting in mid-year, we would see a more significant investment in working capital towards the end of the year, maybe similar to what we’ve seen in 2019.

On a normal run rate you know 2023-2024, we’re just – the assumptions for the working capital is just sort of a normal build to support the additional sales of the subsequent year.

Okay, that’s great. And in terms of capital deployment, you highlight the CAD 500 million to CAD 600 million over the next three years, roughly what would you expect in terms of split between the buyback and the dividends?

So the dividends as you’ve seen historically we’ve been increasing them you know over time, so we would expect you know similar type of increases in dividends over the next few years and the remaining being the buyback. So probably you know CAD 50 million or so dividends as we currently have is a good run rate over the next few years.

Okay, that’s great color. And when we look at the EBITDA margin at 15%, just trying to size whether you’re conservative here.

I saw that the increased volume economies of scale better mix with the fire-retardant mesh could probably push the margins a bit higher going forward. So what are kind of the pluses and minus should we take into account when assessing the EBITDA margin?

So you’ll notice, we said approximately 15%, we’re giving ourselves a bit of wiggle room there, Benoit obviously, but so you’re completely right over the long-term to three-year period, I would expect us to achieve and exceed the 15%. And when I say, it exceed you know, it’s not 17% either.

And I think you understand what I mean by that. In the coming year you know, we’ll have the dynamics of increased costs that have a delayed pass through.

So, it’ll be interesting you know for us to navigate that exercise in the next 12 months of seeing oil price increases, freight price increases, passing it on to customers and seeing as you know how this goes for us. And so you know, is it going to be in 2022?

It’ll be interesting to observe, because we also have price increases that are coming into effect. So it’s a bit of a mix of a lot of things for this year.

But I agree with you, that over time as we keep growing our business with the growth on our infrastructure-related products you know we should see economies of scales on the SG&A piece definitely.

Okay. And for 2022, I know that you want to move away from the annual guidance, but just wondering whether it would still be fair to assume stable EBITDA over 2021 in the current environment?

Benoit, that was our guidance last time we spoke – on the Q3 conference call, right, if I recall, we had guided that stable or stable revenues and EBITDA. You know since then you know what has changed is really what we’re seeing in Residential Lumber.

Obviously, when we had that discussion, lumber prices were – you know market lumber prices were trading around, let’s say USD 700 a 1,000 board feet. You know, we’re looking today at prices in the USD 1,500.

So obviously that has a different dynamic and I would say could have a positive impact if those prices hold for the balance of the year. The rest you know high-single digit growth for Utility Poles, low-single digit growth for Railway Ties and Industrial that holds.

So you know we’re very comfortable with you know with those views. There will be a bit of headwinds obviously with cost increases so you know we’re putting through some pricing increases to our customers, but then we’re seeing costs continue to evolve.

But all being said you know, I’m not changing my views on that front and you know I’ll leave it up to you to predict the price of lumber to see if it – if we can you know beat that guidance.

Okay, that’s great. And the last one for me, just in terms of leverage ratio, what would still be your comfortable leverage for a – larger acquisition?

You know, I have no concerns leveraging up to 3 times, Benoit you know and I’m just giving that number as an example, we generate you know the additional cash that you know acquisitions bring you know enables us to pay down that bank very quickly. If you take for example you know we reported a 2.2 times leverage at the end of the year that includes Cahaba acquisition that was made you know in mid-November, Canadian dollars was CAD 130 million.

And you know our leverage was 2.2 times. On a pro forma basis, if we had 12 month of EBITDA you know, it’d be 2.1 times, maybe even a bit less.

So it gives you a bit of an idea of there’s – you know there’s enough capacity for us to execute on our capital allocation that we’re announcing today within our guidance, and then for any potential acquisition to lever up to you know over 2.5 times to 3 times. That’s not a problem.

We have a very healthy balance sheet, strong cash flow generation. So I think you know I would sleep very well at night and knowing I could execute my budget and explain to you.

Okay. Thank you very much for the time.

My pleasure, Benoit.

Hi, good morning.

Good morning, Maxim.

[technical difficulty] the first question, I was wondering if you don’t mind providing a bit of color in terms of your integration playbooks on Cahaba sort of the priorities? And then you know what to expect in terms of [technical difficulty]?

Maxim, I’m sorry, there’s a lot of background noise. Would you mind repeating the question?

Yeah, sorry, I apologize for that. I’m just wondering if you don’t mind providing a bit of an update in terms of the integration playbooks for your most recent transactions in terms of kind of the priorities and what to expect to be able to deliver some new transactions?

Thanks.

Yeah, okay. Thanks.

So with regards to the Cahaba acquisitions you know the – they’re fully integrated on our IT systems, that’s all been done before year end, you know December 31st. Since it is in a region where you know in this US southeast, we already had an existing infrastructure of sales procurement.

So you know that part went actually very smoothly as we already know the suppliers and most of the customers, the Cahaba acquisition actually solidifies the relationship or introduces us to – formally introduces us to a customer that we weren’t able to access before, because they were – you know that customer’s stronghold, if you want, but so that’s going very well. You know I would say for the first month of operations, I’m very impressed with you know the quality of execution of the team, how fast we’re turning inventory over in that facility, the Stephen’s family that own that business operated it very well, they have a – they had a very good process in place.

We’re very impressed with that. And then with regards to synergies, I think you know there – they’ll – they should translate in the first half of the year simply because its efficiencies on us leveraging our total network as where we put orders being able to use that additional procurement access to be able to get good prices at the proper plants, so things are going exceptionally well.

I’m very happy.

Okay, that’s great to hear. Maybe just last question, and again, apologies for the noise.

In terms of labor availability across the network, can you maybe comment on that and [technical difficulty] as well? Thanks.

I’m sorry, Maxim, are you talking about labor cost?

No, just availability, because I think I presume that labor cost is important as well to get small. Do you mind just maybe talking about just having been able to do the work in general?

Thanks.

Okay, thank you. Well you know well like every company, we’re competing for the human capital on the market.

We took steps last year actually to adjust wages to our employees, to be able to well, first, retain our employees and second to be able to attract quality talent for our opened – for our open positions. So you know, we’re still looking to fulfill certain positions, but it’s not necessarily a big headwind, it’s not a headwind for us to be able to operate.

Unfortunately, we’re compensating with a bit of overtime, which you know is something I want to be mindful of obviously the greater the overtime, sometimes the greater you know, health and safety concerns come into play. So, the whole team is very mindful of being able to balance it, but so I’ll just say human resources are adequate, I’d say to be able to support our production plan and we’re not suffering from that.

Okay, that’s great. That’s it from me.

Thanks very much.

Thank you, Maxim.

Well, thank you, Julianne and thank you everyone for joining us on today’s call. We look forward to speaking with you again on our next quarterly call.

Thank you.