This article first appeared on GuruFocus .
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Sales:Increased by $18 million to $791 million.
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Utility Product Sales:$469 million, up 12% from the previous year.
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Railway Tie Sales:$198 million, down 5% or $10 million from the prior-year period.
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Residential Lumber Sales:$76 million, down 14% from the previous year.
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Adjusted EBITDA:$136 million, with a margin of 17.2%.
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Cash from Operations:$47 million generated, compared to $16 million used in the previous year.
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Net Debt to Adjusted EBITDA Ratio:2.6 times.
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Available Liquidity:$646 million.
Release Date: May 06, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Stella-Jones Inc ( STLJF ) reported a strong start to 2026 with a 10% growth in their utility products business, driven by high demand for wood utility poles.
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The acquisition of Locweld has provided an immediate platform for growth, with expected capacity expansion in Canada fully allocated until the end of 2027.
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Investments to double steel structure production capacity are on schedule, with full ramp-up expected in the second half of 2026.
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The company generated $47 million of cash from operations in Q1, a significant improvement over the previous year, highlighting disciplined working capital management.
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Stella-Jones Inc ( STLJF ) maintains a stable leverage ratio of 2.6 times, providing flexibility to support business needs and strategic investments.
Negative Points
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Residential lumber sales faced a 14% decline due to softer demand and lower pricing year-over-year.
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Railway tie sales decreased by 5% due to foreign exchange impacts, with Class 1 volumes under pressure from industry consolidation.
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The company expects to incur one-time restructuring charges related to optimizing the railway tie business, mostly non-cash and recorded by the end of Q2.
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Adjusted EBITDA margin declined from 18.2% to 17.2% year-over-year, impacted by a less favorable product mix and a $5 million mark-to-market adjustment on stock-based compensation.
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Intense competition in the spot market for utility poles is expected to continue, potentially impacting pricing as additional capacity comes online.
Q & A Highlights
Q: Eric, on the railway tie side, are you still expecting flat sales there overall for the full year? And have any of the four Class 1 contracts been renewed yet? A: Our views for the year are still flat sales year over year for 2026. Discussions with several customers are ongoing and positive. We are also considering moving to some treating services, which could impact top-line more in 2027 than in 2026, but profitability and margin remain the same.
Q: Silvana, you referenced $10 million to $15 million of cost savings by early '27. When will the benefits start to show up? A: We don't expect any benefits this year. Most of the benefits will start in 2027, with the $10 million to $15 million being annualized starting then.
Q: On the residential lumber side, how much of the 11% decline was due to weaker volumes versus softer pricing? A: The decrease was pretty much 50-50 in terms of volumes and pricing. We are starting to see a pickup in demand, and our key customer remains bullish on the year with some growth and market share gains.
Q: Can you help us frame the cadence of the contracted backlog for utility poles for the balance of 2026? A: The first half of last year had softer volumes, so the comp is easier in the first half of this year. We don't expect the 12% volume growth to carry through into Q3 and Q4, but we still believe we'll hit mid-single-digit growth for the business, incorporating pricing headwinds.
Q: Do you see an opportunity to optimize the production network for utility poles and residential lumber similar to railway ties? A: We are deploying continuous improvement initiatives throughout the organization. While restructuring in capacity isn't likely for utility poles, we are working on other efficiency initiatives. We are also happy with our footprint and capacity usage in residential lumber.
Q: Can you provide an update on the Brooks Automation and the potential for selling cross arms in Canada? A: The integration of Brooks is progressing well, and we are making inroads with Canadian utilities. Regarding the new location in Tennessee for steel lattice, we are on track to commission the facility by the end of '27, with no firm purchase orders yet but ongoing discussions with customers.
Q: Is the $10 million to $15 million savings from restructuring within the Ties business specifically from idling two sites? A: Yes, the savings are associated with idling a treating plant and a raw material consolidation yard. We are evaluating other opportunities, but this is the necessary adjustment for now.
Q: How should we think about investment in working capital for the full year? A: Typically, for every incremental sales dollar, we need to invest $0.40 to support those sales. However, with more opportunities for TSO, which is less capital intensive, the net investment might be less than $50 million for the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
