Stella-Jones, Inc. (STLJF) Q4 2022 Earnings Call Transcript

Stella-Jones, Inc. (OTCPK:STLJF) Q4 2022 Earnings Conference Call March 8, 2023 10:00 AM ET

Company Participants

Eric Vachon - CEO, President & Director

Silvana Travaglini - SVP & CFO

Conference Call Participants

James McGarragle - RBC Capital Markets

Hamir Patel - CIBC Capital Markets

Benoit Poirier - Desjardins Securities

Michael Tupholme - TD Securities

Operator

Good morning, and convey you for opinionated by. Welcome to Stella-Jones Fourth Quarter 2022 Earnings Call. [Operator Instructions].

I would for illustration to punctual everyone that this convention telephone is being recorded connected Wednesday, March 8, 2023. Please statement that comments made connected today's telephone whitethorn incorporate forward-looking information, and this information, by its nature, is taxable to risks and uncertainties. Actual results whitethorn disagree materially from nan views expressed today. For early accusation connected these risks and uncertainties, please consult nan company's applicable filings connected SEDAR. These documents are besides disposable successful nan Investor Relations conception of Stella-Jones website astatine www.stella-jones.com. We person besides prepared our corresponding presentation, which we promote you to travel on pinch during this call.

I will now walk nan telephone complete to Eric Vachon, President and Chief Executive Officer of Stella-Jones. Eric?

Eric Vachon

Thank you, Julie. Good morning, everyone, and convey you for joining america today. I'm present pinch Silvana Travaglini, Senior Vice President and Chief Financial Officer of Stella-Jones, and we convey you for joining america for this chat of nan financial and operating results for Stella-Jones' Fourth Quarter ended December 31, 2022.

Earlier this morning, we issued our property merchandise reporting 2022 4th fourth and year-end results. Along pinch our MD&A, it tin beryllium recovered successful nan Investor Relations conception of our website astatine www.stella-jones.com and will beryllium posted connected SEDAR coming arsenic well. As a reminder, each figures expressed connected today's telephone are successful Canadian dollars, unless different stated.

I will statesman today's telephone by providing a business update earlier turning nan telephone complete to Silvana for a much elaborate financial review. I will reason nan telephone pinch a advancement update connected our 2022, 2024 goals earlier opening nan level to your questions.

I'm proud this greeting to statesman nan telephone by stating that 2022 was a twelvemonth of exceptional capacity for Stella-Jones. The institution generated robust financial and operating results and successful doing so, demonstrated and reinforced its starring position arsenic a cardinal subordinate successful nan business infrastructure merchandise space. We achieved full income of $3 billion, up 11% from astir $2.8 cardinal past year, and our EBITDA accrued 12% to a grounds $448 million.

2022 represents nan 22nd consecutive twelvemonth that Stella-Jones has posted an yearly income increase, which speaks to our resilient business exemplary and nan beardown fundamentals successful which it is anchored. Our income maturation was mostly attributed to nan beardown capacity of our infrastructure-related merchandise categories, namely inferior poles, railway ties and business products, which each met aliases surpassed our targets.

Allow maine to concisely reappraisal nan capacity of our merchandise categories successful 2022. Our inferior poles merchandise class delivered exceptional results passim 2022, pinch income increasing to $1.2 cardinal compared to income of $925 cardinal past year. Utility rod income benefited from beardown marketplace dynamics and nan publication of our accretive acquisitions.

On an integrated basis, inferior rod income accrued by complete 20% successful 2022. Our rod procurement squad roseate to nan situation this past year, leveraging relationships to meet increasing customer request and laying down nan instauration to entree caller procurement areas. We are presently seeing important investments being made by inferior companies to guarantee nan infrastructure will support North America's early needs, and we expect this inclination to continue.

Utilities are investing to support their existent networks, facilitate accrued broadband web use, support request generated by electrical vehicles and build newer and stronger lines, each while looking to their proviso partners for semipermanent commitments.

On nan railway necktie front, income reached $750 cardinal successful 2022 compared to income of $700 cardinal past year, an integrated maturation complaint of 4%. Railway necktie income benefited from income value adjustments to screen higher costs, but Class 1 volumes pulled backmost year-over-year. Procurement successful nan second portion of 2021 and nan first 3 quarters of 2022 was challenging. The tightness successful untreated railway necktie readiness drew down our barren inventory position. This resulted successful a emergence successful untreated necktie costs, and we progressively walk these costs done to our customers.

Capacity usage besides accrued fixed nan agelong accumulation cycles erstwhile treating ties that are not wholly dried. A process besides referred to arsenic boultonizing. On a affirmative note, much untreated ties became disposable successful Q4 2022 and successful nan first period of 2023. At nan existent complaint of procurement, untreated necktie inventories will beryllium replenished by midyear pinch optimal barren inventory levels being reached successful nan 2nd half of 2023. This will, successful turn, trim nan number of some bully charges and unfastened opportunities to reside much customer demand, which is being driven by dependable railroad attraction and ongoing infrastructure spend.

Industrial merchandise income grew to $143 cardinal compared to $121 cardinal successful 2021. The integrated summation of 15% was chiefly attributable to higher request for business products specified arsenic pilings, timbers and bridges. Our business merchandise class perfectly complements our obstruction and inferior offerings and will use from infrastructure nationalist spending. Sales for residential lumber pulled backmost this twelvemonth to $744 cardinal successful 2022 from $773 cardinal past year, but did not propulsion backmost arsenic overmuch arsenic expected. Residential lumber income continued to use from above-normalized pricing levels successful 2020.

Our residential lumber merchandise class supports prime customers that admit nan worth of Stella-Jones' premium lumber programme and complementary products and services. Over nan years, we person proven our expertise to support retailers and big-box stores good supplied which successful move has enabled our customers to turn their marketplace presence.

On nan acquisition front, 2020 was nan first afloat twelvemonth of publication from our Cahaba acquisition which was completed successful nan 4th fourth of 2021. Cahaba, now known arsenic nan Stella-Jones Brierfield installation is simply a well-established shaper of treated wood poles and engages successful earthy worldly procurement astatine its treating operations successful Alabama. The facility's capacity acold exceeded our expectations this year, contributing to our income maturation successful inferior poles.

Accretive acquisitions stay an integral portion of Stella-Jones' growth. In 2022, we continued connected this way pinch nan acquisition of nan wood inferior rod manufacturing business of Texas Electric Cooperatives aliases TEC successful Jasper, Texas. TEC joining our autumn added a 43rd wood treating installation to our web and further expanded our capacity to proviso nan increasing needs of North American utilities. This people our 2nd wood treating installation successful nan authorities of Texas, nan 2nd largest economical region of nan United States, and we expect TEC to alteration america to leverage nan economical standard -- nan economies of standard while expanding our customer base.

North American request for inferior poles is strong. And arsenic mentioned earlier, we expect it to proceed to turn successful nan coming years. As we hole for this growth, securing fibre is apical of mind. With this, I'm pleased to denote that Stella-Jones acquired industries poles and pilings successful February 2023 for a information of USD 12.5 million. Industry is specialized successful procuring, peeling and drying SYP poles and is simply a awesome summation to our existing networks of rod peeling facilities.

We proceed to consistently -- apologies. We consistently activity accretive acquisition opportunities that will support our maturation for our existent businesses arsenic good arsenic grow merchandise offering successful our -- for our infrastructure customers. In summation to being underscored by a robust operating and financial results, 2022 besides demonstrated nan resilient quality of our business exemplary arsenic good arsenic Stella-Jones capacity to present outstanding performances amidst challenging macroeconomic conditions.

The world system continues to wrestle pinch inflationary costs pressures, fluctuating commodity prices and proviso concatenation constraints. Regardless of these trying circumstances, I'm proud to opportunity that Stella-Jones was capable to meet request and proceed to service our loyal customer base. This tin beryllium attributed to a number of factors.

First, Stella-Jones benefits from long-standing procurement relationships. Our skilled and resourceful procurement teams were particularly diligent successful securing nan fibre needs to meet demand, which enabled america to proceed to supply basal products to our customers. Second, our contractual income statement building proceed to supply america pinch nan expertise to walk done costs increases, which helps america insulate from rising costs, peculiarly important successful nan existent inflationary climate.

And finally, our expansive North American beingness places america successful a unsocial position to service our customers some efficiently and costs efficaciously based passim Canada and nan United States. The expertise to proceed to present nan worth and returns to shareholders successful 2022 is different denotation of a resilient exemplary and coagulated business fundamentals. We ended nan twelvemonth amended positioned than ever to proceed our maturation trajectory, and I look guardant to what is still up to come.

Before I move nan telephone complete to Silvana, I want to supply an update connected ESG. We are mindful of really our operations effect nan satellite and nan communities successful which we operate. And arsenic a result, we proceed to prioritize easy information crossed each facets of our business. We were pleased pinch our efforts successful 2022 to amended our ESG attack and are dedicated to continuous betterment of our sustainability and wellness and information practices done ongoing learning, training and information collection.

I look guardant to nan publication of our adjacent ESG study later this year, wherever we will beryllium sharing our 5-year strategy on pinch nan targets for nan metrics we track. One notable ESG arena successful 2022 was nan completion of our very first star sheet installation astatine our railway necktie manufacturing installation successful Clanton, Alabama. This installation, which was commissioned a fewer weeks ago, is already gathering its target of 70% sum of nan facilities' energy requirements. This is nan first of respective star power conversions we are readying and an important measurement connected our way to sustainability of which we are very proud.

I will now manus nan telephone complete to Silvana, who will reappraisal our financial capacity successful much detail.

Silvana Travaglini

Thank you, Eric, and bully morning, everyone. Today, we reported nett income for nan 4th fourth of $36 cardinal aliases $0.61 per stock compared pinch $22 cardinal aliases $0.34 per stock past year. For nan afloat year, nett income was up 6% to $241 cardinal from $227 cardinal successful 2021. Earnings per stock was $3.93, an summation of 13% compared to $3.49 successful 2021.

During nan 4th quarter, we generated income of $665 million, up from $545 cardinal for nan aforesaid play past year. Sales successful nan 4th fourth benefited from a 17% integrated summation successful infrastructure-related sales, nan publication of our acquisitions and a favorable rate impact. The 17% integrated maturation of infrastructure-related income was mostly fueled by higher pricing.

Utility rod income were up 27%, railway ties income accrued successful nan debased single-digit scope and business products income grew by 20%. Residential lumber income were down somewhat compared to nan aforesaid play past year, and this was mostly attributable to little volumes.

As Eric mentioned earlier, successful 2022, nan institution achieved full income of $3.1 billion, up 11% from past year. Sales from our inferior poles merchandise category, which accounted for 40% of full income successful 2022 were mostly driven by an integrated maturation of 21%. Approximately 75% of nan integrated income summation was owed to higher pricing pinch 25%, making up accrued volumes to cater to nan beardown demand.

Railway ties income accounted for 24% of full income successful 2022, up 4% from past year, an summation that was wholly attributable to higher prices. Volumes were little year-over-year owed to nan simplification of nan attraction programme of definite Class 1 customers. Sales successful residential lumber accounted for 24% of full sales. The pullback successful income of 5% successful 2022 was attributable to some little pricing and volumes.

Finally, business merchandise income represented 5% of full income and were up 15% from past year. 65% of nan summation was owed to higher volumes. In 2022, we realized a grounds 4th fourth EBITDA of $87 cardinal compared to $65 cardinal successful nan 4th fourth of past year, representing a separator of 13.1% versus 9.5% successful 2021. The summation successful absolute dollars and arsenic a percent of income was chiefly attributable to pricing gains outpacing costs increases for definite infrastructure-related merchandise categories arsenic good arsenic nan betterment successful nan EBITDA of residential lumber compared to nan marginal EBITDA generated successful nan 4th fourth of past year.

Residential lumber results successful Q4 of 2021 were impacted by nan driblet successful request successful nan 2nd half of nan twelvemonth and nan resulting higher costs of inventory connected hand. For nan year, we generated $448 cardinal of EBITDA, representing a 12% summation complete past twelvemonth and a grounds for nan company. The EBITDA separator was comparatively unchanged astatine 14.6% compared to 14.5% past year, reflecting nan company's expertise to optimize its operational efficiencies and screen each costs increases.

Adjusting for different losses, which were mostly related to nan status of idled equipment, we achieved an EBITDA separator person to 15% successful 2022. During nan 4th quarter, we invested $136 cardinal successful inventory, acquired TEC continued to make superior expenditures to support and grow our operating assets and returned superior to shareholders. The important summation successful inventory successful nan past 4th of nan twelvemonth was to replenish successful portion our untreated necktie inventory fixed nan availability, accrued log purchases to meet nan increasing inferior rod request and build nan seasonal residential lumber inventory. We see this an finance successful our expertise to proceed to supply work to our customers and meet request erstwhile galore successful nan manufacture could not.

For nan year, nan institution generated rate from operations of $255 million. Our coagulated rate travel procreation is really Stella-Jones delivers worth to shareholders. In 2022, we returned $230 cardinal of superior done stock buybacks and costs of dividends. During nan year, nan dividend paid to shareholders amounted to $0.80 per share, representing an 11% summation compared to 2021. And arsenic portion of our normal people issuer bid, we repurchased astir 4.7 cardinal shares for $181 million. We ended nan twelvemonth pinch a nett debt-to-EBITDA ratio of 2.5x, which is wrong our stated expectations.

In statement pinch our committedness to return superior to shareholders yesterday, nan Board of Directors declared a quarterly dividend of $0.23 per stock representing an summation of 15% complete nan antecedently quarterly dividend, and we proceed to repurchase shares nether nan existent NCIB programme arsenic announced past November. We clasp a beardown financial position and ended nan twelvemonth pinch disposable liquidity of astir $260 million.

Subsequent to year-end, we announced that we amended nan position of our workplace in installments installation to summation nan magnitude disposable by USD 200 cardinal and extended nan word of nan revolving installation to March 2028. The expertise to amend our in installments installation astatine charismatic position is simply a testament to nan spot of our business, particularly fixed nan existent macroeconomic environment.

In summary, our beardown financial capacity has group america up good to meet our superior requirements and stay connected way successful achieving our maturation objectives successful 2023.

With that, I will now walk it connected to Eric for his concluding remarks. Eric?

Eric Vachon

Thank you, Silvana. Last year, we laid retired financial nonsubjective for nan 3-year play from 2022 to 2024. Our capacity this past twelvemonth positions america good to meet aliases transcend these targets. From a income perspective, we benefited from beardown request connected nan inferior rod broadside and better-than-expected residential lumber income to push america to nan precocious extremity of our guidance. While we are pleased pinch these results, we're still moving towards nan income operation that we person forecasted.

We person targeted infrastructure-related merchandise categories, to comprise betwixt 75% and 80% of our full sales. We are connected our measurement to attain this objective, having achieved this target successful nan 4th fourth and being conscionable nether 70% successful 2022. Given nan integrated maturation successful inferior poles successful 2022, which is projected to proceed into 2023 arsenic good arsenic nan publication from our caller TEC acquisition, we afloat expect to transcend our existent income goals for inferior poles.

For residential lumber, our 3-year scheme is targeting for income to correspond betwixt 20% and 25% of full sales, while residential lumber income for 2022 stay supra projected levels, nan comparative information of residential lumber income decreased to meet our target range. Given nan existent marketplace information of lumber, we proceed to expect residential lumber income to propulsion backmost and stabilize to present betwixt $600 cardinal and $650 cardinal connected an yearly basis.

The forecast for inferior rod maturation CapEx stood betwixt $90 cardinal and $100 million. Over nan past 18 months, we committed to instrumentality purchases and spent $33 cardinal of this letter cover successful nan past year. We person successfully changed 3 treating cylinders, expanding our Douglas Fir web treating capacity by 15%. Additionally, we will use successful 2023 from nan accumulation of 2 caller SYP rod peeling and drying accommodation starting midyear.

As Silvana mentioned during her remarks, we returned $230 cardinal of superior to shareholders successful 2022, which is conscionable nether half of nan target we outlined betwixt $500 cardinal and $600 million. Our EBITDA maturation successful 2022 has translated to much free rate travel and indebtedness leverage opportunities that who we person wisely utilized to nan use of our shareholders.

In 2023, we look to build connected our achievements from this past twelvemonth to support early maturation of our infrastructure merchandise categories, proceed to return superior to shareholders and execute our separator goals. We look guardant to providing much specifications successful that respect astatine our inaugural Investor Day, which we will beryllium hosting connected May 25 successful Toronto.

2022 was a momentous twelvemonth for Stella-Jones successful position of performance, which would not person been imaginable without nan effort, expertise and dedication of our labor each crossed North America, each of whom understand nan value of delivering nan champion for our customers each day. And for this, I opportunity convey you.

This concludes our prepared remarks. Thank you for your time, and we will now unfastened nan statement for questions.

Question-and-Answer Session

Operator

[Operator Instructions]. Your first mobility comes from Walter Spracklin from RBC Capital Markets.

James McGarragle

This is James McGarragle, I'm connected for Walter this morning. Congrats connected nan 4th and dream everyone is keeping well. I wanted to inquire a mobility connected your inferior rod guidance. Again, you said you expect that to transcend your anterior targets, that was up precocious single. I cognize your competitor past week they were talking astir perchance rod income up arsenic precocious arsenic 30%. So that's a beautiful large discrepancy betwixt supra precocious single. So are you -- is what your competitors said, is that accordant pinch what you're seeing early successful nan year? And if you're capable to supply a small spot much colour connected what you meant by transcend precocious single-digit growth?

Eric Vachon

Yes, certainly, James. So well, convey you for nan question. First, our integrated maturation successful 2022 was conscionable complete 20%, really 21%. And arsenic I conscionable mentioned successful my past comment, we expect this integrated maturation to proceed done 2023. And we will beryllium supporting that maturation pinch nan industry's acquisition arsenic good arsenic nan caller rod peeling yards that will beryllium online this year. So we've secured -- we secured nan procurement facet of it, and we are besides seeing nan request summation aliases to beryllium astatine that level from our customer base.

James McGarragle

Okay. So past conscionable to clarify, nan integrated maturation of past twelvemonth should use past again into 2023?

Eric Vachon

Yes, we -- yes, exactly.

James McGarragle

Okay. Perfect. And past connected nan acquisition pipeline, tin you supply a small spot of an update connected what you're seeing there? I cognize it seems for illustration there's a batch of opportunity successful poles and you're investing organically heavy there. So is that going to beryllium nan attraction connected a much integrated finance connected nan rod side? Or could we perchance spot a pickup successful M&A activity successful 2023 arsenic well?

Eric Vachon

Ideally, pinch nan operation and I said ideally because we cannot dictate nan hit of M&A. But remainder assured, arsenic I mentioned, we support discussing -- we support seeking accretive acquisitions, and we are continuing discussions pinch imaginable targets. So I would for illustration to deliberation that we could support our early maturation pinch integrated and M&A, but nan 20% growth, conscionable to beryllium clear, does not see speculation astatine immoderate M&A. So this would beryllium wholly disconnected of our existent footprint and successful superior investment.

James McGarragle

Okay. I admit nan color, and I'll move nan statement over.

Operator

Your adjacent mobility comes from Hamir Patel from CIBC Capital Markets.

Hamir Patel

Silvana, I conscionable wanted to explain 1 of your comments connected yearly -- for yearly '22 rod performance. Did I perceive you correct that 75% of nan summation location was price? And immoderate visibility you tin springiness america connected -- for nan 4th quarter, really overmuch of nan summation location was value versus volume?

Silvana Travaglini

Yes. So you're correct, Hamir, that 75% was pricing, comparatively nan aforesaid percent successful nan 4th quarter, possibly conscionable a small spot higher. And basically, nan measurement portion is really conscionable getting constricted by nan capacity constraints. So we're beautiful overmuch trading everything that we really capable to nutrient successful trade.

Hamir Patel

Okay. Great. And Silvana, would you hap to person nan value measurement splits for ties and res lumber successful Q4 arsenic well?

Silvana Travaglini

So for ties, it's wholly -- it's each pricing. So volumes were somewhat down, some successful nan 4th and year-to-date. And for residential lumber for nan quarter, it's each volume. Pricing precocious was beautiful overmuch successful statement pinch past year's Q4 and year-to-date, I would opportunity mostly measurement pricing was down, but not arsenic overmuch arsenic nan volume.

Hamir Patel

Okay. Great. That's helpful. And then, Eric, I wanted to inquire astir connected nan res lumber business, I judge you mentioned benignant of nan income location trending to $600 cardinal to $650 cardinal complete time. Is that a scope you would expect successful '23? And what benignant of value deflation would you expect? Because I cognize 1 of your awesome big-box customers is benignant of playing to level volumes successful '23?

Eric Vachon

Yes, correct. So yes, truthful nan $600 cardinal to $650 cardinal would beryllium our anticipation for '23. We guidelines our forecasting based connected nan 2x6 disconnected of random lengths. And year-over-year, we're seeing a simplification successful that pricing adjacent to 15%. Canadian dollars delivered Montreal, if you're going to do nan math. And besides support successful mind that there's an accessory information into sales, which is driven mostly by composite products, which -- that is not pulling backmost and past evidently is pursuing existent inflationary trends, if you want.

Hamir Patel

Okay. Great. And conscionable nan past mobility I had, Eric, conscionable connected poles and ties, what benignant of pricing pass-through trends are you seeing successful '23, conscionable fixed -- I cognize there's a lag location connected nan pass-throughs and conscionable really earthy materials fared successful caller months?

Eric Vachon

Right. For railway ties, we're seeing nan value of untreated ties benignant of level off. There's still flimsy increases. So we'll spot a spot much adjustments to our customers successful nan adjacent quarter, possibly nan adjacent 2 quarters, possibly 1% aliases 2 arsenic acold arsenic we tin show astatine this point. And astatine that point, hoping that nan procurement inclination continues. I'm hoping we'll beryllium capable to spot a spot of a stabilization successful nan full market.

For inferior poles, we had value increases astatine different times done 2022. So nan first facet is, obviously, we'll beryllium benefiting increases from nan 2nd half of past year, will beryllium benefiting nan first half of this year. We're still seeing immoderate value increases generated by nan -- our contracts for inflationary adjustments, for example, which we would spot materialize successful our pricing successful 2023. So pricing will decidedly beryllium portion of that integrated growth, but decidedly measurement arsenic well.

Hamir Patel

That's each I had. I'll move it over.

Operator

Your adjacent mobility comes from Benoit Poirier from Desjardins Capital Markets.

Benoit Poirier

Congrats for nan beardown finish. Yes. Just to look astatine nan railway ties regarding nan incidents that person taken spot astatine Norfolk Southern was affected this -- was Stella-Jones affected successful immoderate way? And do you judge that this could lead to a imaginable early uptick successful motortruck attraction from Class 1 looking guardant to 2023 and beyond?

Eric Vachon

So first, conscionable to beryllium clear, we're not -- Stella-Jones is not being tied to nan unfortunate incidents that happened connected their track. Secondly, I deliberation our railwork customers are each very overmuch focused connected nan value of nan attraction of their web arsenic good arsenic nan information of nan train. So unfortunate incident, could it benignant of recenter immoderate interests to guarantee that attraction is sustained. But I don't deliberation we would spot an uptick successful sales. So I deliberation our customers do a bully occupation astatine maintaining their networks.

Benoit Poirier

Okay. Perfect. And Silvana, you mentioned immoderate colour astir nan inventory replenishment that will beryllium going done mid-2023. How should we look astatine nan moving headdress going into 2023, connected nan backmost of this inventory replenishment for railway ties. And if you could stock immoderate colour astir nan marketplace dynamics pinch nan sawmills and nan pricing for untreated ties. That would beryllium great.

Silvana Travaglini

So successful position of nan superior finance successful inventory expected successful 2023, I mean, it could spell arsenic precocious full for nan institution to spell arsenic higher than $100 million. So portion of that is, arsenic you mentioned, and arsenic Eric mentioned, is nan replenishment of nan introduction to necktie inventory. The costs are stabilizing, truthful we wouldn't beryllium expecting immoderate important increases there, astatine slightest not connected nan necktie side.

The different large portion of nan inventory build that we would beryllium expecting successful 2023 is for nan pole. So pinch nan continued summation successful request to support nan income that we're seeing and nan income maturation that we would beryllium expecting, we would besides beryllium expecting to put much successful our -- successful nan purchases of logs this year. So I would opportunity those are benignant of nan 2 main factors. Residential lumber, we're not seeing immoderate important swings. There mightiness beryllium a small spot little costs but thing significant.

Benoit Poirier

Okay. And what astir CapEx scope for 2023, Silvana?

Silvana Travaglini

So for 2023, we would expect astatine slightest for nan maturation piece, arsenic we mentioned, we've already spent astir $30 cardinal of nan $100 cardinal we'd expect astir apt nan remaining -- 60% of nan remaining successful 2023 and nan remainder successful 2024 successful summation to nan emblematic $50 cardinal to $60 cardinal scope that we're still seeing successful 2023 for our regular CapEx.

Benoit Poirier

Okay. Perfect. And conscionable from an EBITDA separator standpoint, if we region nan -- immoderate different losses for nan year, your EBITDA separator was conscionable nether 15%. And now fixed your comments astir boultonization reduced publication from residential lumber going into 2023, really should we look astatine nan separator going into 2023?

Eric Vachon

I'll return -- I'll start. I'll springiness nan first portion of nan answer, Silvana you could chime in. So Benoit, we were still targeting nan 15%. I mean, nan boultonizing piece, it is utilizing much waste time. I can't opportunity that nan costs effect is that overmuch important. But we do person a pass-through connected that further costs successful our contracts for nan boultonizing piece. So connected nan railway necktie side. So I don't consciousness that, that would effect our separator percentages. And I consciousness rather optimistic astir america being capable to execute nan 15% level starting this year.

Benoit Poirier

Perfect. That's awesome color.

Operator

Your adjacent mobility comes from Michael Tupholme from TD Securities.

Michael Tupholme

To prime up connected a fewer of nan things that person already been discussed, but a mates of clarifications and past immoderate further item maybe. So conscionable to beryllium wholly clear, Eric, for poles successful 2023, is nan proposal that you deliberation integrated maturation tin beryllium location successful and astir that 20% scope benignant of broadly accordant pinch what you did successful 2022?

Eric Vachon

Correct.

Michael Tupholme

Okay. Perfect. And past I cognize nan visibility arsenic we spell further out, gets much challenging. But if we deliberation astir beyond 2023, would you beryllium guiding america backmost to that precocious single-digit scope arsenic we look beyond this year? Or has location been benignant of a -- nan full benignant of position shifted upward successful position of what you deliberation you tin do successful this business organically?

Eric Vachon

So Mike, for now, I'll instrumentality to our precocious azygous digit because that's what we had successful our existent guidance. And we'll beryllium providing immoderate much colour astatine our Investor Day connected May 25. We're presently doing a heavy dive will beryllium 1.5 years into our existent goals. And I deliberation it will beryllium an opportunity for america to talk a spot much of nan semipermanent views. But arsenic I stated earlier successful my comments, we spot our inferior customers proceed to put looking for semipermanent partnerships.

We person immoderate visibility respective years retired pinch definite customers correct now and they're looking to necktie up Stella-Jones' expertise to proviso to beryllium capable to recognize their projects. So it will beryllium an absorbing chat connected May 25 arsenic we expose more. And arsenic well, wherever we'll person our elder squad besides talk to inferior poles alternatively of maine expressing it, you'll perceive it from our elder squad arsenic well.

Michael Tupholme

Okay. That's helpful. Look guardant to that detail. Just successful position of nan operation aliases nan creation of this maturation you expect successful poles successful 2023, is that expected to beryllium broadly akin to what you saw successful 2022 successful position of 75% driven by value and nan equilibrium volume?

Eric Vachon

I would deliberation so. Yes. The measurement facet is consistently increasing pinch very coagulated dynamics. But obviously, nan pricing comes into play erstwhile you're successful nan marketplace dynamics wherever there's much request and supply. But definitely, a bully presumption would beryllium to usage nan 75-25 going guardant for '23.

Michael Tupholme

Okay. That's helpful. And past erstwhile we deliberation astir nan request side, I deliberation successful your prepared remarks, you called retired immoderate of nan factors that are driving demand. So there's aging poles request to beryllium replaced arsenic a baseline and possibly a measurement up successful that level of replacement activity, but you called retired broadband web description initiatives and maturation successful EV request hardening of nan grid.

So erstwhile we deliberation astir each of these things, are each of those contributing to request to nan fullest imaginable already successful what we saw successful 2022 aliases things for illustration broadband web description and EV demands. Like is that going to thrust further maturation arsenic we look retired further? Or is that each happening correct now?

Eric Vachon

So they're not each driving astatine nan akin level, right? So nan replacement rhythm because of aging infrastructure is astatine nan forefront of nan demand, broadband description is thing we've been proceeding astir a batch successful nan past 2 years, and we're seeing those measurement request really materialize now, but I judge we'll spot much of that going forward. And past electrical vehicles and hardening of nan network, I do deliberation that request has still immoderate imaginable maturation going forward. And immoderate of these projects will besides beryllium supported by infrastructure walk by governments that we haven't needfully seen nan autumn aliases very -- really not overmuch of nan effect truthful far. So location is nan U.S. bill, obviously, for infrastructure. We're besides proceeding astir nan Canadian authorities that's looking to put successful infrastructure. We perceive it done our partner, nan energy Canada that nan authorities is very overmuch willing successful ensuring that there's a resilient web successful Canada, and that will besides bolster request going forward.

Michael Tupholme

Okay. And do you deliberation that done nan various tuck-in acquisitions you've been capable to do and others that possibly could travel guardant arsenic good arsenic conscionable I suppose possibly readiness improving wrong -- successful position of fibre wrong nan rod business? Like are you going to beryllium capable to benignant of afloat capitalize connected that demand? Or do you deliberation that nan beardown request drivers, but immoderate of nan proviso broadside constraints are going to limit nan ability?

Eric Vachon

So our scheme is to meet each azygous portion of nan request we can. So we did nan acquisition of Industries earlier this twelvemonth to unafraid immoderate fibre proviso connected nan rod side. We embarked successful our CapEx maturation for inferior poles past year. And to beryllium transparent, we benignant of were seeing these dynamics, and I'll convey nan Board of Directors for supporting guidance successful our views and supporting nan CapEx spend. And arsenic I besides mentioned, we person 2 caller rod peeling and drying yards online by midyear. And much to come, obviously, M&A will support it. We're pulling each nan levers correct now that we tin to reside nan demand.

And our squad is wholly focused connected this integrated maturation opportunity that we're seeing. It's for america to seize. We're very good positioned. We've sewage a awesome North American footprint, and we tin build upon that to adhd capacity astatine rod peeling and drying yards and procurement arsenic good arsenic successful Canada arsenic well, we're moving connected different task successful BC to beryllium capable to support much fibre procurement. And we tin travel up successful early convention calls really we're progressing connected that because it will beryllium cardinal to our expertise to support this activity position we are presently having successful nan market.

Michael Tupholme

That's helpful. And yes, clearly, you're doing everything you tin to put yourself successful a position to meet that demand. And I conjecture conscionable shifting complete to railway ties, arsenic you look up to 2023, tin you talk astir what you expect to spot from a measurement position there, it was flattish successful 2022? And I guess, much specifically, immoderate indications from your Class 1 and non-Class 1 customers successful position of CapEx and what they're looking astatine for 2023?

Eric Vachon

So successful 2022, we really saw a flimsy pullback successful Class 1 customers. So looking into '23, we spot akin volumes correct now. There is immoderate request dynamics that are strong, particularly successful nan non-Class 1 market. And I conjecture our bottleneck is really nan procurement piece. So arsenic I mentioned, we're seeing much readiness successful nan last, let's say, 4 months. We're very pleased pinch that. We're replenishing our inventory levels. So that's a mobility of tin we -- really soon will we get nan barren inventory to work our customers and proceed to boultonize aliases not barren to work clients. So we're very intimately monitoring our procurement and inventory levels.

So our first priorities to work our existent contracts pinch Class 1 and immoderate commercialized customers that besides person a fewer multiyear contracts. So we request to grant our engagements there. And past we're looking to optimize nan opportunity, I guess, successful nan commercialized business wherever we do spot patient demand. And truthful successful nan backmost half of nan year, if things proceed connected this trend, we'll beryllium capable to capitalize. And there, location mightiness beryllium immoderate volume, but I conjecture I'll corroborate it connected our adjacent call. So for now, if I summarize it for '23, volumes are flat, and we'll spot immoderate pricing uptick arsenic we're catching up connected our pass-throughs.

Michael Tupholme

Okay. That's each very helpful. I'll get backmost successful nan queue.

Operator

[Operator Instructions]. Mr. Vachon, location are nary further questions astatine this time. Please proceed pinch your closing remarks.

Eric Vachon

Well, convey you, Julie, and convey you, everyone, for joining america today. We look guardant to speaking pinch you connected our adjacent telephone successful early May pinch our first 2023 net call.

Operator

Ladies and gentlemen, this concludes your convention telephone for today. We convey you for joining, and you whitethorn now disconnect your lines.