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Edited Transcript of CWX.TO earnings conference call or presentation 8-Nov-19 4:00pm GMT

Q3 2019 CanWel Building Materials Group Ltd Earnings Call

VANCOUVER Nov 16, 2019 (Thomson StreetEvents) -- Edited Transcript of CanWel Building Materials Group Ltd earnings conference call or presentation Friday, November 8, 2019 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ali Mahdavi

CanWel Building Materials Group Ltd. - Head of IR

* Amardeip Singh Doman

CanWel Building Materials Group Ltd. - Chairman & CEO

* James S. Code

CanWel Building Materials Group Ltd. - CFO

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Conference Call Participants

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* Colin Healey

Haywood Securities Inc., Research Division - Research Analyst of Mining

* Paul C. Quinn

RBC Capital Markets, Research Division - Analyst

* Roshni Luthra

CIBC Capital Markets, Research Division - Analyst

* Steven P. Hansen

Raymond James Ltd., Research Division - SVP

* Yuri Lynk

Canaccord Genuity Corp., Research Division - Director and Senior Engineering & Construction Equity Analyst

* Zachary Evershed

National Bank Financial, Inc., Research Division - Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the CanWel Building Materials Group Ltd. Third Quarter 2019 Financial Results Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Ali Mahdavi. Please go ahead.

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Ali Mahdavi, CanWel Building Materials Group Ltd. - Head of IR [2]

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Thank you, operator. Good morning, everyone. Thank you for joining us for CanWel Building Materials Third Quarter 2019 Financial Results Conference Call. Joining me this morning are CanWel's Chairman and Chief Executive Officer, Amar Doman; and Chief Financial Officer, James Code.

If you have not seen the news release, which was issued yesterday after the close of markets, it is available on the company's website at canwel.com as well as on SEDAR along with our MD&A and financial statements. I would also like to remind you that a replay of this call will be accessible until midnight on Friday, November 22. Following the presentation, we will conduct a Q&A session. Instructions will be provided at that time for you to join the queue for questions.

Remarks and answers to your questions today may contain forward-looking information about future events or the company's future performance. This information is subject to risks and uncertainties that may cause actual events or results to differ materially. Any information regarding forward-looking statements is made as of the date of this call, and the company does not undertake to update any forward-looking statements.

Please read the forward-looking statements and risk factors in the MD&A, as these outline the material factors, which could cause or would cause actual results to differ. The company will not provide guidance regarding future earnings during today's call, and management does not anticipate providing guidance in future quarterly or interim communications with the market and its investors.

I'll now turn the call over to Amar. Amar?

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [3]

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Thank you, Ali, and good morning, everybody. Thanks for joining the call. Let me begin by highlighting some of our key financial metrics for the 3- and 9-month period in 2019, followed by some color on our operations during the quarter and what we are seeing so far, which gives us continued confidence across our business segments. Then I will hand the call over to Jay Code, who can drill further into the numbers.

Starting with the reality of the markets we live in, the third quarter represented a continuation with nearly last 12 months of macroeconomic pressures relating primarily to headlines around housing starts, and of course, lumber, oriented strand board and plywood pricing.

The seasonally adjusted annualized rate for overall housing starts in the U.S. and Canada were up 1.5% and 12.5% respectively, on a year-over-year basis, which remains a healthy number as a metric to watch for our business and volumes. Lumber, OSB and plywood markets during the third quarter continued to experience downward pressure, with pricing remaining significantly below what we experienced during the third quarter of 2018.

On a year-over-year basis, all 3 categories have seen lower pricing. Despite these macro headwinds, I'm very pleased to report that our business plan continues to deliver as designed, with revenues for the first 9 months of the year increasing to in excess of CAD 1 billion.

The ongoing combination of the impact of our strategic growth plan through acquisitions, operational efficiencies and overall cost controls has enabled us to work through challenging period of the past, and we are successfully doing so now with robust result. As a result of these efforts and despite of the aforementioned weak economic backdrop, I am pleased to report that during this third quarter, we achieved relatively strong results across our key financial metrics.

With revenues increasing 6.6% to $373.2 million, gross margin dollars amounting to $52.3 million or 14% of revenues, EBITDA totaling $25 million, net earnings amounting to $6.4 million, and we paid a quarterly dividend of $0.14 per share.

The balance sheet continues to be in line with and well positioned for our growth objectives, while serving our operational needs, especially during peak periods such as second and third quarters. As is usually the case, our debt level increases meaningfully in these peak seasonal periods, as it has, throughout the history of CanWel.

In summary, we remain as excited and confident as ever about the prospects for our business, despite the negative pressures I have already touched on. We continue to deliver top line growth, strong gross margins and earnings while maintaining a growth-friendly balance sheet to the comparison of strategic and opportunistic growth opportunity.

Overall, we continue to be very pleased with the net impact of our actions to date, which have provided us with the ability to both withstand market pressures and show top line growth with relatively stable profitability. We will continue to monitor the North American landscape for opportunistic and strategic growth opportunity to complement our organic growth profile.

As we have done so in the past, we will remain extremely disciplined on pricing and evaluating any and all growth opportunities that may become available to us. With year-to-date revenues of 1.3% at over $1 billion, and EBITDA up 6.7% at $67.4 million, 2019 has demonstrated the resilience of our business model so far. We remain very excited about prospects for our business.

With that, I'd like to ask Jay Code, our CFO, to take over and provide a review of the company's third quarter financial results in greater detail. And then we're going to open up the call for analyst question. Jay?

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James S. Code, CanWel Building Materials Group Ltd. - CFO [4]

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Thank you, Amar, and good morning, everybody. As a reminder, effective the first quarter of 2019, the company adopted the new lease accounting standard known as IFRS 16. The impact of IFRS 16 is described extensively in our financial statement disclosures as well as our MD&A for the quarter.

During today's call, I'll also point out significant areas affected by the new standard. Sales for the 3-month period ended September 30, 2019, were $373.2 million versus $350.2 million in the comparative period in 2018, representing an increase of $23 million or 6.6% due to the factors to be discussed.

Sales for the Distribution segment increased by $24.5 million or 7.3%, largely due to the inclusion of the results from the Lignum acquisition in 2019 and our 2018 acquisitions of the Oregon Cascade and Woodland wood preservers as well as the company's continuing focus on its product mix strategies and target customer base.

These improvements in the quarter were partially offset by the impact of construction materials pricing, which generally continued on a downward trend until late in the quarter.

Sales for the Forestry segment decreased by $1.5 million or 11.2%. The decrease in sales relative to the same quarter of 2018 was largely the result of reduced demand for timber from local sawmills, reflecting curtailments experienced across the industry.

The company's sales by product group in the quarter were made up of 57% construction material compared to 58% in the same quarter last year, with the remaining balance of sales resulting from specialty and allied products of 37%, and Forestry and other revenues of 6%.

Gross margin dollars increased to $52.3 million in the 3-month period versus $50.8 million in the comparative period of 2018, an increase of $1.8 million or -- sorry, $1.5 million or 3%.

Gross margin percentage was 14% in the quarter, decreased from the 14.5% achieved in the same quarter of 2018. The increase in margin dollars is largely attributable to the inclusion of the results from the Lignum acquisition in 2019 as well as the 2018 acquisitions.

Expenses for the 3-month period ended September 30, 2019, were $37.2 million as compared to $35.2 million in the comparative quarter in 2018, an increase of $2 million or 5.7% due to the factors to be discussed. As a percentage of sales, expenses were 10% in the quarter compared to 10.1% during the comparative quarter in 2018.

Distribution, selling and administration expenses decreased by $3.7 million or 11.9% to $27 million in the third quarter of 2019 from $30.7 million in the same period of 2018.

Excluding the impact of the IFRS 16 adoption, distribution, selling and administration expenses increased by $1.5 million or 5%, largely due to the additional expenses relating to the Lignum acquisition in 2019 and the 2018 acquisitions operations. As a percentage of sales, these expenses were 7.2% in the quarter compared to 8.8% in the same quarter in 2018.

Depreciation and amortization expenses increased by $5.6 million from $4.6 million to $10.2 million. Depreciation and amortization expenses for the Distribution segment increased by $5 million, largely due to the impact of the adoption of IFRS 16. Depreciation and amortization expense for the Forestry segment increased by $647,000.

Finance costs for the third quarter of 2019 were $5.8 million compared to $3.1 million in the same period in 2018, an increase of $2.7 million. Finance costs for the Distribution segment were $2.4 million higher than the same quarter in 2018 partly due to the impact of the adoption of IFRS 16 and partly due to higher average borrowings in order to finance the company's working capital requirements and higher interest rates resulting from the issuance of unsecured notes in 2018.

Finance cost for the Forestry segment remained largely in line with the third quarter of 2018. EBITDA was $25.0 million and adjusted EBITDA was $25.3 million, consistent with the comparative quarter of 2018. Current quarter EBITDA and adjusted EBITDA were -- positively impacted by the adoption of IFRS 16 in the amount of $5.1 million. Excluding the impact of IFRS 16 adoption, adjusted EBITDA increased by $113,000, largely consistent with the comparative quarter of 2018. As a result of the foregoing factors, net earnings for the quarter ended September 30, '19, were $6.4 million compared to $8.5 million for the same period in 2018, a decrease of $2.1 million.

Turning now to the statement of cash flows. In the first 9 months of 2019, operating activities generated $49.5 million in cash before working capital changes, compared to $47.1 million in the same period of 2018. Changes in noncash working capital items generated $7.7 million in cash compared to consuming $48 million in cash in the same period in 2018.

The company experienced a significant increase in inventory towards the end of the fourth quarter of 2018, built up to address a strong order backlog with treated lumber customers and to take advantage of favorable buying conditions at that time. This resulted in reduced inventory stocking required during the first and second quarters of 2019 and the year-over-year $55.7 million positive variance in cash generated.

Dividends paid to shareholders amounted to $10.9 million in the quarter and $32.6 million year-to-date, consistent with the same periods in 2018. The dividends declared and paid on a per share basis were unchanged at $0.14 per share for the quarter.

The revolving loan facility increased by $21.5 million compared to an increase of $49.8 million in the same 9-month period in 2018, and the company was not in breach of any of its covenants during the 9 months ended September 30, 2019.

Investing activities consumed $19.9 million of cash compared to $12 million of cash in the same 9-month period in 2018. Cash purchases of property, plant and equipment relating to the Distribution segment were $3 million compared to $3.3 million in 2018.

Cash purchases of property, plant and equipment related to the Forestry segment were $2.8 million compared to $2.6 million in 2018. Investing activities in 2019 included the Lignum acquisition and the related cash and cash equivalents acquired, whereas 2018 included the acquisition of Oregon Cascade.

The company's cash flows from operations, the revolving loan facility and its other credit facilities are expected to be sufficient to meet the operating requirements, capital expenditures and anticipated dividends. The company's lease obligations require monthly installments, and these payments are all current.

This concludes our formal commentary, and we would now be happy to respond to any questions you may have. Thank you. And operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll now take our first question from Steve Hansen from Raymond James.

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Steven P. Hansen, Raymond James Ltd., Research Division - SVP [2]

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Just a couple of quick ones here for me. Amar, do you want to comment perhaps just on how you think about your positioning right now in Southeast, BC relative to some of the capacity shuts we've been seeing. I think you alluded to it briefly in the commentary around some of the demand for logs being down. But just maybe a high-level overview of how that impacts you, short-term, medium-term, long-term? Whether there's opportunities that arise from that? To serve us some context around that would be helpful.

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [3]

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Yes. Sure. I mean, it's not really the largest segment of our business but very important. Certainly, we are seeing curtailments in all the sawmills across BC, some are completely shut down. But a lot of our customers are getting their inventories down, back in line on the logging side, on the log deck. So we've been curtailed and restricted on delivery.

So that has no impacted results there as you can see. But as we head into the new year, it does look like things are going to come up. We can understand from a customer base, delivery volume should get back up to a normal level back in 2020.

So we see this as a short-term impact right now. But then when we look at opportunities, we don't see a lot of opportunities just arising, just because there's a lot of turmoil in the Forestry side right now, just with a lot of shutdowns, et cetera. But we haven't seen a lot of opportunities yet, but we do see some companies are in distress and we're keeping our eyes on those, just in case there's a deal that's available to us.

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Steven P. Hansen, Raymond James Ltd., Research Division - SVP [4]

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Sure. And just maybe on the activity side, on the U.S. side of the border. There has been a lot of indications that things' picking up steam. Just trying to get a sense for how your California group's been feeling as a result of that? If they've noticed the same uptick and/or whether you think you can make any adjustments accordingly? Or is it -- I'm just trying to understand how much optimism is in the home building space in some of the data that we're seeing relative to what you're seeing on the ground on your operations?

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [5]

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Yes. The U.S. business is strong. In all the states that we're in, certainly California, Hawaii, it's very, very busy. And there was a very, very late start to the building season. This year it was very, very wet in California. One of the wettest springs in history. So we didn't even really get going till, sort of, mid-May into full force. And we've already been shipping into Nevada until June with any kind of volume. And now it's just -- it's still screaming busy. It's good, the margins are healthy because the lumber markets are much more through than they were a year ago, as the wheels are coming off the lumber market last year in panels.

So we're enjoying some nice tailwinds right now. And we'll move in October, and November has started off very strong as well. So we're pretty happy with what's going on down south.

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Steven P. Hansen, Raymond James Ltd., Research Division - SVP [6]

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Great. And then just lastly, if I may, on the M&A front. I mean, can you just describe perhaps the pipeline of opportunities that you've been looking as of late is -- would you characterize that as similar to the past, better than the past, lesser? Just trying to get a sense for what you're looking at in quantity.

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [7]

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Yes. Similar to the past. We have some dialogues happening. But again, I can't comment too much on those, Steve. But we're an acquisitive company and we spend a lot of time building relationships with stellar to look at getting a value price deal done at the appropriate time as we continue to consolidate certain geographic areas with lumber pressure trading and distribution.

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Operator [8]

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And now we take our next question from Roshni Luthra of CIBC Capital Markets.

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Roshni Luthra, CIBC Capital Markets, Research Division - Analyst [9]

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I just -- I wanted to ask about if you could provide some color on how Honsador performed over the quarter, like was it up quarter-over-quarter, year-over-year for revenue growth.

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [10]

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Yes. Honsador, on the lumber side, as you recall there's 2 divisions inside Honsador, one is electric and one is lumber building materials. So the Honsador lumber building material side is certainly up as compared to last year. Oahu seems to be sort of flat. Maui is very strong right now in the niche smaller markets, but they're very busy. So we're seeing good activity there.

The Alpha site is having a slower year just because last year, we finished up a lot of the airport contracts with electrical business. And we've got a lot coming on, sort of, late this year and into the next year. So Alpha is a little bit off on the electrical side, the smaller division, but Honsador is up and strong.

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Operator [11]

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And now we take our next question from Colin Healey of Haywood Securities.

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Colin Healey, Haywood Securities Inc., Research Division - Research Analyst of Mining [12]

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Solid quarter. It sounds like you're taking some pretty good momentum into Q4. Would you characterize Q4? I know it's early days but as likely to be better than last year?

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [13]

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Yes. You know we don't comment too much, but if you can read the tea leaves of kind of what Jay and I are saying that the momentum of Q3 is definitely rolling right into Q4.

Lumber pricing is stable to up on almost all the product lines that we have. I know random link's been slightly off today, but that's -- it doesn't really bother us too much because the cash markets are strong.

The distribution centers are strong, both sides of the border. So right now we're looking at, we think, a very, very nice fourth quarter.

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Colin Healey, Haywood Securities Inc., Research Division - Research Analyst of Mining [14]

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Yes, it definitely looks like it. I was looking at some of U.S. housing start data last night, some of the updated data. And obviously, August was like, a 12-year high for them. And then it can't -- it dropped off.

It seemed like really high volatility in housing, sort of, data in the U.S. Is that consistent with what you're seeing? Or is it just steady business lies down there for you guys?

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [15]

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Yes. I think if we look at the numbers month-to-month, they balance up and down. The multis really swings things around, but I can tell you just from the regions we're dealing with, which, as you know, where Hawaii and the U.S. West Coast, Arizona, Nevada. Things are very busy, builders are busy. Again, it was a late start to the year, so we're having this, sort of, false surge. The weather is excellent, so things are very good.

I look at interest rates, 3 notches down this year in the U.S. The homebuilders are, obviously, moving well on their equities. Everything's busy. So I think we're in shape for a good 2020 and a very, very good finish to 2019.

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Colin Healey, Haywood Securities Inc., Research Division - Research Analyst of Mining [16]

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Yes, I would agree. I would definitely think the macro backdrop is improving, and sets up well for you guys. That's all I had for now. I'll jump out.

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Operator [17]

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And now we take our next question from Yuri Lynk of Canaccord Genuity.

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Yuri Lynk, Canaccord Genuity Corp., Research Division - Director and Senior Engineering & Construction Equity Analyst [18]

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So we saw activity pick up in Q3, which was nice. Was organic growth positive for you guys in the quarter, if you strip out the acquisitions?

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [19]

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It'd be fairly flat in Canada, Yuri. In U.S., I would say, we'd up probably 3% to 4%. Looking at volumes, because if we look at pricing compared to last year, the commodity markets have been all over the place, but we look into units. Our panel business in Canada was up, our lumber was off slightly. But in the U.S. all categories are up.

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Yuri Lynk, Canaccord Genuity Corp., Research Division - Director and Senior Engineering & Construction Equity Analyst [20]

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Okay. That's helpful. So I guess, the revenue numbers that we look at, I don't have access to volumes, obviously. But I guess, with the price action, it would have put pressure to the organic growth a little bit?

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [21]

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Yes, a little bit. I think more the weather was probably the hardest thing and we hate using weather because it's something that's around every day. But we had some extreme colds in Canada and the long winter that would never end. And I think this is what's helping us now recover a lot of these volumes. And in fact, it looks like we'll surpass last year in volumes probably on both sides of the border as the tape finishes on 2019.

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Yuri Lynk, Canaccord Genuity Corp., Research Division - Director and Senior Engineering & Construction Equity Analyst [22]

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Okay. And then just on your M&A program, Amar. I mean, how should we think about the success of your acquisition program over the last few years in the context of if you look at most per share metrics, adjusted EPS would be the easiest, I mean, to look at. They've generally been on a decline since 2017. And so are you pausing it all to reassess this roll up strategy? Or are you still working on some synergies that are going to make these acquisitions more accretive?

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [23]

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Yes. Well, I think the public doesn't get the full financial statement review that we have internally. And what really has whipsawed the company last year was the commodity collapse, the worst in history. And the underlying acquisitions of the manufacturing are all doing well. They're all -- they've been immediately accretive as we said every acquisition we've done has been immediately accretive. So things underneath are going well. We're in discussions.

Again, we're on pace to do 1 to 2 a year. Some valuations have got a little high, so we stepped back. And we just will not get caught up in overpaying. So we still have a long, strategic plan we're working on that will take several years to execute.

And when those acquisitions arrive, you'll see us publish those. So the strategy has not changed, whatsoever, in what we're doing. It's just -- if the valuations are too high, we'll take a knee and we'll wait it out or move to another market. But we do have a deep plan here in place that we will execute on over the coming years.

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Yuri Lynk, Canaccord Genuity Corp., Research Division - Director and Senior Engineering & Construction Equity Analyst [24]

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Okay, that's fair. And just on that last question for me. I mean, this is the -- I think this is a seasonal low point in terms of your debt balances. So you're levered about -- sorry, just over 5x EBITDA, excluding IFRS. So what would you consider to be an appropriate leverage level for this business? Just so we can gauge the ability to do some M&A in the next year or so.

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [25]

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Yes. I mean, it does ebb and flow. That leverage number is backed primarily by inventory and receivables as we know. So as we've grown the sales of the company, certainly the debt grows certain times of the year. But again, it's virtually all working capital. And I'll let Jay speak to the ratios in a minute, but in -- around that number, we're very comfortable. And again, you can, kind of, set your watch by the time it goes up and the time it goes down as far as the working capital requirements of the business go.

This year was a little bit of a later start. Everyone had heavier inventories in the spring just due to longevity of the winter and now the inventories are coming into line very nicely as we head into the fall and start booking things for 2020. Any further color there, Jay?

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James S. Code, CanWel Building Materials Group Ltd. - CFO [26]

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Yes. I was just going to say, Yuri, that looking ahead for leverage, we would be comfortable in that 4 to 5 range for a ratio, considering lumber markets, panel markets returning to more than normal patterns. We believe that, that could be achieved.

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Yuri Lynk, Canaccord Genuity Corp., Research Division - Director and Senior Engineering & Construction Equity Analyst [27]

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Right. Yes. I mean, I'm just -- the point of my question is, you look back at the third quarter. Usually at this point, you'll leave it around 3.5x, and now it's 5.2. And I understand we're coming off of a very, very tough commodity price environment. I'm just wondering if that's going to perhaps slow the pace of acquisitions until you get that back down to where it's been historically?

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [28]

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Yes. I think, Yuri, the way I would answer that is we've always not, I don't want to say ignored, but we always pay attention to the debt levels, but also when we're doing an acquisition just depending on the size and scope of it, we'll dig pretty deep to make sure we protect the balance sheet and don't get over-levered on acquisitions. So there's other solutions for us to go to market.

We'd look at all solutions to make sure that we maintain our ratios, don't head into dangerous territory. So protecting the company's always number 1.

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Operator [29]

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And now we take our next question from Steven Hansen of Raymond James.

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Steven P. Hansen, Raymond James Ltd., Research Division - SVP [30]

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Yes. Just a follow-up, if I may. Just -- if you're thinking about the M&A pipeline understanding you're in some discussions now, but Amar, how do you feel about the mix of the business today relative to where it was several years back? I'm just thinking back on the different treatment acquisitions you've done and even some north of the border -- some south of border, some domestically.

But how do you feel about relative mix, cross-border as well as from a value-added standpoint versus just the core distribution, like, where should we think about you wanting to add going forward?

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [31]

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Yes. I think, if you look at our mix today, we're pretty happy, as a board, with what we've done. We're able to weather storms fairly well. We saw a severe one last year with the pricing collapse. We come out, we think, very well. So we think we were in a decent mix size, but where we'd like to grow and continue to grow is the U.S., West Coast. So you're going to continue to see us focus there.

It's an area that we like. We think there's long-term growth opportunities there, good businesses that fit in. We've centralized our buying into apartment office now. So there's a lot of good things happening on the West Coast that, we believe, we have strong management team to help us execute. So I think you're going to continue to see us grow there. So I think you'll see the mix change to higher revenues in the U.S. over time.

Again, one by one, and also organically, we're working on some customers strategies, with our plants down there and trying to get our organic growth up on the West Coast as well, Steve. So there's a lot of good things happening, and that's what where we'd like to focus our efforts.

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Operator [32]

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(Operator Instructions) And now we take our next question from Zachary Evershed of National Bank Financial.

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Zachary Evershed, National Bank Financial, Inc., Research Division - Analyst [33]

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Looking to just comment on normal patterns in commodity prices. We've seen a number of permanent and temporary curtailments on the West Coast. Where would you view the price point in being structurally balanced, particularly in lumber, where you don't have a lot of that production coming back on, but you also have healthy profitability across the vertical. How do you guys think about that going forward?

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [34]

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Yes. I think, we've come off a very unique period in lumber pricing. And now we've got stability to the upside. So with these curtailments coming later in the year, Zach, I see that this could put a lot of pressure when spring buying comes or fall buying, that people start to book large quantities of materials, like the big home retailers do to traders like us.

We see a lot of positive in pricing coming. 2.5 billion board feet has been removed from BC alone. That's massive. So we believe that the strategy of curtailments of the sawmills is the right one, and we're going to see some pretty good price torque over the next coming months.

So I think that's going to be very, very positive. The only negative for us is slightly unlogging the 2020. Looks like we'll back delivering good volumes to our customer base there. So I don't know if that answers your question exactly, Zach, but we're pretty positive and bullish on wood products right now.

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Zachary Evershed, National Bank Financial, Inc., Research Division - Analyst [35]

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That does, that's helpful. And then one more for me. We've read reports that the CRA is looking to crackdown on tax evasion among contractors by obtaining a hardware retailer customer list.

You think that, that could have any kind of impact on your business in any way?

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [36]

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I don't know the depth of that. I read about that about a week ago, and I don't know if that's going to stop big jobs. I would think that may be CRAs offer after the guys that are doing under-the-table little renovations and things like that.

But we're selling big, big contractors material and U.S. Direct. When we talk about Canada, which is what you're asking about, we sell the dealers, we sold Lowes, Depot, virtually all of the retailers in Canada.

So I don't really think it's going to have a big effect. I think it could affect, again, smaller, under-the-table deals, because I don't think the large ones get done with cash or tax evasion. It's just too big.

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Operator [37]

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And now we take our next question from Paul Quinn of RBC Capital Markets.

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Paul C. Quinn, RBC Capital Markets, Research Division - Analyst [38]

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Listen, I missed just about almost all of the call because there was a conflict. But just want to ask a high-level question. We've had very difficult market conditions for the last year, you guys have weathered it well. You're paying an 11% dividend. Amar, you've been buying back stock like crazy. What is the investor -- what are investors missing on your story?

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Amardeip Singh Doman, CanWel Building Materials Group Ltd. - Chairman & CEO [39]

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Well, I don't think it's just all us, Paul. I think what happens, and it's -- since I think this is what does happen, when the lumber market seems to collapse, our stock goes with it, and I think if you layer CanWel's sharp performance against random lengths, you can almost see a mirror image. We were at $7.5, under 2 years ago. And today, we're sitting in the mid-$4.

So we get sold off when markets look tough in lumber. And obviously, that does squeeze our profits a little bit, but we're diversified into so many different things that we just sometimes don't get the respect we like, but we certainly eat our own cooking. We -- myself, the directors, management are buying stocks. So we're all in for the long-term, and we know the stock will correct itself as we continue to print better numbers. And we're through that storm. So I think, we'll see, hopefully, some more positive momentum on the buy side. We're certainly seeing some of that this morning, which is great to see as well.

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Operator [40]

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It appears there are no further questions at this time. Mr. Mahdavi, I'd like to turn the conference back to you for any additional or closing remarks.

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Ali Mahdavi, CanWel Building Materials Group Ltd. - Head of IR [41]

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Thank you, operator. On behalf of the CanWel team, thank you for joining us today, once again. And we look forward to reporting our fourth quarter year-end results in the new year, around the early to mid-March 2020 time frame.

That concludes today's call. Have a great day.

Operator, back to you.

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Operator [42]

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This concludes today's call. Thank you for your participation. You may now disconnect.