Earnings Call: Q2 2020

Aug 5, 2020

Earnings release

Ladies and gentlemen, thank you for standing by. Welcome to Stella Jones Q2 2020 Earnings Conference Call. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded on Wednesday, August 5, 2020. I would now like to turn the conference over to Eric Vachon, President and CEO. Please go ahead. Good morning, ladies and gentlemen. I'm here with Silvana Travalini, Chief Financial Officer of Stella Jones. Thank you for joining us for the discussion of the financial and operating results for Stella Jones' Q2 ended June 30, 2020. Our press release reporting Q2 results was published earlier this morning. It, along with our MD and A, can also be found on our website at www dotstellajones.com and will be posted on SEDAR today as well. Let me remind you that all figures expressed on today's call are in Canadian dollars unless otherwise stated. Let me begin by thanking each and every one of our 2,300 employees across North America who have worked diligently and safely to ensure the critical continuity of our essential operations and support our customers throughout the pandemic. With the exceptional contribution from the team and proven resiliency of our business model, we delivered record results this quarter. We realized solid performances in our utility pole and railway type product categories, which continued their growth momentum from the Q1 and benefited from exceptional demand from residential lumber stemming from increased home improvement activity in the context of the novel coronavirus pandemic. Sales grew 15% this quarter compared to the same quarter last year to $768,000,000 and EBITDA increased 28% to $120,000,000 surpassing the $100,000,000 mark for the first time in a single quarter. During the quarter, we generated strong cash from operations, which allowed us to reduce our leverage and position the company to continue to deliver value to our shareholders. Let me now turn to a brief overview of our 2nd quarter sales results by product category. Utility pole sales amounted to $230,000,000 up from $211,000,000 generated in the Q2 of 2019. The increase this quarter is primarily driven by upward price adjustments in response to raw material cost increases. Raw railway tie sales increased to $225,000,000 up from $199,000,000 in the same period last year. Excluding the currency conversion effect, sales rose 10% as certain Class 1 customers accelerated their 2020 maintenance program, while demand remains strong for non Class 1 customers supported by a healthy level of untreated tie inventory. Residential lumber sales totaled $257,000,000 up 32% from $195,000,000 generated last year. The significant increase in sales is attributable to greater than expected volumes as a result of strong form improvement activity in the context of the COVID-nineteen pandemic. Industrial product sales amounted to $33,000,000 down 6% from $35,000,000 recorded in the previous year's quarter, primarily as a result of lower piling project activities. The sales of Logs in Lumber, a product category used to optimize procurement, was $23,000,000 down from $27,000,000 last year. Sales decreased given the limited market supply of lumber. Sylvainna will now provide further details regarding our results and financial position before I conclude with our 2020 outlook. Sylvainna? Thank you, Eric, and good morning, everyone. Turning to profitability. Driven by the strong sales growth this quarter, gross profit increased 21 percent to CAD131 1,000,000 compared to gross profit of CAD108 1,000,000 in the Q2 last year. Similarly, operating income and EBITDA increased 31% 28% to $101,000,000 $120,000,000 respectively. This increase is largely attributable to strong pressure treated wood demand, particularly for residential lumber and pricing improvements, which more than offset the rising raw material costs. Net income rose 33% for the 2nd quarter to $69,000,000 or $1.02 per share compared to $52,000,000 or $0.76 per share last year. Turning to liquidity and capital resources. Cash flow generated from operating activities totaled $146,000,000 in the 2nd quarter, largely explained by improved profitability and a seasonal reduction in inventory, which was amplified this quarter by very strong residential lumber sales. We deployed the cash generated to invest in our network, return capital to our shareholders through dividends and reduce our long term debt. As of June 30, 2020, the net debt to trailing 12 month EBITDA ratio decreased to 1.9 times and we had access to $205,000,000 in liquidity through a combination of cash on hand, syndicated credit facilities and an undrawn demand facility. Given the strength of our balance sheet, today, Celadon announced a normal course issuer bid, which will allow us to repurchase up to 2,500,000 shares, representing 3.7% of our outstanding common shares from August 10, 2020 to August 9, 2021. In addition, consistent with previous quarters, the Board of Directors yesterday declared a quarterly dividend of $0.15 per share, payable on September 18, 2020 to shareholders of record at the close of business on September 1. I will now turn the call back to Erik for the outlook. Erik? Thank you, Saldana. We revised our earnings guidance for 2020 to reflect our strong operating performance this quarter, largely driven by the greater than expected demand for residential lumber. As a result, we now expect EBITDA for 2020 to be in the range of $320,000,000 to $345,000,000 up $20,000,000 from the previously disclosed guidance. The lower end of the range continues to reflect uncertain impact of the pandemic on customer demand. We also expect the EBITDA margin to be comparable to 2019. This revised guidance assumes an exchange rate of 1.38 for the balance of the year. The 2020 CapEx guidance remains the same as previously disclosed in the range of $45,000,000 to $55,000,000 The company's strategic vision focused on continental expansion remains intact and acquisitions continue to be an integral part of this growth strategy. Our pipeline of acquisition opportunities is active and we are in discussion with several identified targets across North America, but certain but the current context is creating certain headwinds. We remain committed to delivering value to our shareholders. As part of our capital allocation approach, the company intends to target a net debt to EBITDA ratio between 2x and 2.5x. This target leverage ratio should allow us to return capital to shareholders and take advantage of internal growth and acquisition opportunities, while maintaining a healthy financial position. This concludes our prepared remarks. We will now be pleased to answer any questions you may have. Thank you. Your first question comes from the line of Mark Neville with Scotiabank. Eric, just on the again, obviously, very strong quarter. I guess my question is just around the guidance. At the midpoint, it would imply roughly flat EBITDA in the back half, whereas you were up north of 25% in Q2. So maybe just trying to understand the puts and takes of sort of what's in the guidance or how you're thinking about that just to reconcile the difference between the two periods? Yes, certainly. So I think the way to look at the range in this particular context is to see the lower end as being, I guess, negatively impacted or continued to be impacted by the current pandemic and uncertain economic conditions. And we could view the higher range of the guidance, more return to historical demand and business activity. That's the best way I could describe it. So using the middle point might not necessarily be the best way to look at it depending on how general economy and the pandemic evolves in the next 6 months. Sure. Just to help us again get a better sense of the quarter and I guess recent trend. Maybe just talk about the pace of improvement or sort of the cadence through the quarter of demand through your various product lines. I guess I'm curious if residential is taping off a bit or flattening out. I mean just trying to get a better, again, understanding of ties where you've talked about sort of maintenance activity being pulled forward, sort of what that means for the back half? Okay. So just to be clear, are you talking about the Q2 results or the second half of the year? No, sorry. The yes, through the quarter and I guess into July, sort of the pace of improvements across ties and residential, again, if it's sort of moderated a bit, sort of you spoke to some pull forward in ties. So I was thinking the quarter in July, but if you want to talk to the second half, that would be good as well. So I mean during the quarter, if we go part of category 1 at a time, so for Utility Board, as we indicated, a lot most of the growth has come from year over year pricing, which was driven to some extent by increased costs related to the products. What we've seen with regard to demand from customers, a lot of, well, certainly, deals across North America have been cautious in deploying their maintenance crews in the context of the pandemic, and that has curtailed demand to a certain extent for certain utilities. So that has slowly been resolving itself throughout the quarter. If I think about early April, so what we're seeing today, that has the volume piece has improved. With regards to the railway business, railway tie sales were positively impacted from pull forward from certain Class 1s as they saw an opportunity with lower traffic on their network to bring the business forward. That being said, in general terms, Class 1s have not necessarily changed their annual program, if you want. So it's essentially taking Q3, Q4 sales into the Q2, which is we're always grateful to see those our expectation on sales materialize, in this case, materialize at this current year. We also saw healthy demand in the non Class I business as there has been significant porting activity in the first half of the year. So that has been very interesting for us, and we're very fortunate to have proper levels of untreated ties to be able to support that demand. Last but not least, the residential lumber, as our result showed this morning, demand has been very strong throughout the Q2. I would say we actually depleted some of our finished goods inventories. And looking forward, our customers are telling us that they still see some healthy demand going forward into H2. Okay. Maybe just two quick follow ups. Some of the pricing in pools, is that can you just is that something that we continue through the second half? Again, just based on prices are up year over year and then some of the residential, just to confirm, it doesn't really sound like the demand is tapered off, but just maybe just a point of clarification on that. No, the demand has not tapered off. I guess, maybe flattish or slightly off, but the demand has not tapered off. And the cost or the pricing dynamics will really depend on the case by case depending on the contractual agreements. But most often, it is driven by the cost profile of the product and also the profile of that of the product that the customer is ordering. Okay. Thanks, Eric. I'll get back to you again in the next few quarters. Good. My pleasure. And your next question comes from the line of Amir Patel with CIBC Capital Markets. Please go ahead. Hi, good morning. Eric, on the tie side, do you have a sense yet as to how your Class I customers are thinking about their 2021 volumes? It sounded like the 2020, there's been no change so far. So that's a conversation we'll be having in the next few months with our Class I customers. I guess the best I can provide at this point is we're sort of expecting a status quo or said otherwise no one has come out to say expect lower levels for 2021. But as we're now preparing our 2021 budget and thinking about starting a procurement program for inventories for next year, conversations will be ongoing most often it is through August, September October. Great. That's helpful. And just on the pulp side, one of your peers was pointing to risks of some projects slipping into 2021 and kind of rationale they're giving was procurement issues for line hardware and transformers. Are you seeing that as a potential headwind as well? We haven't heard much about the product being delayed because of a supply of, I guess, sort of what I call it, complementary, but other accessories that go into the network or the infrastructure. I think best I can say with regards to our demand is we've always, in the last few years, guided to mid single digit growth for utility poles, and that's where we see where we'll be most likely be ending up the year. Fair enough. And Silvana, could you give us a breakdown for the 32% growth in res lumber? How much of that was volume and how much was price? Essentially all volumes. All volume. Okay. So given that, would you guys expect the 32% growth rate to be even higher in Q3, just given the huge rally that we've seen in lumber prices? And it sounded like volumes haven't really changed sequentially. Well, so based on historical pattern, the Q3 is usually a bit lighter than the 2nd quarter. So although we had a great second quarter this year, I do expect our Q3 to be higher at least volume wise, than last year's sales. So that's the best way I can describe it for now. This is based on what our indicating. Okay. Okay. And Eric, maybe put it a different way. Just if lumber prices hold steady where they are and based on your pass throughs, what would that maybe year over year pricing improvement in Q3 be for res lumber? So I won't quantify it, but you're completely right that lumber being a commodity item, there is agreements with our customers and collaboration as when we see basically price increases. To your point, there is a pass through where the cost increase gets moved over to our customers. Our customers expect it. They themselves, in most cases, are purchasing wet lumber on the market, so they understand the challenges we have in the current context. So you're right that in the second half of the year, we could see some effect on being attributable to pricing. Okay. Fair enough. That's all I had. I'll turn it over. Thanks. Thank you, Amir. And your next question comes from the line of Walter Brokawin with RBC. Please go ahead. So if I were to come back to visibility, Eric, you issued guidance previously and kind of brought it down. Could you point out and now bringing it back up, just curious as to what was the area it sounds like it was residential lumber, but you tell me what was the area of the biggest delta in terms of what you're expecting 3 months ago and what's happening here today? And is that visibility improved now that we're a little bit into the Q3 here as you give guidance for the rest of the year? Or are you in kind of the same situation where things can change abruptly to lead to that that led to that guidance change? So you're completely right. The bump the major part of the bump of the guidance comes from the strong performance from residential lumber. So based off of our previous forecasts, we need to acknowledge the great results we had this year, and I don't expect to pull back on residential lumber in the back half of the year. That being said, my comment with regards to our guidance on, let's say, just the lower end of the range being potentially impacted by coronavirus, it really depends how things will play out. As we're seeing cases increase in the U. S, you will probably see more lockdowns or you will see some pullbacks. As I mentioned, certain utilities are very cautious with their employees. So that's, I guess, the lower part of the range. The higher part of the range is that come Labor Day, we see cases drop and a lot of our customers have plans and projects for maintenance. And it just depends whether they feel comfortable enough to be able to execute it. Safe to say that I strongly believe in the guidance we provide today, and I really sincerely believe that we will realize that guidance in the second half of the year. Yes. I mean, back to Mark's original question, even if we use the high end of your guidance, I mean, you were up even going first half compared to last half. You're up 16% over 20% in the second quarter. But at the high end of your guidance, you're implying only a 4 for the rest of the year. So I'm just curious whether the pull forward we've seen is now completely done. And again, back to the question on lumber, are you assuming some kind of bearish scenario in your high end of your guidance here? Because as it looks from this point forward, it seems like given you've done you're trending at above 25%, for the rest of the year, you could probably do better than 4% for the second half. Yes. So I don't disagree with your comment. And I think we didn't talk about, as you mentioned, the term pull forward, we did see pull forward in railway tie sales into the second quarter. So obviously, those are sales. The downside of that will come in the second half of the year. So that's also part of the consideration. I know looking out to 2021 is a difficult task. If we look at the impact of COVID-nineteen and the gyrations from pulling forward and all that, Is it safe to take your 2020 is there anything wrong with taking 2019 Is that Is that how we should look at 2021? Or could there be a lower level of activity in 2021 because of the revenue that was pulled into 2020? It's a difficult question to answer. But if you're going to build a model using your assumptions in 2019 and building in some growth after that makes sense. One thing I believe is the current pandemic context has demonstrated our strength as a company, especially in the residential lumber business. We show the strength of our vendor network to supply raw material. We showed our customers our ability to continue to deliver and to produce. And I think we will get some tailwinds out of that next year as we're demonstrating that we're I'd like to believe that we're the partner that a lot of retailers should be partnering up with. So there's I guess there's that aspect to it. And after that, I mean, for the other product categories for Elvitide, you are correct. I would expect if volumes don't entirely resume for utility poles this year, we should see things hopefully get better by the end of the year and hit a bit of a normalized trend or growth trend into 2020 1. Okay. That's all my questions. Thanks very much. Thank you. And your next question comes from the line of Benoit Poirier with Desjardins. Please go ahead. Yes. Thanks very much and congrats for the good quarter. To come back on residential lumber, could you talk a little bit about the ability to meet stronger residential strong residential demand in the back half given the depleted inventory? And maybe also talk about the ability to replenish the inventory level for residential lumber? Thank you, Bhim. That's a great question. So you're completely right. Demand from our customers in the second quarter was very strong, and we did have dip into our finished goods inventory reserve, if you want to call it, to be able to satisfy demand. As I mentioned earlier, we have a very strong vendor supply group of outstanding people that are willing to support Stella Jones. We today have a constant flow, daily flow of wet wood raw material coming into our plants. We're currently pushing capacity to be able to treat the inventory and supply the market. So I'm quite confident when I talk about us being able to exceed the volumes of 2019 in the second half of twenty twenty, it really stems from my confidence in our procurement team to be able to procure sufficient wood and our operations seem to be able to treat it. That being said, we're very mindful about finishing the year with healthy inventory levels to be able to address the 2021 year with regards to residential lumber. So that's top of mind. And right now, there's no indication that we will not be able to achieve that. Okay. And given the strong improvement in lumber prices, Eric, could you talk a little bit about how margins could be impacted in the back half and maybe 2021 as there could be a lag before passing through the price increase to customers? Well, in the current context, as I mentioned previously, a lot of our customers procure their own wet wood for purposes. We procure it to be able to treat it. So the product or the lumber being a commodity and a price that's known in the market, our customers know what's going on. So we are able currently to pass through those increases. So I don't expect margin erosion. That's probably the best way I can put it, Bruno. Okay. That's very good. And given the big movement in inventory, how should we be thinking about the working capital movement for the full year? And maybe if there's any change in the CapEx expectation for 2020? Yes, Shirley. I'll let Giovanna answer that one. Yes. So basically, for the working capital, we're still pretty much expecting, as we had mentioned to the market, probably a $50,000,000 drop for the year just to be able to always maintain a certain level of build of inventory for the next year. Obviously, in the second half with all the residential lumber sales being so strong, there will be a significant inflow. So that might change a little bit, but just generally, we're still targeting and forecasting that amount. And the second question for the CapEx, yes, we're still aiming for the between the $45,000,000 $65,000,000 We're comfortable with that for 2020. Okay. Thank you very much for the time. And your next question comes from the line of Michael Todd Holm with TD Securities. Eric, just first of all, want to understand a little more clearly the breakdown between the organic growth in ties and poles. You've given some commentary, but on ties and poles, can you give the volume versus price breakdown in the quarter in terms of the composition of the organic growth you saw? In the quarter, so broad strokes, Benoit sorry, broad strokes, Michael. So for utility poles, we're talking essentially pricing was driving the organic growth. And with regards to railway tie, it was a combination of both. But obviously, since there's a pull forward, there's different from certain Class 1s, there's definitely a stronger volume impact. Okay. And then if we look forward with the pull forward in ties that talked about, I understand you said earlier sort of no change in the full year expectations. Can you help us understand what that means for volumes in the second half for ties? Does that mean they're down year over year? Are they flat? And just it's hard to necessarily appreciate what happened in the last in last year's Q2. So just looking for some help there. So yes, so I think your comment is right. We could expect lower volumes in the second half year over year, simply because we pulled forward into the Q2. So I guess for the Class 1 maintenance programs, we need I guess we need to look at the whole year maintenance program really to appreciate what happens with the volume there. The other piece of it is really the non Class 1, where that environment is getting very competitive on the pricing. So both are competitive in the sense of obtaining the winning the quotes and then again seeing some pressure because a lot of treaters in this case, the smaller treaters in the industry that have Class 1 contracts are aggressively treating to get business. Okay. So down year over year in the second half in both Class I and non Class I. Is that what you're suggesting? Yes, yes, exactly. Okay. And sort of order of magnitude like mid single digit or is it more significant than that? Yes. I think mid single is is a bit high, but yes. Like high meaning sorry, high meaning 2 negative, right? Yes, yes, yes, yes. But it's not so I hesitate because it's always a bit difficult to fair. Okay. And then on the coal side, it sounds so mainly price driven in the Q2. It sounds like you maybe are seeing some of the volume that was that didn't show up in the Q2 because of caution around COVID sort of maybe coming back if I'm hearing correctly. Yet I think you talked about mid single digit growth for Kohl's on a full year basis. If we look at what you've done through the first half, the math that I'm seeing sort of suggests maybe flattish organic growth in the back half to get you that kind of mid single digit number. So I'm not sure I can kind of reconcile all that. Like do you expect some positive organic growth in pools in the second half, your repeat? Yes, but not as strong as the first half driving us driving that full year percentage a bit down. Okay. So it sounds like maybe in the second half, something on the order of mid single digit for poles is maybe not unreasonable. Is that fair to say? No, that's fine. Yes, that's fine. Okay. And then just back on the guidance, you've had a few questions. Appreciate that sort of the commentary you've made around the difference between the lower end of the EBITDA range versus the upper end. Just to be clear, at the lower end, it sounds like there's sort of a deterioration in the broader COVID situation and things sort of really pull back and there are lockdowns again. Like it sounds like there's quite a that would be sort of a really negative outcome relative to where we sit right now in terms of COVID. And then on the upper end, like I'm just not sure, is that kind of a continuation of what you're seeing? Or are there some negativity and caution built into the upper end as well around potential lockdowns or sort of So I think, Michael, you're looking at the right way. So we are looking at the lower end as being stronger headwinds that we're not seeing today appear in the general market, be it COVID or economic dynamics or financial dynamics. The upper end of the range also has a bit of conservatism as you said as a starting point, we would see things progressively get better in the next few months. So obviously, we hit our stride later in the second half of the year. So to your point, there is a bit of conservatism in that in the upper range, but not at the point. And that's just to reflect the fact that there's still a lot of uncertainty in the world right now and in the markets that you're Yes Yes. No, exactly. And to this day, I was talking earlier about certain utilities in North America being prudent with their maintenance program because they're wanting to protect the safety of their employees. We're still seeing certain utilities still slowly getting out of that mode. So that's why I'm referring to things picking up gradually. So cases in Canada are increased a bit, but they're sort of hopefully stabilizing, but we're seeing cases in the U. S. Increase. But it seems like the U. S. Economy is determined to want to take off and keep supporting activity. It's just very hard to read where it's going to go. So I guess we didn't want to come out and be fully bullish that after later day, we're back to historical levels and we'll be doing obviously a percentage of growth. So we're just being a bit cautious and understanding that there's a lot of dynamics at play with and obviously some uncertainty a bit of uncertainty ahead of us. Okay. Yes, I think the uncertainty trying to factor in that uncertainty makes a lot of sense in this environment. I guess just to round this all out, it seems as though thus far through the first half, you really have not been affected by all of that uncertainty. In fact, there has actually been sort of a tailwind, a pretty significant one in the residential lumber business. So like just again, just to be clear, you're building in some uncertainty and some risk, but thus far, you have not really been affected by that to a material degree. Is that fair to say? Well, the degree of performance is obviously, we had a strong Q1, which really helped us start the year and we were quite upbeat about our 2020 year. The Q2 obviously got positively impacted by residential lumber. But as I mentioned, we did see some softening on volume on the volume side for utility poles, and we're fortunate to see a pull forward on the railway side. So when you factor all these you're right, all these great things, it's a great first half of the year, but I don't want to abstract the fact that we're still living in a world where there's coronavirus and certain economic pullback, and we're just being cautious in considering those aspects. Okay. That makes sense. Okay. I'll leave it there and turn it over. Thank you. Thank you. And your next question comes from the line of Noam Ansari with Laurent Mondelez. Please go ahead. Good morning, everyone. It's Lamon here in place of Mona. Just going back to the margin question, there's a good improvement there. I understand you don't give a breakdown of each segment. I'm just wondering if it was a broad based improvement or if there was 1 particular segment that way, can you give us that update? So just to clarify your question, you're talking about EBITDA margin as a percentage? That is correct, yes. Yes. So well, yes, obviously, we do we did benefit from pricing from railway times. And as I mentioned, pricing for railway times and utility both had a certain effect on the general margins. Also the fact that we had a lot of volume, it also helps general economies of scale within our facilities, in particular for the residential lumber. Fair enough. And just to follow-up on that, When you say that the pricing were up, I'm assuming the cost was also up. So will there be a lag effect in the second half on margins for that? I don't think so. I think right now what we're seeing is reflective of what we can expect in the second half of the year. Fair enough. And just on the residential numbers, I've seen a lot of growth there. Is that primarily from the big box customer? And if that is the case, do you see any potential opportunity from non big box customer in coming quarter? So we do have big box customers and smaller what we could call it as a dealer network. So the strong demand has come from all fronts. And all of these all of our customer base is sort of projecting strong overall strong demand for the second half or at least the third quarter. Okay. That's great. And just one last from my end. I know that M and A remains a focus for you guys. And you've said in your commentary that there's a strong pipeline. But given in the COVID environment, do you think that anything material will probably be dragged through 2021 rather than 2020? The timing is always difficult to establish. I mean, I'm quite excited about the conversations we've had with a few customers or customers or a few targets in the last several weeks, I think things are sort of picking up on the discussion front. But then we need to go through the discussion on valuation and set forth the process. So the timing at this point is hard to predict. But obviously, we our goal is to bring to the finish line in the best possible or as soon as we possibly can transactions. And obviously, there's always the consideration of fair value in multiples. So and negotiating a deal that is fair for both parties, but I'd like to think that we like to bring to the table deals that are accretive for Stella Jones. That's great color. That's all from my end and congrats on a great quarter. Thank you. Your next question comes from the line of Max Sytchev with National Bank. Please go ahead. Hi. This is Olivier calling for Max. Max. So I have a quick one question regarding the EBITDA reconciliation. Historically, the depreciation of right of use asset was added back to reported EBITDA numbers, but that wasn't the case for this quarter. I was just wondering why. And the right of use depreciation metric went up almost $9,000,000 on a sequential basis. So if you could provide any color on how to think about that on a future run rate basis would be very helpful. And finally, how should we think about the EBITDA guidance of $325,000,000 midpoint? Does that impute the right of use asset for the remainder of the year? So perhaps I can answer that. So all our depreciation is added back and the amount that can really be inferred from the cash flow where it's pretty consistent. So the depreciation of the fixed assets was $6,000,000 in the Q1, dollars 6,000,000 in the second quarter, so $12,000,000 year to date. Same thing for the amortization of the intangibles, dollars 3,000,000 in the Q1, dollars 4,000,000 in the second quarter and the depreciation of the right of use assets, again, fairly consistent, dollars 9,000,000 in the first quarter, dollars 9,000,000 in the second quarter. And you have the year to date amounts, like I said, that you could get some insights by going through the cash flow. And actually, we do provide a reconciliation in our MD and A as well for the 3 month period and the 6 month period and you can tie those numbers back to the cash flow. Okay. Thank you. That's all for me. Thank you. Thank you. And your next question the line of Michael Tupholme with TD Securities. Please go ahead. Thanks for taking the follow ups. Eric, one of the recent questions you asked about M and A and it sounded like you said things were maybe picking up a little bit. I understand the timing is hard to predict, but have the travel restrictions that have hampered your ability to advance discussions earlier in the year? Have those been lifted? And are you now sort of able to engage in more discussions more easily? Yes. So obviously, yes, we are leading in discussions. However, travel restrictions have not been lifted for Stella Jones anyhow. We still believe that we want to keep our employees safe, and we're not allowing our employees to fly. We can definitely drive. So depending on who we're talking to, it makes things a bit more complicated. But in the current context, in certain regions of North America also make it more complicated to get consultants out to the different facility to support due diligence and the M and A process. So I would sort of agree to what you just said hopefully to give you a bit more insight there. Okay. And then just one or 2 others here. I think you were asked about this, but from a cost pressure perspective, is there anything going on right now in terms of cost pressures that you see as sort of potentially threatening the margins or that you don't see an ability to offset through pass throughs? Not particularly, Michael. So there's nothing that comes top of mind. If there are increases to be seen in fiber or preservative costs, and as you know, we often have the opportunity to reset and have discussions with our customers. But I don't see anything significant ahead. Okay. And then just lastly, on the buyback announcement, I'm just curious if you can provide any commentary. Is that simply to have in place and therefore to be opportunistic with if you see an opportunity that you think represents good value? Or is the idea to be quite active with that and to essentially try to fully utilize that buyback? Good. Well, thank you for asking that question. It gives me the chance to give a bit more insight on the thought process. So as Silvana explained and when we disclose, our net debt to EBITDA leverage mid year is sitting at 1.9, which for mid year for us is pretty actually pretty low. We usually see that occur more at year end. So looking forward, with our healthy free cash flow that should that will be upcoming in the next few months, We felt that if we want to keep a certain leverage on our balance sheet that the NCIB would be a great opportunity to have in place to be able to use the European opportunistically to be able to make proper use of our free cash flow or available cash and invest return value to shareholders. That being said, if an M and A opportunity presents itself, we'd be very much willing to lever above the range that we discussed, knowing very well that our cash flow will help us replenish it. So I guess it's another tool in the box for us to be able to deploy capital. Okay, that's helpful. Thank you, Eric. Thanks. And there are no further questions at this time. I will turn the call back over to the presenters for closing remarks. Well, thank you for joining us on this call today. We look forward to speaking with you again in our next quarterly call.