Jewett-Cameron Trading Company Ltd. (JCTC) Earnings

Management highlights

- Core Business Strategy Focus * Prioritize the core metal fencing business, the company's largest and most important category, leveraging established differentiated brands, strong retail relationships, and existing consumer demand. * Continue rolling out in-store display programs to drive consumer engagement and product understanding at the point of purchase, with disciplined expansion of the core product lineup. * Maintain focus on high-potential sub-products: Lifetime Steel Post for wood fencing applications, patented Adjust-A-Gate and Fit-Rite installation solutions, and Perimeter Patrol for portable security and temporary fencing. - Balance Sheet Improvement & Cash Conversion * Delivered substantial progress: inventory reduced to $7.5 million as of May 31, 2026 from $15.9 million at August 31, 2025; cash and cash equivalents increased to $1.1 million from $226,000 at fiscal year-end; bank indebtedness reduced to $1.3 million from $4.3 million at the end of Q2 2026. * Liquidated excess non-core cedar fencing inventory and slow-moving pet inventory, even where sold at or below cost, to free up capital, reduce storage costs, and pay down borrowings. * Improved inventory turnover to 98 days in Q3 from 128 days in the prior year quarter. * Revised and extended the company's borrowing agreement with North Rim Funding Services through June 30, 2027, with adjusted borrowing limits aligned to current forecasted inventory levels. - Cost Reduction * Achieved 21% year-over-year reduction in wages and employment benefits in Q3, and a 22% reduction for the first nine months of fiscal 2026, totaling over $1 million in year-to-date savings from headcount alignment to current revenue levels. * Higher year-to-date SG&A is driven by temporary professional fees for outside consultants supporting the ongoing strategic realignment process, which is expected to continue through the remainder of fiscal 2026. - Strategic Review of Non-Core Assets * Management and the Board are conducting an ongoing evaluation of strategic options for non-core assets and business lines to unlock value and simplify the company. Assets under review include Greenwood, select pet assets, the remaining wood fencing business, and unused real estate properties. * Potential options include divestitures, joint ventures, business partnerships, or other collaborative arrangements. No definitive agreements have been reached to date, and no further updates will be provided until a definitive agreement is finalized. - Tariff Update * Filed $904,000 in IEEPA tariff refund claims following the U.S. Supreme Court's invalidation of IEEPA tariffs. $286,000 of these claims were approved in Q3, and a total payment of $1,009,000 (including all approved claims, additional pending claims, and interest) was received after quarter-end. * Most of the company's ongoing tariff burden comes from Section 232 steel and aluminum tariffs, which remain in effect and continue to create significant cost pressure.

Guidance

Management did not issue specific quantitative financial guidance for full fiscal 2026, but maintained its existing long-term strategic and operational guidance: - Maintain focus on exiting fiscal 2026 with a sustainable long-term business model centered on high-value core metal fencing products, supported by disciplined operations and a strengthened balance sheet. - Continue progress on cash conversion, inventory monetization of remaining excess non-core inventory, and cost reduction through fiscal 2026. - Continue the ongoing strategic review of non-core assets, with the goal of unlocking value to support core business growth.

Segment performance

1. Core Metal Fencing: Reported year-over-year quarterly revenue growth across all key sub-products (Adjust-A-Gate, Fit-Right, Lifetime Steel Post, Perimeter Patrol). Growth was driven by in-store display programs and focused product expansion, offsetting the revenue decline from the discontinued low-margin Cedar Fencing Supply Agreement. Excluding the discontinued agreement revenue, overall company revenue would have been up year-over-year. This segment is the company's largest and highest-priority category. 2. Pet Products: Revenue remained soft amid pressured consumer discretionary spending. It contributed to overall year-over-year revenue decline, with slow-moving non-core pet inventory being liquidated at or below cost during the period. 3. Greenwood: Q3 fiscal 2026 revenue was $1.1 million, up 58% from $705,000 in Q3 2025. It generated an operating profit of approximately $134,000 in the quarter, compared to an operating loss of $20,000 in the prior year quarter. Growth stemmed from recovering demand from transit customers and higher sales to non-transit customers. Greenwood accounts for ~11% of total Q3 2026 revenue. Overall company Q3 2026 revenue: $9.9 million, a 22% decline from $12.6 million in Q3 2025. Nine-month fiscal 2026 revenue was $29 million, a 6% decline from $30.9 million in the prior year period. Gross margin for Q3 2026 was 18%, up from 15% in Q3 2025; nine-month gross margin was 8%, down from 17.5% in the prior year period, impacted by a $2.2 million Q1 inventory write-down.

Risks & headwinds

- Ongoing macroeconomic headwinds: continued consumer caution in discretionary home improvement and pet categories, housing affordability pressures, and retailer caution around inventory commitments that limit demand growth. - Persistent cost pressures: Section 232 steel and aluminum tariffs remain in effect, with recent rule changes slightly increasing overall tariff burden; elevated fuel, shipping and logistics costs continue to pressure margins, and the company's ability to fully pass these cost increases to customers is limited. Margins remain below pre-tariff historical norms. - Liquidity constraints: the company adjusted its borrowing agreement to lower maximum funding limits to align with current inventory levels, and continues to rely on non-core asset disposition to strengthen liquidity. - Strategic review uncertainty: there is no assurance that ongoing discussions regarding potential strategic transactions for non-core assets will result in completed deals, creating uncertainty around future value realization. - Soft demand in the pet product category remains a drag on overall performance, requiring continued inventory liquidation that negatively impacts near-term margins.

Analyst Q&A

• Q: How should investors contextualize the recently received IEEPA tariff refunds relative to the company's overall cost pressures?

  A: The refunds only represent a small portion of the total tariffs the company has paid and continues to incur. While the company is pleased to receive the $1,009,000 total payment (including approved claims, remaining pending claims, and interest), most ongoing tariff costs are from Section 232 tariffs that remain in effect. Tariffs will continue to create significant cost pressure on the business even after these refunds. A nominal amount of rejected claims will still be pursued through the dispute process where available.

• Q: What is management's current approach to the pet products segment amid continued soft demand?

  A: The segment remains soft due to ongoing weakness in consumer discretionary spending. The company's current strategy is to focus on core Lucky Dog pet containment products that have the strongest consumer demand, while continuing to reduce exposure to and liquidate older, slow-moving non-core pet inventory.