JEWETT CAMERON TRADING CO LTD Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Tariff Impact: Uncertainty around tariffs negatively impacted Q3 results, with retailers and consumers deferring purchases of imported metal products. Lower gross margins due to higher tariffs and transportation costs.
• Proactive Initiatives:
  • Multi-sourcing suppliers to reduce dependence on high-tariff countries, with suppliers in Vietnam, Malaysia, and Bangladesh.
  • Developing pricing strategies to align with increased costs.
  • Implementing process improvements and technology to drive efficiencies.
  • Approximate 20% personnel reduction in April 2025 to increase productivity and reduce costs.
• LTP Displayer Expansion: Lifetime Steel Post Displayer program saw 85% product sales growth in recent quarter; temporarily paused adding new units to prioritize inventory replenishment.
• MyECO World Growth: Sales for current nine months up 265% over fiscal 2024, with focus on expanding in big box stores and foreign markets unaffected by U.S. tariffs.
• Greenwood Segment: Sales decreased 24% due to supply issues, but potential for growth in transit and new markets; possible new tariffs on Canadian wood products could impact raw materials.
• Seed Cleaning Facility: Actively marketing 11.6-acre facility with carrying balance under $600,000; sale or lease would improve shareholder equity.

Segment Performance

• Metal Fence Business: Revenue down 4% from year-ago period. Product sales of lifetime steel post up 85% compared to Q3 2024. Represents more than half of overall business.
• Pet Business: Down 44% compared to last year's Q3, but slightly up from sequential quarter.
• Wood Fence/Lumber Business: Pullback during Q3 due to supply interruption, but expanded supplies and on track to meet demand.
• MyECO World (Compostable Products): Sales for current nine months up 265% over fiscal 2024.
• Greenwood: Sales decreased 24% to $700,000 from $900,000 in Q3 2024 due to supply issues.

Guidance

• Expectation of return to normalized state once tariff volatility reduces.
• Focus remains on four key areas: growth drivers, product innovation, supply chain efficiency, and asset monetization, despite near-term tariff challenges.
• Belief that reduced tariff volatility will occur, leading to more normalized customer purchasing patterns.

Risks

• Unpredictable Tariffs: Rapid and unpredictable tariff changes causing consumer and retailer deferral of purchases, making pricing adjustments difficult.
• Supply Chain Issues: Logistical challenges from new factories outside China impacting displayer delivery schedules.
• Potential New Tariffs: Possible new tariffs on Canadian wood products could increase raw material costs.

Question and Answer

Q: Tariff mitigation strategies?

A: Multi-sourcing suppliers to countries other than China to reduce dependence on high-tariff areas.

Q: Revised OpEx expectations?

A: Focus on efficiency across operation, but no specific projections provided; continuing to pursue talent and technology to enhance efficiency.

Q: Percent of total sales for lifetime steel fence posts?

A: Currently 8% of gross sales.

Q: Overlap between customers of steel fence products and pet/MyECO World products?

A: Suspected overlap in target audience as fence products often used to contain animals, and MyECO World products appeal to gardeners, but no definitive database evidence.