JEWETT CAMERON TRADING CO LTD Q4 FY2025 earnings call

• Tariffs in Feb 2025 caused market turmoil, deferring retailer purchases, straining logistics, and increasing costs, impacting second half results.
• Metal fence business had growth in first half due to Lifetime Steel Post and Adjust-A-Gate products, but second half affected by tariffs. Took steps like workforce realignment (27% headcount reduction) to mitigate tariff impacts.
• Lumber consignment program had low profitability due to customer resistance to price increases, and primary lumber customer intends to transition away.
• Pet products had excess inventory; working with liquidators to sell slow-moving inventory, and increased obsolete inventory allowance by $650,000.
• Greenwood business had 2% growth, and is reviewing strategic collaborations for its industrial wood products subsidiary.
• MyEcoWorld focusing on big box stores and foreign markets instead of grocery due to tariffs.
• Seed cleaning property listed at $7.223 million and innovation studio in North Plains, Oregon listed at $795,000 for sale.
• Plan to reduce operating expenses by $1 million to $3 million annually to align with gross profit levels for long-term profitability.

Total revenue for the year was $41.3 million, down from $47.1 million the previous year. The fourth quarter revenue was $10.4 million vs $13.2 million prior year. Metal fence business was essentially flat compared to the previous year. Lumber sales were down due to supply challenges and low profitability. Pet business revenue was $4.3 million vs $7.6 million last year. Greenwood industrial wood business saw 2% growth, totaling $3.8 million compared to $3.7 million. MyEcoWorld business had revenue of $800,000 versus $1.5 million in the prior fiscal year.

• Plan to reduce operating expenses by approximately $1 million to $3 million annually.
• Goal to exit fiscal 2026 in a dramatically improved financial position by focusing on core strengths, improving cost-price correlation, reducing inventory exposure via direct import sales, and maintaining a lean operating structure.

• Rapidly escalating and unpredictable tariffs causing market turmoil, deferred purchases, strained logistics, and higher costs.
• Difficulty in getting customers to accept price increases in a timely manner due to complex and changing tariffs.
• Lumber consignment program with low profitability and inventory burdens.
• Weak pet industry leading to excess inventory and lower profitability.
• Need for adjusting credit line with Northrim to increase borrowing flexibility due to working capital needs and inventory movement.

Q: Can you provide more details about the customer slow adoption of your price adjustments?

A: Any price increases must be consented to by the customer, with delays in agreement. Frequent tariff changes made price changes obsolete before passing to customers, affecting recapture of higher costs.

Q: Why did your lumber customer decide to move forward without you?

A: Consignment model slowed cash flow, reduced margins, tied up capital. Aligns with customer's long-term strategic direction; transition will reduce inventory burdens and allow focus on metal fence products.

Q: Expand on your decision to focus on the metal fence business as the go-forward strategy?

A: Metal fence products represent innovative solutions for pros and DIYers. Patented products like Adjust-A-Gate have growth potential; existing customers request expansion into thousands of stores, and sales team is pursuing channel expansion.

Q: Talk about the timeline for any asset sales?

A: Engaged in preliminary discussions; will provide additional disclosures when definitive arrangements are entered into.

Q: Expand on the increase in credit line usage from $2 million to $4 million?

A: Actively pursuing strategic financing to accelerate business plan, fund core growth initiatives, and ensure operational capacity amidst global economic volatility.

Q: What is the collateral for the Northrim line of credit?

A: Agreement provides for sale of accounts receivable and advance against current inventory.

Q: Discuss cash freeing up in next 6 months from pet product liquidation and excess lumber inventory?

A: Can't disclose exact amount beyond 10-K; will share later when more definitive.