SJ

• Overall Business Performance • Q2 2026 results showed continued strength in infrastructure-focused end markets, with utility products remaining a core growth driver, partially offset by softness in residential lumber and temporary cost headwinds. • Near-term profitability was impacted by non-recurring site-specific environmental/maintenance costs, higher fuel prices, temporary inefficiencies from the Candiac steel structure capacity expansion, and a lag in passing through cost increases to pricing. Excluding non-recurring items, adjusted margin would have been ~17.5%. • The company remains on track to achieve its 3-year average adjusted EBITDA margin target of 17.5% to 18.5%, with current low margins not representing a structural change in earnings power.

• Acquisitions and Growth Investments • Integration of the Cross Arms acquisition is proceeding in line with expectations, with a solid contribution to Q2 results and initial Canadian sales recorded during the quarter, leveraging existing customer relationships to expand wallet share. • The Candiac, Quebec steel structure capacity expansion remains on track to double capacity to 20,000 tons by Q3 2026, with full ramp-up by year-end 2026. Demand for lattice towers is strong, with capacity already substantially allocated through the end of 2027, including a 10-year contract for ~one-third of production capacity. • Development of the 20,000-ton Fayetteville, Tennessee U.S. steel structure facility is progressing on track, with a projected $50 million U.S. investment, commissioning in late 2027, and full production by end of 2028. Early customer commitments from existing U.S. clients support a smooth startup.

• Operational and Network Optimization • The railway tie network optimization plan initiated in Q1 is advancing, with Q2 one-time charges for footprint consolidation, and expected annual cost savings of $10 to $15 million starting in 2027. • A new phase of network optimization for wood utility pole facilities is planned, focused on capacity consolidation, increased plant specialization, and improved utilization, which will generate an estimated $10 to $12 million in incremental annual profitability starting in 2027, with most one-time charges being non-cash asset write-downs. • All optimization initiatives will also improve the company's GHG emissions profile, supporting long-term sustainability targets.

• Sustainability • The 2025 Sustainability Report was published in Q2, showing a 23% reduction in Scope 1 and 2 GHG emissions vs. the 2022 baseline, a year-over-year decline in injury frequency, and 96% of Canadian salaried employees completing Indigenous cultural awareness training.

• Full year 2026 residential lumber sales are still expected to land within the $600 million to $650 million target range.
• Adjusted EBITDA margin is expected to improve in the second half of 2026 as near-term cost pressures ease, but full year 2026 margin will remain below the 3-year target range of 17.5% to 18.5%.
• Full year 2026 wood utility pole organic volume growth is still projected to hit the mid-single-digit target, despite Q2 weather-related disruptions in Texas.
• Railway tie full year 2026 sales are expected to come in between flat and -2% YoY, with TSO volumes expected to rise to 5-10% of total tie sales by the second half of 2026 and remain at that level going forward.
• The 17.5% to 18.5% 3-year average adjusted EBITDA margin target is maintained; the ongoing operational optimization initiatives were not included in the original target and are expected to help push margins to the higher end of the range.

All figures are in Canadian dollars:

1. Utility Products: Q2 2026 sales of $510 million, up 7% year-over-year (YoY), representing ~49.9% of total Q2 revenue. The increase came from a $29 million contribution from the acquired Cross Arms business and modest organic growth in wood utility poles, partially offset by lower steel structure sales from temporary operational disruptions. Organic wood utility pole sales grew 1% in Q2, with volumes up 2% entirely from contract business. Year-to-date (YTD) utility product sales hit $979 million, up 9% YoY; excluding acquisitions and foreign exchange, wood utility pole sales rose 4% YTD, with 7% volume growth partially offset by lower pricing.
2. Railway Ties: Q2 2026 sales of $235 million, down 2% YoY, representing ~23% of total Q2 revenue. Lower Class 1 volumes were largely offset by strength in the non-Class 1 commercial market, with total volumes down 1% and pricing slightly lower due to a higher mix of lower-priced TSO volumes. YTD railway tie sales totaled $433 million, down 2% YoY excluding foreign exchange, with modest declines in both volumes and pricing. The business recorded $32 million in one-time restructuring charges in Q2.
3. Residential Lumber: Q2 2026 sales of $234 million, down 5% YoY, representing ~22.9% of total Q2 revenue. The decline reflected 4% lower pricing and 1% lower volumes from softer demand and adverse weather. YTD residential lumber sales were $310 million, down 7% YoY, with 2% lower volumes and continued soft pricing. Total company Q2 2026 sales were $1.042 billion, an $8 million increase YoY. Adjusted EBITDA was $167 million (16% margin) compared to $189 million (18.3% margin) YoY.

• Approval of DCOI (the primary oil-based preservative alternative to Penta) is still pending in Canada, creating uncertainty for wood utility pole operations.
• Most pricing adjustments for recent fuel and preservative cost increases will not take effect until contract anniversaries in the first half of 2027, creating ongoing margin pressure through the end of 2026.
• CRISI grant funding for commercial railway projects is scheduled to expire at the end of 2026, which could reduce demand after 2028, though previously awarded funding will support activity through that point.
• One-time non-cash asset write-down charges will be incurred as the company implements network optimization initiatives across utility poles and railway ties.

Q: Analyst James McGarigal asked for specific timelines for when key near-term cost pressures will ease, and how pricing recoveries for these costs will flow through the business. / A: Management stated that temporary production inefficiencies from the Candiac steel structure expansion are almost entirely behind us, with ramp-up to 14,000 annualized tons of capacity expected in the second half of 2026. Fuel and preservative cost increases will mostly be passed through at annual contract anniversaries, which primarily fall in the first half of 2027, though some residential lumber pricing adjustments were already implemented in Q3 2026. One-time environmental and unplanned maintenance costs that hit Q2 are not expected to recur in the second half of the year. Pricing adjustments are heavily weighted to utility poles, with smaller impacts on railway ties.

Q: Analyst Hamir Patel asked for an update on 2026 railway tie sales guidance, Class 1 contract renewal status, the outlook for TSO volume growth, and M&A opportunities outside of steel structures. / A: Management confirmed full year 2026 railway tie sales are now expected to be between flat and -2% YoY, down from prior guidance for flat sales. One Class 1 contract has been renewed with volume growth, a second is under negotiation and expected to be finalized in Q4 2026 with additional volumes starting 2027, and a third is in early discussion. TSO volumes are expected to rise to 5-10% of total tie sales long-term, which improves returns and reduces working capital requirements. Management confirmed M&A opportunities remain on the table for both railway tie competitors and small wood utility pole businesses in the U.S. Southeast, alongside continued organic growth for wood poles.

Q: Analyst Michael Topol asked what organic wood utility pole growth would have been in Q2 without weather disruptions, if full year mid-single-digit growth guidance is still on track, when wood pole optimization savings will materialize, and how optimization impacts the long-term margin target. / A: Management estimated Q2 organic growth would have been 4-5% (mid-single-digit) without the Texas heavy rain disruptions, and reaffirmed full year 2026 mid-single-digit organic growth guidance for wood utility poles, with partial recovery of lost volumes expected in the second half. The $10-12 million in annual profitability improvements from wood pole optimization will not materialize until 2027, same as the railway tie optimization initiatives. These incremental savings were not included in the original 17.5-18.5% 3-year margin target, and are expected to help the company reach the upper end of the target range.

Q: Analyst Michael Topol also asked if steel structure transition headwinds would continue into Q3, and confirmed mid-single-digit growth guidance applies only to wood poles. / A: Management stated that most transition work was completed during the planned July construction shutdown in Quebec, with only minor finishing work remaining in August, so headwinds from the expansion will not impact Q3 meaningfully. Management confirmed the mid-single-digit growth guidance applies only to wood utility poles, not the overall utility product segment. Lessons learned from the Candiac expansion will also reduce execution risk and enable a smoother startup for the new Fayetteville, Tennessee facility, which uses the same equipment and layout.