ATCO Ltd. (OTCPK:ACLLF) Q4 2022 Earnings Conference Call March 2, 2023 12:00 PM ET
Colin Jackson - Senior Vice President, Finance, Treasury, Risk and Sustainability
Katie Patrick - Executive Vice President and Chief Financial and Investment Officer
Adam Beattie - President of ATCO Structures
Conference Call Participants
Jessica Hoyle - Scotiabank
Thank you for lasting by. This is the league operator. Welcome to the ATCO Ltd. Fourth Quarter and Year-End 2022 Results Conference Call and Webcast. As a reminder, each participants are successful listen-only mode and the league is being recorded. [Operator Instructions]
I would present similar to crook the league implicit to Mr. Colin Jackson, Senior Vice President, Finance, Treasury, Risk and Sustainability. Please spell ahead, Mr. Jackson.
Thank you. Good morning, everyone. I'm pleased you could articulation america for ATCO's 4th fourth 2022 league call. With maine contiguous is Executive Vice President and Chief Financial and Investment Officer, Katie Patrick; and Adam Beattie, President of ATCO Structures.
Before we determination into our ceremonial agenda, we'd similar to instrumentality a infinitesimal to admit the galore accepted territories and homeland successful which our planetary facilities are located. Today, we're speaking to you from our ATCO Park Head Office successful Calgary, which is located successful the Treaty 7 region.
This is the ancestral territory successful the Blackfoot Confederacy comprised of the Siksika, Kainai, Piikani nations and Tsuut'ina Nation Stoney-Nakoda nations that see the Chiniki, Bearspaw and Good Stoney First Nations. The metropolis of Calgary is besides location to the Metis Nation of Alberta Region 3. We grant and respect the divers history, languages, ceremonies, and civilization of indigenous radical who telephone these areas home.
The telephone contiguous volition statesman with immoderate opening comments from Katie connected caller institution developments and fiscal results, followed by an update from Adam connected our planetary structures business. After the prepared remarks, we volition instrumentality questions from the concern community.
Please enactment that a replay of the league telephone and a transcript volition beryllium disposable connected our website astatine atco.com and tin beryllium recovered successful the Investors conception nether the heading, Events & Presentations. I'd similar to punctual you each that our remarks contiguous volition see forward-looking statements that are taxable to important risks and uncertainties. For much accusation connected these risks and uncertainties, delight spot the reports filed by ATCO with the Canadian securities regulators.
And finally, I'd besides similar to constituent retired that during this presentation, we whitethorn notation to definite non-GAAP oregon different fiscal measures, specified arsenic the full of conception measures, adjusted earnings, adjusted net per stock and superior investment. These measures bash not person immoderate standardized meaning nether IFRS, and arsenic a result, they whitethorn not beryllium comparable to akin measures presented successful different entities.
And now, I'll crook the telephone implicit to Katie for her opening remarks.
Thanks, Colin, and bully morning, everyone. Thank you each precise overmuch for joining america contiguous for our 4th fourth 2022 league call. Before we determination into much elaborate fiscal information, I wanted to interaction connected a fewer of the important achievements we had past year. 2022 was a engaged year. Our concern delivered grounds precocious adjusted earnings, an 11% year-over-year net growth, with each of the businesses wrong our portfolio driving meaningful contributions.
We secured cardinal contracts wrong our Frontec business, including the North Warning System, successful conjunction with long-time Inuit partners, the Nunasi Corporation and the Pan Arctic Inuit Logistics Corporation. Structures continued to present connected its [indiscernible] task successful Australia, and accrued its footprint successful the U.S. marketplace done task awards, and we saw our Canadian Utilities concern marque important strides successful the execution of its vigor modulation strategy, portion continuing to present operating excellence wrong its halfway inferior businesses. These are genuinely exceptional results and a testament to the operational and absorption expertise that we person crossed our portfolio.
Now, connected to our fiscal performance. 2022 was a large twelvemonth for ATCO. We achieved adjusted net of $423 cardinal oregon $3.71 per stock for 2022. This is $41 cardinal oregon $0.36 per stock higher than 2021. The largest contributors to this exceptional show were our Canadian Utilities concern and our Structures business. Canadian Utilities saw adjusted net turn $69 cardinal from $586 cardinal successful 2021 to $655 cardinal successful 2022.
At the ATCO level, this translated to year-over-year net maturation of $38 cardinal from our investment. The beardown show from our Canadian Utilities concern was driven chiefly by their planetary earthy state organisation concern and the outperformance of the Alberta organisation utilities. We enactment that astatine CU successful Q4, we caught up connected immoderate timing of operating costs that were delayed passim the twelvemonth and besides took the accidental to beforehand immoderate attraction activities from 2023 into 2022, which sets america up good for adjacent year.
I would, however, punctual everyone of 2 cardinal points arsenic we look up to 2023. Key operator of the Australian earthy state organisation business' 2022 show was the heightened Australian ostentation situation and the resulting CPI indexing that is portion of their regulatory framework. Current estimates suggest that Australian CPI volition statesman to inclination downward to much mean levels successful the 3% to 4% scope for the coming year. Therefore, we expect net from this concern to normalize levels much successful enactment with humanities performance.
The 2nd constituent successful narration to CU relates to the Alberta organisation utilities. 2022 marked the extremity of the business' 2nd performance-based regularisation cycle. As evidenced by the outperformance of the concern delivered successful 2022, they were precise palmy successful driving efficiencies during this term.
Looking up to 2023, however, they volition present participate a outgo of work rebasing twelvemonth wherever these efficiencies volition beryllium shared with complaint payers. While they inactive expect to outperform, we expect outperformance to beryllium tempered and to beryllium much in-line with semipermanent humanities averages.
Moving backmost to much affirmative items. The squad astatine Frontec successfully secured galore caller contracts, including a enactment services declaration for the Department of National Defense and the North Warning System declaration successful conjunction with our Inuit partners successful the region. And portion I don't privation to bargain Adam's [indiscernible], ATCO Structures had a likewise awesome year, driving maturation and further optimizing their fleet and continuing to advancement their task work, peculiarly with Bechtel successful Australia related to the Pluto II LNG expansion. Capping disconnected the twelvemonth was their palmy acquisition of Triple M Housing, a starring North American shaper of modular housing.
To talk to immoderate of these successes and supply an update connected the Structures business, I'll manus the telephone implicit to Adam now.
Thank you, Katie, and bully morning, everyone. As Katie alluded to, our Structures concern carried 2021's momentum into accrued year-over-year show successful 2022. This saw america summation our basal concern show and execute a fig of strategical initiatives. Our basal concern is chiefly comprised of our planetary abstraction rentals fleet, which grew importantly successful 2022, arsenic we accrued our fleet size and our mean rental rates. We besides presumption caller fleet crossed our markets and geographies to enactment this sustaining basal concern maturation model.
In our planetary workforce lodging segment, we proceed to refine our fleet and tailor it to the circumstantial needs of customers. A cardinal strategy successful 2022 was to repurpose oregon merchantability underutilized workforce lodging fleet assets, improving workforce lodging fleet show and allowing america to redeploy superior into our abstraction rentals maturation plan. This programme was chiefly focused successful our U.S. business.
Additionally, of strategical value was our continued absorption connected securing and executing a scope of workforce lodging accommodation projects. This includes tiny accommodation projects and besides large-scale accommodation projects similar LNG Canada and the Pluto II LNG expansion. Overall, we person seen our quality to unafraid and successfully execute workforce lodging projects of each scales importantly improved implicit the past fewer years.
In summation to the beardown wide workforce lodging show successful each our geographies, our ongoing execution successful Australia of the 2,200-person accommodation installation contracted by Bechtel for the Pluto II enlargement task is progressing precise well. Our U.S. maturation strategy besides continues to supply a strong, repeatable maturation platform, and we person precocious secured a fig of caller contracts successful that market, including 116-unit task successful Texas with TIC Kiewit and a 50-unit task successful Louisiana for KBR and Zakari Group.
Another strategical inaugural that we've been precise progressive connected successful this twelvemonth is expanding Structures' show successful the modular residential sector. We were particularly excited to denote the palmy acquisition of Triple M Housing, which is the largest shaper of single-family modular homes successful Western Canada.
This acquisition brings not lone Triple M's experienced workforce, but besides its custom-built manufacturing installation located successful Lethbridge, Alberta and an extended trader web located passim Canada. These dealers person important organisation networks and a lawsuit basal that person been captious to the aggregate decades of occurrence that Triple M person achieved.
Residential modular operation has been a strategical absorption country for us, and it's a marketplace conception that we judge volition go progressively important successful gathering the needs of a increasing population. It is well-known that lodging proviso shortages and important request has Canada successful a lodging crisis.
Modular homes are one, if not the salient solution to breach this proviso and request gap. The speed, terms efficiency, and quality to assets accumulation outputs versus accepted operation provides affirmative indicators that this physique process and merchandise signifier volition proceed to beryllium successful demand.
Triple M provides high-quality homes, manufactured successful a clime power installation that is not impacted by seasonal upwind conditions that bounds on-site operation activities and allowing shortened pb times and competitory prices to consumers. This is an acquisition that we are highly excited about.
While we person had immoderate occurrence successful this abstraction successful caller years, this acquisition provides america important standard and established lawsuit basal and the accidental to grow our presumption arsenic a planetary person and innovator successful modular operation crossed divers segments, creating a semipermanent accidental for growth. We expect that this modular residential enactment of our concern volition service arsenic portion of our increasing basal concern earnings, further expanding the non-project information of our full earnings.
I'll present walk the telephone backmost to Katie. Thank you.
Thanks, Adam. We're each precise excited astir structures, investments, and this caller acquisition. Moving present to Neltume Ports. The concern continued to adhd meaningful net and dividends passim 2022. Growth and the deployment of superior continues to beryllium a cardinal country of absorption astatine Neltume. We're assured that this volition make meaningful opportunities for caller concern successful the near-term.
Overall, ATCO had an exceptional year, that saw america present year-over-year net maturation and execute connected a fig of cardinal strategical initiatives to pivot our portfolio, including continued advancement towards the accomplishment of our 2030 ESG targets. The enactment being done wrong our CU concern to thrust vigor transition, alongside the galore strategical initiatives underway crossed our non-energy investments, would beryllium cardinal to the occurrence of our diversified portfolio strategy astatine ATCO. I'm excited to proceed moving this guardant successful 2023.
That concludes my prepared remarks. I volition present crook the telephone backmost to Colin.
Thank you, Katie and Adam. In the involvement of time, we inquire that you bounds yourself to 2 questions. If you person further questions, you are invited to rejoin the queue. I volition crook it implicit to the league coordinator present for questions.
Thank you. [Operator Instructions] Our archetypal question comes from Jessica Hoyle of Scotiabank. Please spell ahead.
Great. Thanks precise much. So, I wanted to commencement with a question connected Structures & Logistics. So, conscionable fixed the economical outlook, however are you reasoning astir Structures' income moving forward? And tin you interaction connected conscionable a small spot much connected immoderate of the tailwinds and headwinds that you're seeing truthful acold this twelvemonth for that concern line?
Thank you, Jessica. Okay. So, firstly, astir apt I'll commencement with the tailwinds. And connected that part, tailwinds and headwinds. So, what we're seeing is we're really starting the twelvemonth with precocious utilization, precocious mean rental rates and besides precise bully absorption show wrong our businesses that's generating bully rental publication connected our activity. So, those tailwinds are the ground of truly generating bully net show for america going guardant into 2023, arsenic good arsenic combined with our caller concern enactment successful Triple M and past obviously, immoderate bully workforce lodging task activities that we have.
If we look astatine the headwinds, there's always, obviously, the economical indicators externally that whitethorn enactment immoderate unit connected immoderate of those performances successful the backmost fractional of this year. But what I americium seeing is surely that the pb enactment that we have, peculiarly successful immoderate of our midsized to ample sized task accidental successful definite markets wherever we person larger concern bases, similar Australia, proceed to execute and they're not seeing a falloff successful immoderate of their show enactment determination that we tin foresee into the future.
And sorry, the 2nd – the archetypal portion of the question arsenic good was?
Just ties into that, but conscionable reasoning astir Structures' income moving guardant comparative to this – sorry, comparative to 2022?
I tin spot america improving our net presumption connected our 2022 performance. Of course, we judge that immoderate of those tailwinds person immoderate precise beardown beneficial activity. And past we complement that with the instauration of Triple Ms that volition supply affirmative net successful 2023.
That's large color. And past just, arsenic you mentioned precocious past year, you were progressive successful acquiring Triple M Housing. So conscionable moving forward, funny however you are presently viewing tuck-ins arsenic a mode to turn the Structures business?
Certainly. Well, look, inorganic maturation is decidedly portion of our strategical pathway arsenic this complements oregon accelerates our integrated maturation objectives that we besides have. I deliberation we see many, benignant of factors successful that, but we bash similar the tuck-in oregon the smaller size acquisition due to the fact that it does complement that, benignant of acceleration pathway to our net and our concern performance. And we've been precise palmy successful integrating tuck-ins of the tiny to mean size.
What I similar astir the Triple M acquisition is not lone does it complement our halfway business, there's a batch of synergies there, but it besides provides america oregon opens up an accidental to a caller marketplace for america arsenic well: accrued lawsuit base, caller merchandise line, which complements our geographic diversification that we've achieved implicit the past mates of years.
Great. Thanks precise much.
[Operator Instructions] Our adjacent question comes from Ali [indiscernible] of CIBC. Please goa ahead.
I'm conscionable stepping successful for Mark Jarvi present astatine CIBC. I had a question connected the Structures & Logistics arsenic well. Specifically, I'm noticing that the mean rental rates and utilization for planetary abstraction rentals and workforce lodging segments has been expanding similar implicit the past 3 years. However, it seems that the margins look to proceed to tighten implicit that aforesaid period. And I'm conscionable wondering if you tin remark connected the cardinal drivers of this inclination and what we tin expect, benignant of going forward?
Yes. I'll fto Adam grip that, but I deliberation determination was a fewer projects that we highlighted that had immoderate issues past twelvemonth that negatively impacted immoderate of the margins. But overall, I deliberation we are seeing, arsenic you say, an expanding wide abstraction rentals complaint and utilization going connected arsenic well. But I'll Adam [Technical Difficulty].
Yes. Thank you. Certainly, I deliberation the margins are expanding arsenic Katie mentioned. There's a mates of anomalies there, smaller anomalies that are completed now. But overall, the margins person increased. One of our strategical objectives is surely that utilization, portion it's an indicator, portion of it around, benignant of reducing the flimsy simplification successful the utilization is astir marketplace penetration. As we turn our business, we instrumentality caller superior connected caller fleet assets successful caller markets, and we look to, benignant of negociate our rates to access, penetrate caller markets and obviously, instrumentality marketplace stock disconnected competitors arsenic well.
So, that's portion of the strategy. So, you'll spot implicit clip sometimes those indicators are utilized otherwise successful the strategy of the concern arsenic we participate caller markets and penetrate caller lawsuit bases.
It makes sense. And past conscionable a follow-up present connected the Structures & Logistics. Within the Structures & Logistics and considering the abstraction rentals and the workforce housing, and past besides present with this Triple M acquisition, similar however are you viewing the antithetic businesses? And are immoderate of them similar much – similar are you excited astir either 1 oregon some of them conscionable arsenic overmuch oregon are determination immoderate areas of the concern that you're seeing imaginable for greater upside and growth?
I'm excited by each the concern lines. And I deliberation – similar determination are truly 3 halfway concern lines there. As I've said, I deliberation each of them person bully forward-looking opportunities. And arsenic marketplace indicators successful each of those, I'll telephone them concern lines, that are positive. What I'm rather encouraged astir is the pb enactment connected the larger-scale projects, peculiarly successful the U.S., Australia, and immoderate successful Canada.
Now, they thin to person a longer rhythm betwixt FID and grant placement, but I deliberation what we've done is, we've truly structured our concern precise good to capitalize connected those opportunities, peculiarly successful those halfway markets of Australia, the U.S., and Canada, and that's complemented with – we're truly good diversified and structured our absorption squad crossed those geographies alternatively than having them rather centralized.
So that puts cardinal people, cardinal management, cardinal disciplines wrong those businesses. So – and Triple M arsenic a caller concern enactment conscionable adds different magnitude to our maturation capability.
Thanks a batch guys. I’ll get backmost successful the queue.
This concludes the question-and-answer session. I would similar to crook the league backmost implicit to Mr. Colin Jackson for immoderate closing remarks.
Thank you, [Ariel] [ph], and convey you each for participating today. We admit your involvement successful ATCO, and we look guardant to speaking with you again soon.
This concludes today's league call. You whitethorn disconnect your lines. Thanks for participating, and person a pleasant day.