Stella-Jones Inc. (TSX: SJ) (“Stella-Jones” or the “Company”) today
announced financial results for its first quarter ended March 31,
2020.
“We had a solid start to the year with sales up
a robust 14%. Sales growth for our pressure-treated wood products
was supported by stronger demand for utility poles and residential
lumber, and improved pricing for utility poles and railway ties.
While higher sales led to a 19% increase in gross profit,
EBITDA was unfavourably impacted by the mark-to-market variation in
diesel derivative commodity contracts. As a result, EBITDA remained
stable compared to the same period last year,” stated Éric Vachon,
President and CEO of Stella-Jones.
“While Stella-Jones’ operations and products are
considered critical to the integrity of the supply chains for North
American utilities, railroads and the construction industry, we
anticipate headwinds from the COVID-19 pandemic and have therefore
updated our 2020 outlook. We remain focused on managing our
business prudently while applying rigorous hygiene practices and
physical distancing policies throughout the organization. We are
confident that our resilient business model and seasoned management
team, combined with a solid balance sheet and ample financial
flexibility position us well to weather the current crisis and
continue to drive growth,” concluded Mr. Vachon.
Financial Highlights (in millions of Canadian
dollars, except per share data and margin) |
Q1-20 |
Q1-19 |
Sales |
503 |
441 |
Gross Profit(1) |
83 |
70 |
EBITDA(1) |
63 |
64 |
EBITDA margin (%)(1) |
12.5% |
14.5% |
Operating income(1) |
45 |
46 |
Net income for the period |
28 |
29 |
Per share – basic and diluted ($) |
0.41 |
0.43 |
Weighted average shares outstanding (basic, in ‘000s) |
67,469 |
69,136 |
(1) This is a non-IFRS financial measure which does not have a
standardized meaning prescribed by IFRS and may therefore not be
comparable to similar measures presented by other issuers. |
FIRST QUARTER RESULTSSales for the first
quarter reached a record $503 million, up $62 million, or 14%,
versus sales of $441 million last year. Pressure-treated wood sales
rose by $59 million while sales for logs and lumber increased by $3
million. The increase in pressure-treated wood sales, excluding the
positive impact of the currency conversion of $3 million, was $56
million, or 13%, and was driven by higher demand and improved sales
prices for utility poles, increased volumes for residential lumber
and industrial products and higher sales prices for railway
ties.
Pressure-treated wood
products:
- Utility poles (40% of Q1-20 sales): Utility
pole sales rose to $202 million, up 18% from sales of $171 million
in the corresponding period last year. Excluding the currency
conversion effect, utility pole sales increased by $29 million,
primarily driven by continued growth in replacement demand and
improved pricing.
- Railway ties (34% of Q1-20 sales): Railway tie
sales were $172 million, an increase of 6% compared to sales of
$162 million in the same period last year. Excluding the currency
conversion, railway tie sales increased $9 million, mainly due to
higher sales prices. Volume remained stable as higher shipments to
Class 1 customers were offset by lower volume to non-Class 1
customers, largely related to the timing of projects.
- Residential lumber (14% of Q1-20 sales): Sales
in the residential lumber category totalled $71 million, up 25%
from sales of $57 million last year. This increase is primarily
attributable to increased demand, both in Canada and the U.S.
- Industrial products (6% of Q1-20 sales):
Industrial product sales increased to $29 million, up 16% compared
to sales of $25 million in the first quarter last year, primarily
as a result of stronger railway bridge sales.
Logs and lumber:
- Logs and lumber (6% of Q1-20 sales): Sales in
the logs and lumber product category were $29 million, compared
with $26 million last year. Sales increased mainly due to higher
lumber market prices in North America for most of the first quarter
compared to the same period last year, while volumes remained
relatively unchanged.
Led by strong sales growth, gross profit
increased 19% to $83 million, compared to gross profit of $70
million in the first quarter last year. Despite the improvement in
gross profit, operating income and EBITDA remained relatively
unchanged compared to the same period last year at $45 million and
$63 million, respectively, given a $7 million mark-to-market loss
recorded in the quarter for diesel derivative commodity contracts.
Adjusting for the mark-to-market impact of diesel derivative
contracts, EBITDA for the three-month periods ending March 31, 2020
and 2019 were $70 million and $60 million, representing EBITDA
margins of 13.9% and 13.6%, respectively.
Net income was $28 million, or $0.41 per diluted
share, versus net income of $29 million, or $0.43 per share, last
year.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operations, before the effect of
working capital changes and interest and taxes paid, of $69 million
in the first quarter of 2020. Combined with additional borrowings
of $108 million under its syndicated credit facilities, the Company
used its liquidity to support seasonally higher working capital
requirements and continued to invest in capital expenditures. As at
March 31, 2020, the Company’s long-term debt stood at $766 million
and the long-term debt to trailing 12-month EBITDA was seasonally
higher at 2.5x.
QUARTERLY DIVIDEND On May 6,
2020, the Board of Directors declared a quarterly dividend of $0.15
per common share payable on June 26, 2020 to shareholders of record
at the close of business on June 5, 2020. This dividend is
designated to be an eligible dividend.
UPDATED 2020 OUTLOOKManagement believes that
the resiliency of the Company’s utility pole, railway tie and
residential lumber product categories as well as its solid balance
sheet and liquidity, places it in a favourable position to navigate
through the current challenging environment.
Given, however, the uncertain impact of the
COVID-19 pandemic and the weaker economic conditions in North
America on the demand for the Company’s core product categories,
the Company has updated its 2020 outlook. It now expects EBITDA for
2020 to be in the range of $300 to $325 million, down $20 million
from the previously disclosed range and EBITDA margin to be lower
versus 2019. The Company’s guidance is revised to reflect either no
improvement or a slight decline in sales volume for utility pole,
railway tie and industrial product categories and weaker demand for
residential lumber compared to 2019. Please refer to the Company’s
Management’s Discussion and Analysis for details regarding
assumptions.
CONFERENCE CALLStella-Jones will hold a
conference call to discuss these results on May 7, 2020, at 1:30
p.m. Eastern Daylight Time. Interested parties can join the call by
dialing 1-647-788-4922 (Toronto or overseas) or 1-877-223-4471
(elsewhere in North America). Parties unable to call in at this
time may access a recording by calling 1‑800-585-8367 and entering
the passcode 7383225. This recording will be available on Thursday,
May 7, 2020 as of 4:30 p.m Eastern Daylight Time until 11:59 p.m
Eastern Daylight Time on Thursday, May 14, 2020.
NON-IFRS FINANCIAL MEASURESEBITDA (operating
income before depreciation of property, plant and equipment,
depreciation of right-of-use assets and amortization of intangible
assets), gross profit, operating income and EBITDA margin are
financial measures not prescribed by IFRS and are not likely to be
comparable to similar measures presented by other issuers.
Management considers these non-IFRS measures to be useful
information to assist knowledgeable investors understand the
Company’s operating results, financial condition and cash flows as
they provide an additional measure about its performance. Please
refer to the non-IFRS financial measures described in the
Management’s Discussion and Analysis.
ABOUT STELLA-JONESStella-Jones Inc. (TSX: SJ)
is a leading producer and marketer of pressure-treated wood
products. The Company supplies North America’s electrical utilities
and telecommunication companies with utility poles, and the
continent’s railroad operators with railway ties and timbers.
Stella-Jones also manufactures and distributes residential lumber
and accessories to retailers for outdoor applications, as well as
industrial products for construction and marine applications. The
Company’s common shares are listed on the Toronto Stock
Exchange.
CAUTION REGARDING FORWARD-LOOKING
INFORMATIONExcept for historical information provided
herein, this press release may contain information and statements
of a forward-looking nature concerning the future performance of
the Company. These statements are based on suppositions and
uncertainties as well as on management's best possible evaluation
of future events. Such factors may include, without excluding other
considerations, general economic and business conditions (including
the impact of the global outbreak of the novel coronavirus),
evolution in customer demand for the Company's products and
services, product selling prices, availability and cost of raw
materials, changes in foreign currency rates, and the ability of
the Company to raise capital. As a result, readers are advised that
actual results may differ from expected results. Unless required to
do so under applicable securities legislation, the Company does not
assume any obligation to update or revise forward-looking
statements to reflect new information, future events or other
changes after the date hereof.
Source: |
Stella-Jones Inc. |
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Contacts: |
Silvana Travaglini, CPA, CA |
Pierre Boucher, CPA, CMA |
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Senior Vice-President and Chief Financial |
Jennifer McCaughey, CFA |
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Stella-Jones |
MaisonBrison Communications |
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Tel.: (514) 940-8660 |
Tel.: (514) 731-0000 |
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stravaglini@stella-jones.com |
pierre@maisonbrison.com |
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jennifer@maisonbrison.com |
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