Stella-Jones Inc. (TSX: SJ) (“Stella-Jones” or the “Company”) today
announced financial results for its first quarter ended March 31,
2021.
“We had an exceptionally robust start to the
year, continuing our momentum of growth. Our first quarter
performance was fueled by record pricing and volume gains in the
residential lumber product category, solid utility poles results,
and strong railway ties demand tempered by pricing pressures in
certain markets. EBITDA grew by 57% to an all-time first quarter
high of $99 million and net income doubled to $56 million compared
to the same period last year,” stated Éric Vachon, President and
CEO of Stella-Jones.
“In anticipation of continued strong market
conditions for residential lumber and solid demand in the other
core product categories, we leveraged our healthy balance sheet
this quarter to increase working capital and invest in our network.
In April, we increased our available liquidity with a new senior
unsecured credit facility, further enhancing our financial
flexibility. Together with our resilient business model and solid
competitive position, we are well positioned to take advantage of
the momentum in demand, create opportunities to grow our core
businesses and deliver EBITDA in the mid-to-high $400 million range
in 2021,” concluded Mr.
Vachon.
Financial Highlights (in millions of Canadian
dollars, except per share data and margin) |
Q1-21 |
|
Q1-20 |
|
Sales(1) |
623 |
|
508 |
|
Gross profit(2) |
112 |
|
83 |
|
Gross profit margin(2) |
17.9 |
% |
16.4 |
% |
EBITDA(2) |
99 |
|
63 |
|
EBITDA margin (2) |
15.9 |
% |
12.4 |
% |
Operating income |
82 |
|
45 |
|
Operating income margin(2) |
13.1 |
% |
8.8 |
% |
Net income for the period |
56 |
|
28 |
|
Earnings per share - basic and diluted |
0.85 |
|
0.41 |
|
Weighted average shares outstanding (basic, in ‘000s) |
65,711 |
|
67,469 |
|
(1) |
Prior period figures have been adjusted to conform to the current
period presentation. |
(2) |
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 RESULTS
Sales for the first quarter reached $623
million, up $115 million, versus sales of $508 million for the
corresponding period last year. Excluding the negative impact of
the currency conversion of $23 million, pressure-treated wood sales
rose $102 million, or 21%, driven by pricing and volume gains in
the residential lumber product category and improved pricing for
utility poles, offset in part by a reduction in sales price for
railway ties, particularly for the non-Class 1 business. The
increase in logs and lumber sales stems from the significant rise
in the market price of lumber.
Pressure-treated wood
products:
- Utility poles (33% of Q1-21
sales): Sales were $206 million in the first quarter of
2021, in line with the corresponding period last year. Excluding
the negative currency conversion effect, utility poles sales
increased by nine million dollars, or 4%, driven by higher pricing,
mainly in response to raw material cost increases and due to a
favourable sales mix, including the impact of greater
fire-resistant wrapped poles sales volume. More project-related
volume this quarter was offset by lower maintenance demand,
particularly in the U.S. Southeast due to extreme winter weather
conditions.
- Railway ties
(25% of Q1-21 sales): Sales were $158 million in
the first quarter of 2021, down 8% compared to sales of $172
million in the same period last year. Excluding the negative
currency conversion effect, railway ties sales decreased by six
million dollars, or 3%, largely due to lower pricing which more
than offset the increase in volumes. The reduction in sales price
is attributable to continued pricing pressures and an unfavourable
product mix for the non-Class 1 business, as well as downward
pricing adjustments in response to lower fibre costs for Class 1
customers. While volumes were lower this quarter for Class 1
customers due to the timing of shipments, overall volumes increased
as a result of the robust demand from non-Class 1
customers.
- Residential lumber (27% of
Q1-21 sales): Sales rose to $166 million in the first
quarter of 2021, up 134% from sales of $71 million in the
corresponding period last year. Excluding the negative currency
conversion effect, residential lumber sales increased $99 million,
or 139%. The significant increase in sales was in large part driven
by the higher market price of lumber. Continued strong demand, an
earlier start of the season for home improvement projects, as well
as the increase in market reach as the Company gained a greater
proportion of customers’ annual programs, further contributed to
the exceptional sales growth this quarter.
- Industrial products (5% of
Q1-21 sales): Sales were $28 million in the first quarter
of 2021, relatively unchanged compared to sales of $29 million in
the first quarter last year. Lower bridge sales, mainly
timing-related, were offset in large part by increased demand for
pilings.
Logs and lumber:
Logs and
lumber (10% of Q1-21 sales): Sales were $65 million in the
first quarter of 2021, more than double the sales of $29 million
generated in the corresponding period in 2020. In the course of
procuring residential lumber volume, excess lumber is obtained and
resold. The increase in sales this quarter is largely attributable
to the significant rise in the market price of lumber.
The strong sales growth led to an increase in
gross profit, which grew 35% to $112 million, compared to the prior
year period, while operating income was $82 million, or 13.1% of
sales, compared with $45 million, or 8.8% of sales last year.
EBITDA rose to $99 million, up 57%, compared to $63 million
reported in the first quarter of 2020. The increase was primarily
driven by sales price increases for residential lumber, which
exceeded the higher cost of lumber, stronger residential lumber
demand, as well as operational efficiency gains. Improved pricing
for utility poles and volume gains for railway ties were largely
offset by pricing pressures for the non-Class 1 railway ties
business.
Net income for the first quarter of 2021 was $56
million, or $0.85 per share, double the net income of $28 million,
or $0.41 per share, in the corresponding period of 2020.
LIQUIDITY AND CAPITAL RESOURCES
During the period ended March 31, 2021, Stella-Jones used its
liquidity to support higher working capital requirements, invest in
its property, plant and equipment and repurchase shares. Net debt
increased to $935 million by quarter-end and included $137 million
of short-term debt. During the quarter, the Company, through its
wholly-owned U.S subsidiary (“U.S. Subsidiary”), borrowed US$50
million under a new bridge term loan agreement. A second US$50
million installment was advanced in April 2021. Borrowings under
the bridge term loan were presented as short-term debt.
As at March 31, 2021, the Company maintained a
solid financial position with a net debt-to-EBITDA ratio of
2.2x.
Subsequent to quarter-end, the U.S subsidiary
entered into a credit agreement with a syndicate of lenders within
the United States farm credit system pursuant to which senior
unsecured credit facilities in an aggregate amount of up to US$350
million were made available, including a term loan facility of up
to US$250 million and a revolving credit facility of US$100
million. On April 29, 2021, a drawdown of US$100 million was made
under the revolving credit facility to repay the bridge term loan
in full.
NORMAL COURSE ISSUER BID On
March 9, 2021, the Company received approval from the Toronto Stock
Exchange (“TSX”) to amend the Normal Course Issuer Bid (“NCIB”)
accepted by the TSX on August 4, 2020 in order to increase the
maximum number of common shares that may be repurchased for
cancellation by the Company from 2,500,000 to 3,500,000 common
shares during the 12-month period commencing August 10, 2020 and
ending August 9, 2021. The amendment to the NCIB was effective on
March 15, 2021.
In the three-month period ended March 31, 2021,
the Company repurchased 801,261 common shares for cancellation in
consideration of $37 million. Since the start of the NCIB on August
10, 2020, the Company has repurchased 2,132,716 common shares for
cancellation in consideration of $97 million.
QUARTERLY DIVIDENDOn May 2,
2021, the Board of Directors declared a quarterly dividend of $0.18
per common share payable on June 22, 2021 to shareholders of
record at the close of business on June 1, 2021. This dividend is
designated to be an eligible dividend.
UPDATED OUTLOOKThe Company’s
financial outlook provided in the MD&A for the year ended
December 31, 2020 is updated to reflect the strong quarterly
performance, largely attributable to the unprecedented rise in the
market price of lumber, and the expectation that the higher levels
of pricing for lumber will continue to favourably impact the
profitability of the residential lumber product category during the
seasonal peak demand period.
Stella-Jones is now targeting to deliver EBITDA
in the range of $450 to $480 million in 2021, up from the
previously disclosed guidance of $385 to $410 million. This updated
guidance anticipates a reduction of approximately $90 million in
sales from the depreciation of the value of the U.S. dollar
relative to the Canadian dollar to C$1.27 per U.S. dollar.
Excluding the impact of the currency conversion,
the Company is projecting 2021 sales growth of 15% to low 20% range
compared to 2020. The projected 2021 sales for utility poles,
railways ties and industrial products remain unchanged. Utility
poles sales are expected to increase in the mid to high-single
digit range compared to 2020, due to sustained healthy replacement
demand, including an increase in value-added fire-resistant wrapped
pole sales, while railway ties and industrial product sales are
projected to be relatively comparable to those generated in 2020.
For residential lumber, sales are now forecasted to increase
in the range of 45% to 65% compared to 2020, driven by the current
trend of higher pricing, which is projected to continue during the
seasonal peak demand period for this product category.
The Company’s financial guidance is based on its
current outlook for 2021 and takes into account a number of
economic and market assumptions. Please refer to management’s
discussion and analysis for a complete list of assumptions.
CONFERENCE CALLStella-Jones
will hold a conference call to discuss these results on May 3,
2021, at 1:30 p.m. Eastern Daylight Time. Interested parties can
join the call by dialing 1-647-362-9671 (Toronto or overseas) or
1-800-599-2055 (elsewhere in North America). Parties unable to call
in at this time may access a recording by calling 1‑800-770-2030
and entering the passcode 4899896. This recording will be available
on Monday, May 3, 2021 as of 4:30 p.m. Eastern Daylight Time until
11:59 p.m. Eastern Daylight Time on Monday, May 10, 2021.
NON-IFRS FINANCIAL
MEASURESGross profit, gross profit margin, EBITDA
(operating income before depreciation of property, plant and
equipment, depreciation of right-of-use assets and amortization of
intangible assets), EBITDA margin, operating income margin, net
debt and net debt-to-EBITDA 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 coronavirus pandemic), 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.
Note to readers:
Condensed interim unaudited consolidated financial
statements for the first quarter ended March 31, 2021 as well as
management’s discussion and analysis are available on Stella-Jones’
website at www.stella-jones.com.
Source: |
Stella-Jones Inc. |
|
|
|
|
Contacts: |
Silvana Travaglini, CPA, CA |
Pierre Boucher, CPA, CMA |
|
Senior Vice-President and Chief Financial Officer |
Jennifer McCaughey, CFA |
|
Stella-Jones |
MaisonBrison Communications |
|
Tel.: (514) 940-8660 |
Tel.: (514) 731-0000 |
|
stravaglini@stella-jones.com |
pierre@maisonbrison.com |
|
|
jennifer@maisonbrison.com |
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