Stella-Jones Inc. (TSX: SJ)
-- Sales of $161.3 million compared with $104.7 million last year
-- Organic revenue growth of approximately 18.0%
-- Gross profit up 49.3% to $29.3 million
-- Net income of $12.2 million or $0.77 per share, fully diluted, up from
$8.3 million a year ago
Stella-Jones Inc. (TSX: SJ) today announced financial results
for its third quarter and nine-month period ended September 30,
2010.
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Financial highlights (unaudited)
(in thousands of dollars, except per share data)
Quarters ended Nine months ended
Sept. 30, Sept. 30,
2010 2009 2010 2009
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Sales 161,298 104,671 427,975 345,729
Gross profit 29,324 19,636 76,378 66,055
Cash flow from operations (1) 15,206 10,315 34,796 34,238
Net earnings for the period 12,218 8,320 23,642 27,028
Per share - basic ($) 0.77 0.66 1.59 2.14
Per share - diluted ($) 0.77 0.65 1.59 2.13
Weighted average shares
outstanding (basic, in '000s) 15,901 12,679 14,840 12,623
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(1) Before changes in non-cash working capital components.
THIRD-QUARTER RESULTS
Sales were $161.3 million, an increase of $56.6 million, or
54.1% from last year's sales of $104.7 million. The acquisition of
Tangent Rail Corporation ("Tangent"), effective April 1, 2010,
contributed sales of approximately $41.2 million. Changes in the
value of the Canadian dollar, Stella-Jones' reporting currency,
versus the U.S. dollar, decreased the value of U.S. dollar
denominated sales by about $3.6 million when compared with the same
period a year earlier. Adjusting for year-over-year currency
fluctuations, sales excluding Tangent increased approximately 18.0%
versus last year's third quarter, reflecting higher railway tie
sales in the United States and greater utility pole sales in both
the United States and Canada.
Railway tie sales increased $40.2 million, or 91.2%, to $84.3
million, as a result of a $27.1 million contribution from Tangent
and increased market penetration. Excluding Tangent, year-over-year
tie sales rose $13.1 million, net of a $1.8 million decrease due to
currency translation effect. Sales of utility poles totalled $42.7
million, up 15.6% from $36.9 million a year ago. This increase
mainly reflects higher sales of distribution poles, partially
offset by lower sales of transmission poles as well as a $0.7
million decrease in sales from the year-over-year currency
translation effect. Industrial product sales rose to $24.7 million,
up from $12.4 million a year earlier, driven by the contribution of
Tangent's coal tar distillation and used tie pickup and disposal
operations. Further capitalizing on efficiencies from
consolidation, all coal tar distillation is now being carried out
at Stella-Jones' Memphis, Tennessee facility. Accordingly,
Stella-Jones sold certain assets relating to its coal tar
distillation business at the Terre Haute, Indiana facility at the
end of October. Finally, consumer lumber sales decreased 15.4% to
$9.5 million.
"Stella-Jones reported strong operating results in the third
quarter with solid organic growth in our core product categories,"
said Brian McManus, President and Chief Executive Officer of
Stella-Jones. "The integration of Tangent continues to further
enhance our market penetration, as we leverage the strengths and
competencies of our expanded North American network. Greater
efficiencies from operational optimization initiatives and
synergies are also driving profitability improvements throughout
the organization."
Gross profit was $29.3 million or 18.2% of sales, up from $19.6
million or 18.8% of sales last year. The 49.3% increase in gross
profit dollars essentially reflects the contribution of the Tangent
operations partially offset by a lower average rate applied to
convert gross profit from U.S. dollar denominated sales. The
reduction in gross profit as a percentage of sales mainly stems
from a different product mix more heavily weighted towards railway
ties.
Net earnings for the period stood at $12.2 million or $0.77 per
share, fully diluted, compared with $8.3 million or $0.65 per
share, fully diluted, last year. Stella-Jones generated solid cash
flow from operating activities before changes in non-cash working
capital components of $15.2 million, up from $10.3 million in the
same period a year ago.
Stella-Jones' balance sheet further improved as at September 30,
2010. Long-term debt, including the current portion, was $147.3
million, representing a ratio of total long-term debt to
shareholders' equity of 0.53:1, down from 0.57:1 three months
earlier.
"Further to the ongoing reduction in long-term debt, a strong
cash flow generation and better working capital resulted in a
substantial decrease in short-term bank indebtedness to $22.5
million as at September 30, 2010, from $47.6 million at the end of
the previous quarter," said George Labelle, Senior Vice-President
and Chief Financial Officer.
NINE-MONTH RESULTS
For the nine-month period ended September 30, 2010, sales were
$428.0 million, up from $345.7 million in the first nine months of
2009. In addition to Tangent's six-month contribution of $83.3
million, sales increased organically by approximately 6.0%, while
changes in the value of the Canadian dollar versus the U.S. dollar
decreased the value of U.S. dollar denominated sales by about $21.8
million when compared with the same period a year earlier.
Gross profit reached $76.4 million, or 17.8% of sales, versus
$66.1 million, or 19.1% last year. Net earnings for the period
stood at $23.6 million, or $1.59 per share, fully diluted, versus
$27.0 million, or $2.13 per share, fully diluted, in the
corresponding period a year earlier. Cash flow from operating
activities before changes in non-cash working capital components
reached $34.8 million, compared with $34.2 million last year.
Year-to-date results include approximately $7.5 million in
non-recurring expenses, mainly consisting of asset impairment
charges for the Spencer, West Virginia facility and the Ripley,
West Virginia U.S. corporate office, severance expenses, a
provision for an unfavourable legal judgment, as well as general
and administrative expenses directly related to the Tangent
acquisition.
OUTLOOK
"We expect current trends to continue to benefit fourth quarter
results. We are observing further signs of improvement in the core
railway tie market resulting from increased freight volume. These
positive developments could lead to greater investment in rail
infrastructure as railway operators constantly seek to optimize
efficiencies. Meanwhile, utility pole demand should hold with
regular maintenance projects providing a stable business flow.
Through our enlarged network, greater market penetration and
stronger competitive position, we are strategically positioned to
benefit from any opportunity that may arise," concluded Mr.
McManus.
CONFERENCE CALL
Stella-Jones will hold a conference call to discuss these
results on Friday, November 12, 2010, at 10:00 AM Eastern Time.
Interested parties can join the call by dialling 1-647-427-7450
(Toronto or overseas) or 1-888-231-8191 (elsewhere in North
America). Parties unable to call in at this time may access a tape
recording of the meeting by calling 1-800-642-1687 and entering the
passcode 19292542. This tape recording will be available on Friday,
November 12, 2010 as of 1:00 PM Eastern Time until 11:59 PM Eastern
Time on Friday, November 19, 2010.
NON-GAAP MEASURE
Cash flow from operations is a financial measure not prescribed
by Canadian generally accepted accounting principles ("GAAP") and
is not likely to be comparable to similar measures presented by
other issuers. Management considers it to be useful information to
assist knowledgeable investors in evaluating the cash generating
capabilities of the Company.
ABOUT STELLA-JONES
Stella-Jones Inc. (TSX: SJ) is a leading producer and marketer
of pressure treated wood products. The Company supplies North
America's railroad operators with railway ties, timbers and
recycling services; and the continent's electrical utilities and
telecommunications companies with utility poles. Stella-Jones also
provides industrial products and services for construction and
marine applications, as well as consumer lumber to retailers and
wholesalers for outdoor applications. The Company's common shares
are listed on the Toronto Stock Exchange.
Except 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,
fluctuations in quarterly results, evolution in customer demand for
the Company's products and services, the impact of price pressures
exerted by competitors, the ability of the Company to raise the
capital required for acquisitions, and general market trends or
economic changes. As a result, readers are advised that actual
results may differ from expected results.
Note to readers: Complete unaudited third-quarter and nine-month
financial statements are available on Stella-Jones' website at
www.stella-jones.com
Contacts: Stella-Jones Inc. George T. Labelle, CA Senior
Vice-President and Chief Financial Officer 514-934-8665
glabelle@stella-jones.com MaisonBrison Martin Goulet, CFA
514-731-0000 martin@maisonbrison.com
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