Stella-Jones Inc. (TSX: SJ)
-- Sales of $561.0 million, up 36.5% from $411.1 million last year
-- Gross profit of $103.6 million versus $76.7 million in 2009
-- Net earnings of $34.4 million compared with $30.1 million last year, up
14.4%
-- Significant debt reduction resulting from solid cash flow generation
Stella-Jones Inc. (TSX: SJ) today announced financial results
for its fourth quarter and fiscal year ended December 31, 2010.
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Financial highlights Quarters ended Years ended
(in thousands of dollars, except Dec. 31, Dec. 31,
per share data) 2010 2009 2010 2009
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Sales 133,071 65,390 561,046 411,119
Gross profit 27,240 10,614 103,618 76,669
Cash flow from operations(1) 15,296 6,698 50,092 40,936
Net earnings for the period 10,753 3,041 34,395 30,069
Per share - basic ($) 0.68 0.24 2.27 2.38
Per share - diluted ($) 0.67 0.24 2.26 2.37
Weighted average shares outstanding
(basic, in '000s) 15,912 12,682 15,163 12,638
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(1) Before changes in non-cash working capital components.
2010 RESULTS
Sales reached $561.0 million, an increase of $149.9 million, or
36.5% over last year's sales of $411.1 million. The acquisition of
Tangent Rail Corporation ("Tangent"), effective April 1, 2010,
contributed sales of approximately $120.5 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 $23.8 million when compared with the
prior year. Adjusting for year-over-year currency fluctuations,
sales excluding Tangent increased approximately 13.0%, reflecting
higher railway tie sales in the United States and Canada as well as
improved utility pole sales in Canada.
Railway tie sales for 2010 amounted to $283.2 million, an
increase of 53.0% over 2009, reflecting tie sales of approximately
$83.0 million from Tangent as well as increased market penetration.
Excluding Tangent's sales and adjusting for a negative foreign
exchange effect of $16.5 million due to a lower average conversion
rate on U.S. dollar denominated tie sales, year-over-year
comparable railway tie sales increased $31.7 million. Utility pole
sales amounted to $166.7 million in 2010, an increase of 11.4% over
2009, due to higher sales of distribution poles in both Canada and
the United States stemming from solid maintenance demand and
greater market penetration. Industrial product sales rose 81.7% to
$81.4 million, an increase essentially attributable to Tangent's
coal tar distillation and used tie pickup and disposal operations.
Finally, sales of residential lumber declined 5.6% to $29.8
million.
Gross profit was $103.6 million or 18.5% of sales, compared with
$76.7 million or 18.6% of sales last year. The 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
marginal 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 2010 increased 14.4% to $34.4 million or $2.26
per share, fully diluted, compared with $30.1 million or $2.37 per
share, fully diluted, in 2009. Cash flow from operating activities
before changes in non-cash working capital components rose 22.4% to
$50.1 million.
"Stella-Jones achieved its tenth consecutive year of sales and
net earnings growth, as recessionary pressures eased in our core
markets and we completed the largest acquisition in the Company's
history," said Brian McManus, President and Chief Executive Officer
of Stella-Jones. "Stella-Jones is now widely recognized as one of
the largest suppliers of treated wood products on the continent.
This has positioned the Company to pursue a larger share of the
business of existing customers, and has strengthened our approach
to new customers. As a full-service provider to the railway tie
market, our competitive position has unquestionably improved, as
the Company can confidently bid on larger and broader
projects."
FOURTH-QUARTER RESULTS
Sales for the fourth quarter of 2010 reached $133.1 million, up
from $65.4 million reported for the same period in 2009. This $67.7
million increase is attributable to a $37.1 million contribution
from the Tangent operations, solid demand for the Company's core
products and strong advanced deliveries of railway ties. The
stronger year-over-year value of the Canadian dollar decreased the
value of U.S. dollar denominated sales by approximately $2.1
million.
Railway tie sales amounted to $62.4 million, up from $22.1
million a year earlier. This increase reflects a $26.6 million
contribution from the Tangent operations and stronger industry
demand. Utility pole sales reached $48.7 million, compared with
$31.1 million last year. This increase is for the most part
attributable to higher sales of distribution and transmission poles
in Canada. Industrial product sales amounted to $19.8 million, up
from $10.1 million a year earlier, due essentially to a $10.6
million contribution from the Tangent operations. Finally,
residential lumber sales rose 5.6% to $2.2 million.
Gross profit in the fourth quarter of 2010 totalled $27.2
million, or 20.5% of sales, compared with $10.6 million, or 16.2%
of sales, in the corresponding period in 2009. While higher gross
profit dollars essentially result from the contribution of the
Tangent operations and the strong increase in organic sales, the
increase in gross profit as a percentage of sales principally
reflects higher volume and resulting efficiencies, overall cost
savings and higher selling prices. Net earnings for the period
totalled $10.8 million, or $0.67 per share, fully diluted, compared
with $3.0 million, or $0.24 per share, fully diluted, in the fourth
quarter of 2009. Cash flow from operating activities before changes
in non-cash working capital components was $15.3 million, up from
$6.7 million a year earlier.
SOLID BALANCE SHEET
As at December 31, 2010, the Company's long-term debt, including
the current portion, amounted to $125.8 million, representing a
ratio of total long-term debt to shareholders' equity of 0.45:1,
down from 0.53:1 three months earlier and 0.48:1 at the end of
2009. In addition, a strong cash flow generation and improved
working capital resulted in a $24.2 million decrease in short-term
bank indebtedness, which stood at $31.9 million at the end of
2010.
"These factors enabled Stella-Jones to reduce its total debt by
$44.1 million during the second half of 2010. Of note, the Company
proceeded with the accelerated repayment of more than $15.0 million
in various financial obligations during the fourth quarter," added
George Labelle, Senior Vice-President and Chief Financial
Officer.
SEMI-ANNUAL DIVIDEND OF $0.24 PER SHARE
The Board of Directors declared a semi-annual dividend of $0.24
per share on the outstanding common shares of Stella-Jones, payable
on May 13, 2011 to shareholders of record at the close of business
on April 1, 2011.
OUTLOOK
As global economic conditions continue to improve, Management
expects demand for the Company's core products to further
accelerate in the upcoming year. However, the strong deliveries in
the latter part of the fourth quarter are expected to slightly
soften first quarter results. In the railway tie market, increased
freight volume on North American railroads should lead to greater
investments in the continental rail network, as operators
constantly seek optimal line efficiency. Meanwhile, demand is
expected to steadily progress in utility poles, as regular
maintenance projects provide a stable business flow for
distribution poles, while the vigour of the transmission pole
market is more correlated to the timing of orders, mostly for
special projects.
"Leveraging the Tangent acquisition remains a priority in 2011
as we fully take advantage of synergies in our expanded network.
The efficiencies we continue to implement should further contribute
to margin improvement and shareholder value. While remaining
committed to our traditional business, we will also continue to
pursue our strategic vision in a methodical fashion. A solid
financial position and growing cash flow are key attributes of our
readiness to study acquisition opportunities in core markets, as
Stella-Jones seeks to further its continental expansion and
industry consolidation," concluded Mr. McManus.
CONFERENCE CALL
Stella-Jones will hold a conference call to discuss these
results on Friday, March 11, 2011, at 10:00 AM Eastern Time.
Interested parties can join the call by dialing 416-644-3426
(Toronto or overseas) or 1-800-731-5319 (elsewhere in North
America). Parties unable to call in at this time may access a tape
recording of the meeting by calling 1-877-289-8525 and entering the
passcode 4404802#. This tape recording will be available on Friday,
March 11, 2011 as of 12:00 PM Eastern Time until 11:59 PM Eastern
Time on Friday, March 18, 2011.
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 residential 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 fourth-quarter and year-end
financial statements are available on Stella-Jones' website at
www.stella-jones.com
Contacts: Stella-Jones Inc. George Labelle Senior Vice-President
and Chief Financial Officer 514-934-8665 514-934-5327 (FAX)
glabelle@stella-jones.com MaisonBrison Martin Goulet, CFA
514-731-0000 martin@maisonbrison.com
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