Stella-Jones Inc. (TSX:SJ) today announced financial results for
its third quarter ended September 30, 2012.
"Stella-Jones delivered a strong operating and financial
performance in the third quarter. Our constant focus on optimizing
efficiency continues to yield solid year-over-year improvements in
net income and cash flow. Demand for our core products remains
solid, as we leverage the strengths of our network and further
expand our reach across the North American market for treated wood
products," said Brian McManus, President and Chief Executive
Officer of Stella-Jones.
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Quarters ended Nine months ended
Financial highlights Sept. 30, Sept. 30,
(in thousands of Canadian
dollars, except per share
data) 2012 2011 2012 2011
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Sales 195,435 181,812 558,149 492,628
Operating income 31,799 25,569 88,469 67,569
Net income for the period 20,683 16,569 56,524 42,340
Per share - basic ($) 1.29 1.04 3.54 2.66
Per share - diluted ($) 1.29 1.03 3.52 2.65
Cash flow from operations
(1) 35,291 28,443 98,434 74,867
Weighted average shares
outstanding (basic, in
'000s) 15,989 15,950 15,975 15,943
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(1) Before changes in non-cash working capital components and interest and
income tax paid.
THIRD QUARTER RESULTS
Sales for the quarter ended September 30, 2012 totalled $195.4
million, an increase of $13.6 million, or 7.5%, over last year's
sales of $181.8 million. The Russellville, Arkansas operating
facility acquired from Thompson Industries, Inc. on December 7,
2011 ("Russellville Facility") contributed railway tie and
industrial product sales of approximately $12.3 million, while the
conversion effect from fluctuations in the value of the Canadian
dollar, Stella-Jones' reporting currency, versus the U.S. dollar,
increased the value of U.S. dollar denominated sales by about $4.1
million when compared with the previous year.
Railway tie sales amounted to $114.7 million, an increase of
$22.3 million, or 24.2%, over sales of $92.3 million last year,
reflecting solid market demand as well as a $12.2 million
contribution from the Russellville Facility. Utility pole sales
amounted to $53.1 million, down slightly from $55.5 million last
year. The variation reflects the year-over-year timing difference
in transmission pole orders for special projects, which had
resulted in stronger sales in the third quarter of 2011. Meanwhile,
sales of distribution poles held steady, reflecting regular demand
for maintenance projects. Industrial product sales reached $15.4
million, compared with $23.3 million a year earlier, due to a
reduction in the tie recycling business and lower demand for marine
applications in Canada. Sales of residential lumber totalled $12.3
million, up 14.9% from $10.7 million a year earlier as a result of
more favourable weather compared with the same period last year and
stronger demand in Western Canada.
Operating income was $31.8 million or 16.3% of sales, up from
$25.6 million or 14.1% of sales last year. The increase in monetary
terms mainly reflects higher business activity and the addition of
the Russellville Facility, while the increase as a percentage of
sales is mainly due to a better absorption of fixed costs resulting
from higher business activity and from greater efficiency
throughout the Company's plant network.
Net income for the period increased 24.8% to $20.7 million or
$1.29 per share, fully diluted, compared with $16.6 million or
$1.03 per share, fully diluted, in the third quarter of 2011. Cash
flow from operating activities before changes in non-cash working
capital components and interest and income tax paid rose 24.1% to
$35.3 million.
NINE-MONTH RESULTS
For the nine-month period ended September 30, 2012, sales
amounted to $558.1 million, up 13.3% from $492.6 million a year
earlier. The Russellville Facility contributed sales of $32.0
million, while the conversion effect from fluctuations in the value
of the Canadian dollar, versus the U.S. dollar, increased the
year-over-year value of U.S. dollar denominated sales by about
$11.1 million.
Operating income reached $88.5 million or 15.9% of sales,
compared with $67.6 million or 13.7% of sales last year. Net income
for the period was $56.5 million or $3.52 per share, fully diluted,
up 33.5% from $42.3 million or $2.65 per share, fully diluted, a
year earlier. Cash flow from operating activities before changes in
non-cash working capital components and interest and income tax
paid rose 31.5% to $98.4 million.
FINANCIAL POSITION REMAINS HEALTHY
As at September 30, 2012, the Company's long-term debt,
including the current portion, amounted to $184.8 million, down
from $192.3 million three months earlier. The ratio of total debt,
including short-term bank indebtedness, to total capitalization was
0.33:1 as at September 30, 2012, down from 0.35:1 three months
earlier.
Working capital stood at $318.2 million as at September 30,
2012, up from $273.2 million at the beginning of the year. This
variation mainly reflects an increase of $22.8 million in accounts
receivable, as a result of strong sales growth in the first nine
months of 2012, and a $25.7 million increase in inventories due to
higher planned inventory levels of air-dried wood, both to improve
future treating cycles and meet anticipated sales growth.
QUARTERLY DIVIDEND OF $0.16 PER SHARE
On November 8, 2012, the Board of Directors declared a quarterly
dividend of $0.16 per common share payable on December 20, 2012 to
shareholders of record as at the close of business on December 3,
2012.
OUTLOOK
"Driven by favourable fundamentals, we expect demand for our
core products to remain solid in the last quarter of 2012 and in
2013. The proposed acquisition of McFarland Cascade Holdings, Inc.
and the construction of a new railway tie facility in Cordele,
Georgia will further enhance Stella-Jones' offerings in its core
markets. These expansion initiatives will strengthen our position
as a leading North American supplier of treated wood products, as
well as create additional value for shareholders," concluded Mr.
McManus.
CONFERENCE CALL
Stella-Jones will hold a conference call to discuss these
results on Friday, November 9, 2012, at 10:00 AM Eastern Time.
Interested parties can join the call by dialling 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 1-855-859-2056 and entering the
passcode 35391409#. This tape recording will be available on
November 9, 2012 as of 1:00 PM Eastern Time until 11:59 PM Eastern
Time on Friday, November 16, 2012.
NON-IFRS FINANCIAL MEASURES
Operating income and cash flow from operations are financial
measures not prescribed by IFRS and are not likely to be comparable
to similar measures presented by other issuers. Management
considers these measures 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 third quarter financial
statements are available on Stella-Jones' website at
www.stella-jones.com
Contacts: Stella-Jones Inc. Eric Vachon, CPA, CA Senior
Vice-President and Chief Financial Officer (514) 940-3903 (514)
934-5327 (FAX)evachon@stella-jones.com Martin Goulet, CFA
MaisonBrison Communications (514)
731-0000martin@maisonbrison.com
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