Stella-Jones Inc. (TSX:SJ) today announced financial results for
its first quarter ended March 31, 2013. This represents the first
full quarter that includes the operating results of McFarland
Cascade Holdings, Inc. ("McFarland"), acquired on November 30,
2012.
"First-quarter results showed sustained demand for Stella-Jones'
core railway tie and utility pole products, although seasonal
patterns proved more normal in 2013, compared to last year. The
operating facilities acquired from McFarland produced solid
revenues. As anticipated, lower margins from these operations
resulted in a reduction of operating income as a percentage of
sales. We are progressing according to plan in regards to the
integration of McFarland's activities into our network, as well as
with the construction and ramp-up of our new wood treating facility
in Cordele, Georgia. These initiatives will further enhance our
presence in the market for treated wood products," said Brian
McManus, President and Chief Executive Officer.
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Financial highlights Quarters ended March 31,
(in thousands of Canadian dollars, except per
share data) 2013 2012
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Sales 217,039 158,795
Operating income 29,671 24,090
Net income for the period 18,757 15,006
Per share - basic and diluted ($) 1.09 0.94
Cash flow from operating activities (1) 34,339 27,180
Weighted average shares outstanding (basic, in
'000s) 17,169 15,959
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(1) Before changes in non-cash working capital components and interest and
income tax paid.
FIRST QUARTER RESULTS
Sales reached $217.0 million, an increase of $58.2 million, or
36.7%, over last year's sales for the same period of $158.8
million. The operating facilities acquired from McFarland
contributed sales of approximately $65.0 million, while the
conversion effect from fluctuations in the value of the Canadian
dollar, Stella-Jones' reporting currency, versus the U.S. dollar,
had a positive impact of $0.5 million on the value of U.S. dollar
denominated sales when compared with the previous year's first
quarter. Excluding these factors, sales decreased approximately
$7.3 million, as a result of a slower start for rail related
industrial products and more traditional seasonal demand patterns
for utility poles and residential lumber in the first quarter of
2013, compared with the same period last year.
Railway tie sales amounted to $96.5 million, an increase of 0.5%
over sales of $96.0 million a year earlier, reflecting steady
market demand. Utility pole sales amounted to $90.8 million, up
from $43.5 million in the corresponding period last year. The
increase is mainly attributable to utility pole sales of $50.7
million from the McFarland operations. Industrial product sales
reached $11.9 million, compared with $15.2 million last year,
mainly as a result of a slower start in rail projects requiring
industrial products, as compared to the first quarter of last year.
Finally, sales in the residential lumber category totalled $17.9
million, up from $4.2 million a year earlier. The increase reflects
additional residential lumber sales of $14.1 million from the
McFarland operations.
Operating income amounted to $29.7 million, or 13.7% of sales,
versus $24.1 million, or 15.2% of sales a year earlier. The
increase in absolute dollars essentially reflects the addition of
the McFarland operations, while the decrease as a percentage of
sales mainly stems from lower margins at the McFarland
facilities.
Net income for the first quarter of 2013 totalled $18.8 million,
or $1.09 per share, fully diluted, versus $15.0 million, or $0.94
per share, fully diluted, in the first quarter of 2012,
representing a year-over-year increase of 25.0%. Cash flow from
operating activities before changes in non-cash working capital
components and interest and income tax paid rose 26.3% to $34.3
million.
SOUND FINANCIAL POSITION
As at March 31, 2013, Stella-Jones' financial position remained
healthy with total debt of $382.6 million. At that same date, the
ratio of total debt to total capitalization was 0.44:1, stable in
comparison with December 31, 2012.
Reflecting higher business activity near the end of the first
quarter as per historical seasonal demand patterns, accounts
receivable rose to $128.5 million as at March 31, 2013, up from
$89.6 million three months earlier. Inventories stood at $425.6
million as at March 31, 2013, versus $413.4 million as at December
31, 2012, due to the normal seasonal inventory build-up ahead of
peak demand in the second and third quarters.
QUARTERLY DIVIDEND OF $0.20 PER SHARE
On May 1, 2013, the Board of Directors declared a quarterly
dividend of $0.20 per common share payable on June 28, 2013 to
shareholders of record at the close of business on June 3,
2013.
OUTLOOK
"Stella-Jones' role as a supplier of basic infrastructure will
continue to serve us well and we expect demand for our core
products to remain healthy for the remainder of 2013. In the
short-term, the integration of the McFarland operations into our
network and the ramp-up of our new facility in Georgia are our main
priorities. We will use our enhanced abilities from an expanded
network to better serve our customers and capture new business
opportunities. Over the long run, we remain committed to our
disciplined approach to network expansion, as well as to unlocking
synergies and achieving maximum efficiency from such initiatives.
Precise execution of this strategy will create further value for
our shareholders," concluded Mr. McManus.
CONFERENCE CALL
Stella-Jones will hold a conference call to discuss these
results on Thursday, May 2, 2013, at 1:30 PM 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 34056092. This tape recording will be available on
Thursday, May 2, 2013 as of 5:30 PM Eastern Time until 11:59 PM
Eastern Time on Thursday, May 9, 2013.
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 first-quarter financial
statements are available on Stella-Jones' website at
www.stella-jones.com
Contacts: Source: Stella-Jones Inc. Contacts: Eric Vachon, CPA,
CA Senior Vice-President and Chief Financial Officer (514)
940-3903evachon@stella-jones.com Martin Goulet, CFA MaisonBrison
(514) 731-0000martin@maisonbrison.com
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