Stella-Jones Inc. (TSX:SJ) today announced financial results for
its second quarter ended June 30, 2013.
"Demand for Stella-Jones' core products remained healthy during
the second quarter, as we continue to leverage our enhanced
presence in the treated wood products market. Gross profit as a
percentage of sales increased from the same period a year ago as a
result of our focus on our main markets and on improving operating
efficiencies, including on-going progress in the integration of our
latest acquisition, McFarland Cascade Holdings, Inc.
("McFarland")," said Brian McManus, President and Chief Executive
Officer.
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Financial highlights
(in thousands of
Canadian dollars, Quarters ended June 30, Six months ended June 30,
except per share data) 2013 2012 2013 2012
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Sales 273,161 203,919 490,200 362,714
Operating income 40,959 32,580 70,630 56,670
Net income for the
period 26,426 20,835 45,183 35,841
Per share - basic ($) 1.54 1.30 2.63 2.24
Per share - diluted ($) 1.53 1.30 2.62 2.24
Cash flow from
operations (1) 48,171 35,963 82,510 63,143
Weighted average shares
outstanding (basic, in
'000s) 17,170 15,976 17,169 15,968
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(1) Before changes in non-cash working capital components and interest and
income tax paid.
SECOND QUARTER RESULTS
Sales for the quarter ended June 30, 2013 totalled $273.2
million, up 34.0% over last year's sales of $203.9 million. The
operating facilities acquired from McFarland on November 30, 2012
contributed sales of approximately $75.0 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 $1.8 million on the value of U.S. dollar
denominated sales when compared with the previous year's second
quarter. Excluding these factors, sales decreased approximately
$7.5 million, as a result of more traditional seasonal demand
patterns in 2013 versus the prior year, lower sales of industrial
products, and reduced railcar availability in Western Canada due to
flooding in southern Alberta.
Railway tie sales amounted to $119.8 million, essentially stable
compared with sales of $120.1 million last year, reflecting healthy
industry demand. Utility pole sales amounted to $95.1 million, up
from $51.7 million in the corresponding period in 2012. This
increase is mainly attributable to utility pole sales of $46.0
million from the McFarland operations. Sales of residential lumber
reached $41.3 million, up from $14.0 million a year earlier as a
result of additional residential lumber sales of $26.7 million from
the McFarland operations. Finally, industrial product sales
totalled $17.0 million, compared with $18.1 million a year earlier,
due to a reduction in the tie recycling business and in rail
projects requiring industrial products compared to the second
quarter of last year, as well as a reduction in sales of certain
non-core products.
Gross profit as a percentage of sales increased to 21.2% in the
second quarter of 2013, from 20.8% last year, as a result of
greater efficiencies across the Company's plant network, including
the McFarland facilities, as well as reduced low margin non-core
product sales. Operating income as a percentage of sales decreased
to 15.0% compared with 16.0% of sales last year. This reflects the
higher level of selling and administrative expenses following the
McFarland acquisition and a loss on the disposal of surplus assets
from previous acquisitions. In monetary terms, operating income was
$41.0 million in the second quarter of 2013, up 25.7% from $32.6
million in the prior year.
Net income for the period increased 26.8% to $26.4 million or
$1.53 per share, fully diluted, compared with $20.8 million or
$1.30 per share, fully diluted, in the second quarter of 2012. Cash
flow from operating activities before changes in non-cash working
capital components and interest and income tax paid rose 33.9% to
$48.2 million.
SIX-MONTH RESULTS
For the six-month period ended June 30, 2013, sales amounted to
$490.2 million, up 35.1% from the same period a year earlier. The
McFarland operations contributed sales of approximately $140.0
million while the year-over-year conversion effect from
fluctuations in the value of the Canadian dollar, versus the U.S.
dollar, increased the value of U.S. dollar denominated sales by
$2.3 million. Excluding these factors, sales decreased
approximately $14.8 million, reflecting more traditional seasonal
demand in 2013 versus prior year.
Operating income was $70.6 million or 14.4% of sales, compared
with $56.7 million or 15.6% of sales last year. Net income for the
period reached $45.2 million or $2.62 per share, fully diluted, up
26.1% from $35.8 million or $2.24 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 30.7% to $82.5 million.
HEALTHY FINANCIAL POSITION AND INVESTMENT IN INCREMENTAL
CAPACITY
As at June 30, 2013, the Company's long-term debt, including the
current portion, amounted to $373.7 million, down from $382.6
million three months ago. At that same date, the ratio of total
debt to total capitalization was 0.41:1, down from 0.44:1 three
months earlier.
During the second quarter of 2013, Stella-Jones invested $5.9
million in purchases of property, plant and equipment, primarily
for the addition of various equipment upgrades and incremental
capacity. This amount includes $1.8 million to continue the
construction of a new treating facility in Cordele, Georgia, where
wood treatment operations are expected to begin in August 2013, and
an initial amount of $1.4 million for a new treating cylinder at
the New Westminster, British Columbia facility.
QUARTERLY DIVIDEND OF $0.20 PER SHARE
On August 8, 2013, the Board of Directors declared a quarterly
dividend of $0.20 per common share payable on September 30, 2013 to
shareholders of record at the close of business on September 2,
2013.
OUTLOOK
"Demand for our core products should remain healthy for the
remainder of 2013, as higher freight volume supports further
investment in the North American rail network and demand for
utility poles is expected to hold over the short-term. More
importantly, we believe that utility pole demand should pick-up
over the mid-term, as an increasing number of installed poles are
approaching the end of their normal service life and will need to
be replaced. Increased forecasted demand by some of our larger
utility pole customers supports this belief. Stella-Jones is
investing in additional capacity to meet this anticipated demand,"
concluded Mr. McManus.
CONFERENCE CALL
Stella-Jones will hold a conference call to discuss these
results on Friday, August 9, 2013, 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 17280571. This tape recording will be available on Friday,
August 9, 2013 as of 1:00 PM Eastern Time until 11:59 PM Eastern
Time on Friday, August 16, 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: Condensed interim unaudited consolidated
financial statements for the second quarter are available on
Stella-Jones' website at www.stella-jones.com
Contacts: Source: Stella-Jones Inc. Eric Vachon, CPA, CA Senior
Vice-President and Chief Financial Officer (514)
940-3903evachon@stella-jones.com Martin Goulet, CFA MaisonBrison
Communications (514) 731-0000martin@maisonbrison.com
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