Stella-Jones Inc. (TSX: SJ) (“Stella-Jones” or the “Company”) today
announced financial results for its second quarter ended June 30,
2020.
“We are pleased with our financial performance,
as each of our three core product categories continued to deliver
improved results. Bolstered by exceptional demand for residential
lumber, we realized double-digit sales growth of 15% and increased
EBITDA by 28% to $120 million this quarter, surpassing the $100
million mark for the first time in a single quarter. We generated
$146 million of cash from operations and reduced our leverage,
further improving our financial strength and flexibility. Based on
our strong quarterly performance and resilient business model, we
have increased our annual 2020 EBITDA guidance and announced our
intention to repurchase up to 3,000,000 of the Company’s
outstanding shares, under a Normal Course Issuer Bid,” stated Éric
Vachon, President and CEO of Stella-Jones.
“Critical to the integrity of the supply chain
for utilities, railroads and the construction industry,
Stella-Jones has continued to operate all of its North American
facilities and support its customers during the varying stages of
restrictions and re-openings implemented by authorities to address
the COVID-19 pandemic. The Company continues to reinforce measures
implemented to mitigate health risks to its employees, business
partners and communities where it operates. I wish to thank
each and every one of our 2,300 employees across North America for
doing their part to successfully operate our business during these
challenging times and contribute to a record performance this
quarter,” concluded Mr. Vachon.
Financial Highlights (in millions of Canadian
dollars, except per share data and margin) |
Q2-20 |
|
Q2-19 |
|
YTD Q2-20 |
|
YTD Q2-19 |
|
Sales(1) |
768 |
|
667 |
|
1,276 |
|
1,113 |
|
Gross Profit(2) |
131 |
|
108 |
|
214 |
|
178 |
|
EBITDA(2) |
120 |
|
94 |
|
183 |
|
158 |
|
EBITDA margin (%)(2) |
15.6 |
% |
14.1 |
% |
14.3 |
% |
14.2 |
% |
Operating income(2) |
101 |
|
77 |
|
146 |
|
123 |
|
Net income for the period |
69 |
|
52 |
|
97 |
|
81 |
|
Per share – basic and diluted ($) |
1.02 |
|
0.76 |
|
1.43 |
|
1.18 |
|
Weighted average shares outstanding (basic, in ‘000s) |
67,479 |
|
69,131 |
|
67,474 |
|
69,134 |
|
- Prior period figures have been
adjusted to conform to the current period presentation.
- This is a non-IFRS financial
measure which does not have a standardized meaning prescribed by
IFRS and may therefore not be comparable to similar measures
presented by other issuers.
SECOND QUARTER RESULTSSales for
the second quarter reached $768 million, up $101 million, or 15%,
versus sales of $667 million for the corresponding period last
year. Excluding the positive impact of the currency conversion of
$15 million, pressure-treated wood sales rose $90 million, or 14%,
driven by an over 30% increase in residential lumber demand, higher
volumes for railway ties and improved sales prices for utility
poles.
Pressure-treated wood
products:
- Utility poles (30% of Q2-20 sales): Utility
pole sales rose to $230 million, up 9% from sales of $211 million
in the corresponding period last year. Excluding the currency
conversion effect, utility pole sales increased by $13 million,
primarily driven by upward price adjustments in response to raw
material cost increases.
- Railway ties (29% of Q2-20 sales): Railway tie
sales were $225 million, an increase of 13% compared to sales of
$199 million in the same period last year. Excluding the currency
conversion effect, railway tie sales increased $20 million, mainly
due to the acceleration of the 2020 maintenance program for certain
Class 1 customers and solid demand from non-Class 1 customers,
which was supported by a healthy level of untreated ties
inventory.
- Residential lumber (34% of Q2-20 sales): Sales
in the residential lumber category were greater than expected,
rising to $257 million, up 32% from sales of $195 million in the
corresponding period last year. The significant increase in sales
is due to higher volumes, largely stemming from strong home
improvement activity in the context of the COVID-19
pandemic.
- Industrial products (4% of Q2-20 sales):
Industrial product sales were $33 million, down 6% compared to
sales of $35 million in the second quarter last year, primarily as
a result of lower piling project activities.
Logs and lumber:
- Logs and lumber (3% of Q2-20 sales): Sales in
the logs and lumber product category were $23 million, down 15%
compared to $27 million in the corresponding period last year.
Sales declined given the limited market supply availability and
resulting decrease in lumber trading activity.
Driven by the strong sales growth across the
three core product categories, gross profit and operating income
increased 21% and 31% to $131 million and $101 million,
respectively, compared to the second quarter last year. EBITDA grew
to $120 million, up 28%, compared to $94 million reported in the
prior year period, reflecting an EBITDA margin of 15.6%. This
increase is largely attributable to stronger pressure-treated wood
demand and pricing improvements to offset higher costs.
Net income was $69 million, or $1.02 per diluted
share, versus net income of $52 million, or $0.76 per share, last
year.
SIX-MONTH RESULTSSales amounted
to $1.28 billion, versus $1.11 billion for the corresponding period
last year. Excluding the positive impact of the currency conversion
of $18 million, pressure-treated wood sales increased by $146
million, or 14%. The improvement in sales led to an increase in
gross profit, which grew 20% to $214 million, compared to the prior
year period
Operating income was $146 million, or 11.4% of
sales, compared with $123 million, or 11.1% of sales last year.
EBITDA rose to $183 million, up 16%, compared to $158 million
reported in the prior year period, reflecting an EBITDA margin of
14.3%. Net income totalled $97 million, or $1.43 per diluted share,
versus $81 million, or $1.18 per diluted share last year.
STRONG LIQUIDITY AND CAPITAL
RESOURCES The Company generated cash from operations of
$146 million in the second quarter of 2020. The Company deployed
its liquidity to reduce debt, pay dividends and invest in property,
plant and equipment. As at June 30, 2020, the Company’s long-term
debt stood at $636 million and the net debt to trailing 12-month
EBITDA decreased to 1.9x.
As a result of the continued strength of the
Company’s balance sheet and resiliency of its business model, the
Board of Directors has authorized the repurchase of up to 2,500,000
of the Company’s Common Shares, representing approximately 3.7% of
its outstanding Common Shares, under a Normal Course Issuer
Bid.
QUARTERLY DIVIDEND On August 4,
2020, the Board of Directors declared a quarterly dividend of $0.15
per share on the outstanding common shares of the Company, payable
on September 18, 2020 to shareholders of record at the close of
business on September 1, 2020. This dividend is designated to be an
eligible dividend.
UPDATED OUTLOOKThe financial
outlook provided in the Company’s Management’s Discussion and
Analysis for the quarter ended March 31, 2020 with respect to
annual EBITDA for 2020 is revised to reflect the strong quarterly
performance, bolstered by the robust demand for residential lumber.
The Company now expects EBITDA for 2020 to be in the range of $320
to $345 million, up $20 million from the previously disclosed
guidance, and EBITDA margin to be comparable to 2019.
As part of its capital allocation approach, the
Company intends to target a net debt-to-EBITDA ratio between 2.0x
and 2.5x. While maintaining a healthy financial position, the
targeted leverage should allow the Company to return capital to
shareholders and take advantage of growth opportunities to further
strengthen its position in the Company’s core product categories,
both organically and through acquisitions, and enhance shareholder
value.
Please refer to the Company’s Management’s
Discussion and Analysis for further details.
CONFERENCE CALLStella-Jones
will hold a conference call to discuss these results on August 5,
2020, at 10:00 a.m. Eastern Daylight Time. Interested parties can
join the call by dialing 1-647-788-4922 (Toronto or overseas) or
1-877-223-4471 (elsewhere in North America). Parties unable to call
in at this time may access a recording by calling 1‑800-585-8367
and entering the passcode 7173474. This recording will be available
on Wednesday, August 5, 2020 as of 1:00 p.m. Eastern Daylight Time
until 11:59 p.m. Eastern Daylight Time on Wednesday, August 12,
2020.
NON-IFRS FINANCIAL
MEASURESEBITDA (operating income before depreciation of
property, plant and equipment, depreciation of right-of-use assets
and amortization of intangible assets), gross profit, operating
income and EBITDA margin are financial measures not prescribed by
IFRS and are not likely to be comparable to similar measures
presented by other issuers. Management considers these non-IFRS
measures to be useful information to assist knowledgeable investors
understand the Company’s operating results, financial condition and
cash flows as they provide an additional measure about its
performance. Please refer to the non-IFRS financial measures
described in the Management’s Discussion and Analysis.
ABOUT STELLA-JONESStella-Jones
Inc. (TSX: SJ) is a leading producer and marketer of
pressure-treated wood products. The Company supplies North
America’s electrical utilities and telecommunication companies with
utility poles, and the continent’s railroad operators with railway
ties and timbers. Stella-Jones also manufactures and distributes
residential lumber and accessories to retailers for outdoor
applications, as well as industrial products for construction and
marine applications. The Company’s common shares are listed on the
Toronto Stock Exchange.
CAUTION REGARDING FORWARD-LOOKING
INFORMATIONExcept 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, general economic and business conditions (including
the impact of the global outbreak of the coronavirus pandemic),
evolution in customer demand for the Company's products and
services, product selling prices, availability and cost of raw
materials, changes in foreign currency rates, and the ability of
the Company to raise capital. As a result, readers are advised that
actual results may differ from expected results. Unless required to
do so under applicable securities legislation, the Company does not
assume any obligation to update or revise forward-looking
statements to reflect new information, future events or other
changes after the date hereof.
Note to readers:
Condensed interim unaudited consolidated financial
statements for the second quarter ended June 30, 2020 as well as
management’s discussion and analysis are available on Stella-Jones’
website at www.stella-jones.com.
Source: |
Stella-Jones Inc. |
|
|
|
|
Contacts: |
Silvana Travaglini, CPA, CA |
Pierre Boucher, CPA, CMA |
|
Senior Vice-President and Chief Financial Officer |
Jennifer McCaughey, CFA |
|
Stella-Jones |
MaisonBrison Communications |
|
Tel.: (514) 940-8660 |
Tel.: (514) 731-0000 |
|
stravaglini@stella-jones.com |
pierre@maisonbrison.com |
|
|
jennifer@maisonbrison.com |
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