Stella-Jones Inc. (TSX: SJ) (“Stella-Jones” or the “Company”) today
announced financial results for its third quarter ended September
30, 2020.
“I am extremely proud of the diligent work ethic
and unwavering commitment that our employees have displayed during
these rapidly changing and extremely challenging times. Supported
by their contribution and the resiliency of our business, we
delivered another record performance this quarter, with growth in
sales, profitability and cash from operations. Benefiting from the
continued strong demand across most of our product categories and
the exceptional rise in market lumber prices, we realized sales
growth of 18% and increased EBITDA by 38% to a quarterly best of
$132 million. This significant increase in profitability translated
into cash from operations of $148 million which was used to invest
in our network, reduce our leverage and return cash to shareholders
in the form of dividends and share repurchases. We ended the
quarter in a very strong financial position with a net
debt-to-EBITDA ratio of 1.4x and over $300 million in available
liquidity,” stated Éric Vachon, President and CEO of
Stella-Jones.
“Following stronger than expected results this
quarter, we have increased our annual 2020 EBITDA guidance. With
ample financial flexibility and sustainable profitability, we are
well positioned to continue to drive growth for our shareholders,”
concluded Mr. Vachon.
Financial
Highlights (in millions of
Canadian dollars, except per share data and margin) |
Q3-20 |
|
Q3-19 |
|
YTD
Q3-20 |
|
YTD
Q3-19 |
|
Sales(1) |
742 |
|
631 |
|
2,018 |
|
1,744 |
|
Gross Profit(2) |
147 |
|
110 |
|
361 |
|
288 |
|
EBITDA(2) |
132 |
|
96 |
|
315 |
|
254 |
|
EBITDA margin (%)(2) |
17.8 |
% |
15.2 |
% |
15.6 |
% |
14.6 |
% |
Operating income(2) |
113 |
|
78 |
|
259 |
|
201 |
|
Net income for the period |
79 |
|
54 |
|
176 |
|
135 |
|
Per share – basic and diluted ($) |
1.17 |
|
0.78 |
|
2.60 |
|
1.96 |
|
Weighted average shares outstanding (basic, in ‘000s) |
67,437 |
|
68,901 |
|
67,462 |
|
69,057 |
|
(1) |
|
Prior period figures have been adjusted to conform to the current
period presentation. |
(2) |
|
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. |
THIRD QUARTER
RESULTSSales for the third quarter of 2020 reached
$742 million, up $111 million, or 18%, versus sales of $631 million
for the corresponding period last year. Excluding the positive
impact of the currency conversion of $5 million, pressure-treated
wood sales rose $85 million, or 14%, primarily driven by higher
pricing and demand for residential lumber and utility poles. Logs
and lumber sales increased $21 million, driven by the significant
rise in the market price of lumber.
Pressure-treated wood
products:
- Utility poles (34% of Q3-20
sales): Utility pole sales rose to $250 million, up 16%
from sales of $216 million in the corresponding period last year.
Excluding the currency conversion effect, utility pole sales
increased by $32 million driven by more project-related volumes, as
well as higher pricing. The pricing improvement stems from upward
price adjustments in response to raw material cost increases and
better product mix, including the impact of greater fire-resistant
wrapped pole sales volumes.
- Railway
ties
(25%
of Q3-20
sales): Railway ties sales were $189
million, a decrease of 2% compared to sales of $193 million in the
same period last year. Excluding the currency conversion effect,
railway ties sales decreased $6 million, largely due to lower
volumes for Class 1 customers given the acceleration of the
maintenance program for certain Class 1 customers in the second
quarter. The decrease in Class 1 volumes was partially offset by
continued strong non-Class 1 demand, supported by a solid level of
untreated tie inventory. Overall, pricing remained relatively
unchanged compared to the same period last year.
- Residential lumber
(30%
of
Q3-20
sales): Sales in the residential lumber category
rose to $220 million, up 39% from sales of $158 million in the
corresponding period last year. The significant increase in sales
was driven by the exceptional rise in the market price of lumber
and higher volumes, which continued to be favourably impacted by
strong home improvement demand during the Covid-19 pandemic.
- Industrial
products
(5% of
Q3-20
sales): Industrial product sales were $34 million,
down 6% compared to sales of $36 million in the third quarter last
year, primarily due to the timing of shipments of products for
rail-related bridge projects.
Logs and
lumber:
- Logs and lumber
(6% of
Q3-20
sales): Sales in the logs and lumber product
category were $49 million, up 75% compared to $28 million in the
corresponding period last year, primarily attributable to the sharp
increase in the market price of lumber during the quarter.
Driven by the strong sales growth in residential
lumber and utility poles, gross profit and operating income
increased 34% and 45% to $147 million and $113 million,
respectively, compared to the third quarter last year. Similarly,
EBITDA increased 38% to a record high of $132 million, or a margin
of 17.8%, up from $96 million, or a margin of 15.2% last year. This
increase was primarily driven by the sharp rise in the market
prices of lumber throughout the quarter, stronger residential
lumber demand, as well as improved pricing, product mix and volumes
for utility poles.
Net income was $79 million, or $1.17 per diluted
share, versus net income of $54 million, or $0.78 per share, last
year.
NINE-MONTH
RESULTSSales amounted to $2,018 million, versus $1,744
million for the corresponding period last year. Excluding the
positive impact of the currency conversion of $23 million,
pressure-treated wood sales increased by $231 million, or 14%, and
logs and lumber sales grew by $20 million, or 25%. The
year-over-year sales growth in pressure-treated wood was supported
by strong demand and improved pricing in the three core product
categories, particularly for residential lumber, while the logs and
lumber increase in sales was largely due to the robust lumber
market in the third quarter.
The improvement in sales led to an increase in
gross profit, which grew 25% to $361 million, compared to the prior
year period. Operating income was $259 million, or 12.8% of sales,
compared with $201 million, or 11.5% of sales last year. EBITDA
rose to $315 million, up 24%, compared to $254 million reported in
the prior year period, reflecting an EBITDA margin of 15.6%. Net
income totaled $176 million, or $2.60 per diluted share, versus
$135 million, or $1.96 per diluted share last year.
STRONG
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operations of $148 million in the
third quarter of 2020. The Company deployed its liquidity to reduce
debt, repurchase shares, pay dividends and invest in property,
plant and equipment, as well as in the implementation of a new ERP
system. As at September 30, 2020, the Company’s long-term debt
stood at $520 million and the net debt to trailing 12-month EBITDA
decreased to 1.4x.
NORMAL COURSE ISSUER BID
(“NCIB”) On August 4, 2020, the Toronto Stock Exchange
accepted Stella-Jones’ Notice of Intention to Make a Normal Course
Issuer Bid (“Notice”). Pursuant to the Notice, Stella-Jones may,
during the twelve-month period commencing August 10, 2020 and
ending August 9, 2021, purchase for cancellation, up to 2,500,000
Common Shares.
In the three-month period ended September 30,
2020, the Company repurchased 334,653 common shares for total
consideration of $15 million.
QUARTERLY DIVIDEND On November
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 December 17, 2020 to shareholders of record at the close
of business on December 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 June 30, 2020 with respect to annual EBITDA for 2020 is
revised to reflect the stronger than expected third quarter sales
growth in the residential lumber and utility poles product
categories. The Company forecasts EBITDA for 2020 to be in the
range of $365 million to $375 million and EBITDA margin to be
higher compared to 2019.
While the impact of the on-going COVID-19
pandemic on the demand for the Company’s products remains
uncertain, based on the Company’s current expectations and assuming
stable currencies, management is forecasting healthy sales for
2021. Utility poles sales are expected to increase in the mid to
high-single digits, compared to 2020, while railway ties and
industrial product sales are projected to be relatively comparable
to those generated in 2020. The demand for new construction and
outdoor renovation projects is expected to be strong in 2021, which
should continue to benefit sales in the Company’s residential
lumber product category.
PUBLICATION OF ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (“ESG”) REPORTOn November 4th, the Company
published its 2019 ESG report. It can be found on the Stella-Jones
website at
www.stella-jones.com/en-CA/investor-relations/environmental-social-governance.
CONFERENCE CALLStella-Jones
will hold a conference call to discuss these results on November 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 1800-585-8367 and
entering the passcode 9923219. This recording will be available on
Thursday, November 5, 2020 as of 1:00 p.m. Eastern Daylight Time
until 11:59 p.m. Eastern Daylight Time on Thursday, November 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 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
third quarter ended
September 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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