Stella-Jones Inc. (TSX: SJ) (“Stella-Jones” or the “Company”) today
announced financial results for its second quarter ended June 30,
2021.
“We are very pleased with our second quarter
performance, which included strong sales growth in each of our
product categories. Volume gains in utility poles and railway ties,
combined with unprecedented high market prices of lumber, drove
sales to over $900 million and EBITDA to a record quarter,” stated
Éric Vachon, President and CEO of Stella-Jones.
“These results allowed us to generate operating
cash flows of $173 million, reduce the indebtedness related to the
seasonal investment in working capital in the first quarter and
return $38 million to shareholders during the quarter. While we
have revised the full-year EBITDA forecast to reflect the
normalization of lumber market conditions, we foresee solid EBITDA
growth in 2021 and are confident that our leading utility poles and
railway ties core product categories will continue to deliver
sustained growth. With our financial strength, scale and focus on
execution and innovation, we are uniquely positioned to capitalize
on growth opportunities and generate solid returns for our
shareholders,” concluded Mr. Vachon.
Financial Highlights(in millions
of Canadian dollars, except per share data and margin) |
Q2-21 |
|
Q2-20 |
|
YTD Q2-21 |
|
YTD Q2-20 |
|
Sales |
903 |
|
768 |
|
1,526 |
|
1,276 |
|
Gross profit(1) |
197 |
|
131 |
|
309 |
|
214 |
|
Gross profit margin(1) |
21.8% |
|
17.1% |
|
20.2% |
|
16.8% |
|
EBITDA(1) |
180 |
|
120 |
|
279 |
|
183 |
|
EBITDA margin (1) |
20.0% |
|
15.6% |
|
18.3% |
|
14.4% |
|
Operating income |
161 |
|
101 |
|
243 |
|
146 |
|
Operating income margin(1) |
17.8% |
|
13.2% |
|
15.9% |
|
11.4% |
|
Net income for the period |
115 |
|
69 |
|
171 |
|
97 |
|
Earnings per share - basic and diluted |
1.76 |
|
1.02 |
|
2.61 |
|
1.43 |
|
Weighted average shares outstanding (basic, in ‘000s) |
65,356 |
|
67,479 |
|
65,532 |
|
67,474 |
|
(1) 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
RESULTS
Sales for the second quarter of 2021 reached
$903 million, up $135 million, versus sales of $768 million for the
corresponding period last year. Excluding the negative impact of
the currency conversion of $63 million, pressure-treated wood sales
rose $136 million, or 18%, driven by growth in the Company’s three
core product categories: residential lumber benefited from the
unprecedented high market prices of lumber, utility poles benefited
from increased volumes, upward price adjustments and an improved
sales mix while railway ties sales growth stemmed from volume
gains. The rise in market lumber prices during the quarter also
explains the increase in sales of the logs and lumber product
category.
Pressure-treated
wood products:
- Utility
poles (26% of
Q2-21 sales): Utility poles sales
increased to $236 million, compared to sales of $230 million in the
corresponding period last year. Excluding the currency conversion
effect, utility poles sales increased by $30 million, or 13%,
driven by improved maintenance demand for distribution poles,
upward price adjustments and a better sales mix, including the
impact of additional fire-resistant wrapped pole sales volumes.
This growth was partially offset by less project-related
volumes.
- Railway ties (24% of Q2-21
sales): Railway ties sales were $216 million, compared to
sales of $225 million in the same period last year. Excluding the
currency conversion effect, railway ties sales increased $15
million, or 7%, largely attributable to higher volumes for Class 1
customers due to the timing of shipments. The higher sales volumes
were offset in part by pricing pressures for non-Class 1 customers,
which eased somewhat during the quarter.
- Residential lumber (37% of
Q2-21 sales): Sales in the residential lumber category
rose to $330 million, compared to sales of $257 million in the
corresponding period last year. Excluding the currency conversion
effect, residential lumber sales increased $84 million, or 33%,
driven by the exceptional rise in the market price of lumber. This
increase was partially offset by lower sales volumes attributable
to softening consumer demand.
- Industrial products (4% of
Q2-21 sales): Industrial product sales were $36 million,
compared to sales of $33 million in the second quarter last year,
largely due to more timber and piling projects, offset in part by
lower project-related bridge and crossing sales.
Logs and
lumber:
- Logs
and lumber (9%
of Q2-21 sales):
Sales in the logs and lumber product category were $85 million, up
over three-fold compared to $23 million in the corresponding period
last year. The exceptional increase is due to the rise in the
market price of lumber during the quarter.
The strong sales growth led to an increase in
gross profit, which grew 50% to $197 million, compared to the prior
year period, while operating income was $161 million, or 17.8% of
sales, compared with $101 million, or 13.2% of sales last year.
EBITDA rose to $180 million, up 50%, compared to $120 million
reported in the second quarter of 2020. The increase was primarily
driven by the rise in sales prices for residential lumber, which
exceeded the higher cost of lumber, improved pricing and volume
gains for utility poles, partially offset by lower residential
lumber demand.
Net income for the second quarter of 2021 was
$115 million, or $1.76 per share, compared to net income of $69
million, or $1.02 per share, in the corresponding period of
2020.
SIX-MONTH
RESULTSFor the first six months of 2021, sales
amounted to $1.53 billion, versus $1.28 billion for the
corresponding period last year. Excluding the negative impact of
the currency conversion of $86 million, pressure-treated wood sales
rose by $238 million, or 19%, and logs and lumber sales grew by
$100 million. The year-over-year sales growth in pressure-treated
wood stems from the significant rise in the market prices of lumber
offset in part by a decrease in residential lumber volumes. Sales
also grew due to the increased demand, upward pricing adjustments
and an improved sales mix for utility poles, as well as, higher
volumes for railway ties which outweighed the pricing pressures for
the non-Class 1 business. The exceptional increase in logs and
lumber sales stems from the unprecedented increase in market prices
of lumber.
The improvement in sales led to an increase in
gross profit, which grew 44% to $309 million, compared to the prior
year period. Operating income was $243 million, or 15.9% of sales,
compared with $146 million, or 11.4% of sales last year. EBITDA
rose to $279 million, up 52%, compared to $183 million reported in
the prior year period, reflecting an EBITDA margin of 18.3%. Net
income totaled $171 million, or $2.61 per share, versus $97
million, or $1.43 per share last year.
LIQUIDITY AND
CAPITAL RESOURCESDuring the
second quarter ended June 30, 2021, Stella-Jones used the cash
generated from operations of $173 million to invest in capital
expenditures, reduce its indebtedness, and return capital to
shareholders with dividends of $24 million and share repurchases of
$14 million.
In April 2021, the Company entered into a credit
agreement pursuant to which senior unsecured credit facilities of
up to US$350 million were made available by a syndicate of lenders
within the U.S. farm credit system, including a term loan facility
of up to US$250 million and a revolving credit facility of US$100
million.
During the quarter, the Company repaid in full
its short-term indebtedness and increased its long-term debt by $26
million. The Company’s long-term debt, including the current
portion, stood at $682 million as at June 30, 2021 and the net
debt-to-trailing 12-month EBITDA ratio was 1.7x.
Subsequent to quarter-end, the Company obtained
a one-year extension of its unsecured syndicated revolving credit
facility to February 27, 2026.
NORMAL COURSE
ISSUER BIDIn the three-month
period ended June 30, 2021, the Company repurchased 296,307 common
shares for cancellation in consideration of $14 million under its
Normal Course Issuer Bid ("NCIB"). For the six-month period ended
June 30, 2021, the Company repurchased 1,097,568 common shares for
cancellation in consideration of $51 million. Since the beginning
of the NCIB on August 10, 2020, the Company repurchased 2,429,023
common shares for cancellation in consideration of $111 million. As
at June 30, 2921, the Company had unsettled transactions to
repurchase 33,549 common shares for a cash consideration of one
million dollars.
Under its NCIB, as amended effective March 15,
2021, the Company may repurchase for cancellation a total of
3,500,000 common shares during the 12-month period commencing
August 10, 2020 and ending August 9, 2021.
QUARTERLY
DIVIDENDOn August 2, 2021 the Board of Directors
declared a quarterly dividend of $0.18 per common share payable on
September 17, 2021 to shareholders of record at the close of
business on September 1, 2021. This dividend is designated to be an
eligible dividend.
UPDATED
OUTLOOK
The Company has revised its full-year financial
forecast to reflect the softening of residential lumber demand in
the second half of 2021. Stella-Jones continues to foresee solid
EBITDA growth in 2021 compared to 2020 but expects EBITDA to be in
the range of $410 to $440 million, compared to the previously
disclosed guidance of $450 to $480 million. The margin expansion
realized in the first half of 2021 is projected to offset the
margin compression expected from declining market prices of lumber
until the Company averages down its higher cost of inventory. As a
result, the Company anticipates EBITDA margin as a percentage of
sales for 2021 to remain comparable to 2020.
Excluding the impact of the currency conversion,
the Company is projecting sales growth in the low-to-high teens for
2021 compared to 2020, down from the projected increase of 15% to
low 20% previously disclosed. The decrease in the sales growth
projection largely stems from the expected slowdown in consumer
demand for residential lumber. Residential lumber sales are
expected to increase 15% to 20% compared to 2020, down from the
previously disclosed forecasted increase of 45% to 65%. While the
sales growth forecast for utility poles remains unchanged with a
high-single digit increase compared to 2020, railway ties and
industrial products sales are projected to increase in the
low-single digit range. For railway ties, the current pricing
headwinds are expected to ease by the end of the year and the
Company believes it will continue to benefit from increased
maintenance activity.
This updated guidance anticipates a reduction of
approximately $130 million in sales from the depreciation of the
value of the U.S. dollar relative to the Canadian dollar to C$1.25
per U.S. dollar.
The Company’s financial guidance is based on its
current outlook for 2021 and takes into account a number of
economic and market assumptions. Please refer to the Company's
Management’s Discussion and Analysis for a complete list of
assumptions.
CONFERENCE
CALLStella-Jones will hold a conference call to
discuss these results on August 3, 2021, at 10:00 a.m. Eastern
Daylight Time. Interested parties can join the call by dialing
1-647-362-9671 (Toronto or overseas) or 1-800-599-2055 (elsewhere
in North America). Parties unable to call in at this time may
access a recording by calling 1-800-770-2030 and entering the
passcode 4899896. This recording will be available on Tuesday,
August 3, 2021 as of 1:00 p.m. Eastern Daylight Time until 11:59
p.m. Eastern Daylight Time on Tuesday, August 10, 2021.
NON-IFRS
FINANCIAL MEASURESGross profit,
gross profit margin, EBITDA (operating income before depreciation
of property, plant and equipment, depreciation of right-of-use
assets and amortization of intangible assets), EBITDA margin,
operating income margin, net debt and net debt-to-EBITDA 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 second quarter
ended June 30, 2021 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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