Stella-Jones Inc. (TSX: SJ) (“Stella-Jones” or the “Company”) today
announced financial results for its fourth quarter and year ended
December 31, 2022.
“Stella-Jones concluded 2022 on a very strong
note, and I am proud of the robust performance we delivered as a
Company,” said Eric Vachon, President and CEO of Stella-Jones. “Our
fourth quarter sales continued their upward trajectory, reflecting
more than a 25% organic increase in utility poles sales, sustained
growth in railway ties sales and better than anticipated
residential lumber sales. Our exceptional results in 2022 can be
credited to several contributors, from the efforts of our dedicated
team to our expansive North American network. In a year of
challenging market and macroeconomic conditions, our proven ability
to procure the fibre required to meet customer demand and pass
through cost increases were true keystones of our success, and a
testament to the resilient character of our business model.”
“Our strong performance was further bolstered by
the contributions of our most recent accretive acquisitions. The
timely addition of Cahaba has allowed us to seize growth
opportunities, while Texas Electric Cooperatives' pole treating
facility represents a strategic addition to our network, and I am
very pleased with its contribution thus far,” added Mr. Vachon.
“2022 marks a 22nd consecutive year of increased sales for
Stella-Jones and the completion of the first year of our three-year
plan, marked by exceptional utility poles sales growth, which we
expect will continue in 2023. From where we stand, we are well on
our way to meet or exceed our objectives, and remain favourably
positioned for the future, with continued growth in sales,
profitability and in turn, shareholder value,” he concluded.
Financial Highlights (in millions of Canadian
dollars, except per share data and margins) |
Q4-22 |
Q4-21 |
2022 |
2021 |
Sales |
665 |
545 |
3,065 |
2,750 |
Gross profit(1) |
112 |
65 |
524 |
456 |
Gross profit margin(1) |
16.8% |
11.9% |
17.1% |
16.6% |
EBITDA(1) |
87 |
52 |
448 |
400 |
EBITDA margin(1) |
13.1% |
9.5% |
14.6% |
14.5% |
Operating income |
61 |
32 |
359 |
326 |
Operating income margin(1) |
9.2% |
5.9% |
11.7% |
11.9% |
Net income for the period |
36 |
22 |
241 |
227 |
Earnings per share - basic and diluted |
0.61 |
0.34 |
3.93 |
3.49 |
Weighted average shares outstanding (basic, in ‘000s) |
59,449 |
64,292 |
61,421 |
65,002 |
(1) Refer to the section "Non-GAAP and
other financial measures" in this press release.
FOURTH QUARTER
RESULTS
Sales for the fourth quarter of 2022 increased
by 22% to $665 million, compared to sales of $545 million for the
same period in 2021. Excluding the $34 million favourable impact of
currency conversion and the contribution from the acquisitions of
Cahaba Pressure Treated Forest Products, Inc. and Cahaba Timber,
Inc. (together "Cahaba") and Texas Electric Cooperatives, Inc.
(“TEC”) of $19 million, pressure-treated wood sales rose $60
million, or 12%. The growth was driven by the sales of the
Company’s infrastructure-related businesses, namely utility poles,
railway ties and industrial products, which grew by 17% compared to
the same period last year. Higher pricing across all product
categories, particularly utility poles and railway ties, and
increased demand for utility poles were partially offset by lower
railway ties and residential lumber volumes.
Pressure-treated wood
products:
- Utility poles
(49% of
Q4-22 sales): Utility poles sales
amounted to $326 million, up from $227 million for the same period
last year. Excluding the currency conversion effect and the
contribution from the acquisitions, sales increased 27%, mainly
driven by higher pricing and, to a lesser extent, increased
volumes.
- Railway ties (24% of Q4-22
sales): Sales of railway ties amounted to $161 million,
versus $147 million in the corresponding period last year.
Excluding the currency conversion effect, sales of railway ties
increased by 2%, attributable to improved pricing for both Class 1
and non-Class 1 business, largely offset by lower volumes,
particularly from Class 1 customers.
- Residential lumber
(15% of
Q4-22 sales): Residential lumber
sales totaled $100 million, down from $107 million in the fourth
quarter of 2021. Excluding the currency conversion effect, sales
decreased 8%, attributable to lower sales volumes as pricing was
relatively unchanged compared to the fourth quarter of 2021.
- Industrial products
(5% of
Q4-22 sales): Industrial product
sales amounted to $32 million, up compared to the $25 million of
sales generated a year ago, primarily due to higher project-related
bridge and crossing sales.
Logs and lumber:
- Logs and lumber
(7% of
Q4-22 sales): Logs and lumber
sales totaled $46 million, up 13% compared to the same period last
year, mainly attributable to higher log sales.
Gross profit(1) was $112 million in the fourth
quarter of 2022, versus $65 million, in the fourth quarter of 2021,
representing a margin(1) of 16.8% and 11.9% respectively. The
increase was primarily attributable to pricing gains outpacing cost
increases in the fourth quarter of 2022 for certain
infrastructure-related product categories, as well as the
improvement in the gross profit of residential lumber compared to
the marginal gross profit generated in the fourth quarter of last
year. The gross profit of residential lumber in the fourth quarter
of 2021 was impacted by the drop in demand in the second half of
the year and the resulting higher cost of inventory on hand.
Acquisitions and the effect of the positive currency conversion
further contributed to the higher gross profit in the fourth
quarter of 2022, compared to the same period last year.
Operating income totaled $61 million in the
fourth quarter of 2022 versus operating income of $32 million in
the corresponding period of 2021 while EBITDA(1) increased to $87
million, compared to $52 million reported in the fourth quarter of
2021.
Net income for the fourth quarter of 2022 was
$36 million, or $0.61 per share, compared to net income of $22
million, or $0.34 per share, in the corresponding period of
2021.
(1) Refer to the section "Non-GAAP and other
financial measures" in this press release.
2022
RESULTS
Sales in 2022 were up 11% to $3,065 million,
compared to $2,750 million in 2021. Excluding the impact of the
Cahaba and TEC acquisitions of $66 million and the currency
conversion of $73 million, pressure-treated wood sales rose $206
million or 8%. Infrastructure-related sales grew by 14%, while
residential lumber sales were lower compared to the record high
sales in 2021. Pricing gains across all infrastructure-related
product categories and increased maintenance and project-related
demand for utility poles were partially offset by lower sales
volumes for railway ties and residential lumber. The decrease in
logs and lumber sales was largely driven by lower lumber sales
activity compared to the prior year.
Pressure-treated wood
products:
- Utility poles
(40% of
2022 sales): Utility poles sales
increased to $1,227 million in 2022, compared to sales of $925
million in 2021. Excluding the contribution from the acquisitions
of Cahaba and TEC in 2022, and the currency conversion effect,
utility poles sales increased by $197 million, or 21%, driven by
upward sales price adjustments in response to higher costs and
increased maintenance and project-related demand, particularly for
Southern Yellow Pine poles in the U.S. south east.
- Railway ties
(24% of
2022 sales): Railway ties sales
were $750 million in 2022, compared to sales of $700 million in
2021. Excluding the currency conversion effect, railway ties sales
increased $27 million, or 4%, due to favourable sales price
adjustments, largely to cover higher fibre and preservative costs,
offset in part by reduced maintenance demand of certain Class 1
customers.
- Residential lumber
(24% of
2022 sales): Sales in the
residential lumber category decreased to $744 million in 2022,
compared to sales of $773 million in 2021. Excluding the currency
conversion effect, residential lumber sales decreased $36 million,
or 5%, driven by the slower start to the 2022 season and lower
pricing compared to the market-driven record prices in the first
half of 2021. While sales in 2022 were lower compared to 2021, they
were up over 55% compared to sales of $471 million generated in the
pre-pandemic period of 2019.
- Industrial products (5% of
2022 sales): Industrial product sales increased to $143
million in 2022 compared to sales of $121 million in 2021.
Excluding the currency conversion effect, industrial product sales
rose by $18 million, or 15%, largely stemming from increased sales
for pilings, timbers and bridges.
Logs and lumber:
- Logs and lumber
(7% of
2022 sales): Sales in the logs
and lumber product category were $201 million in 2022, down from
$231 million in 2021. The decrease in sales was largely due to
lower lumber trading activity compared to last year.
Gross profit(1) was $524 million in 2022
compared to $456 million in 2021, representing a margin(1) of 17.1%
and 16.6%, respectively. The increase in gross profit, in absolute
dollars and as a percentage of sales, was largely attributable to
favourable price adjustments realized for infrastructure-related
product categories, which outpaced higher costs. The increase in
absolute dollars was partially offset by lower demand for railway
ties, residential lumber and logs and lumber. The full year
contribution of the Cahaba acquisition and the positive impact of
the currency conversion also benefited gross profit for the year
ended December 31, 2022.
Operating income totaled $359 million in 2022
versus operating income of $326 million in 2021 while EBITDA(1)
increased 12% to $448 million in 2022, compared to $400 million in
2021. Despite the higher EBITDA, the EBITDA margin(1) in 2022
remained relatively unchanged at 14.6% versus 14.5% in 2021 as it
was impacted by other losses recognized in the year. Excluding
other losses of eight million dollars, primarily related to the
retirement of idled equipment, the Company's EBITDA margin was
closer to its target of 15% in 2022.
(1) Refer to the section "Non-GAAP and other financial measures"
in this press release.
LIQUIDITY AND CAPITAL
RESOURCES
During the year ended December 31, 2022,
Stella-Jones generated cash from operations of $255 million. It
used its operating cashflows and available credit to invest in
capital expenditures, acquire two businesses, Dinsmore Trucking
group and TEC, and return $230 million of capital to shareholders
through share buybacks and the payment of dividends. In 2022, the
dividend paid amounted to $0.80 per share, representing an 11%
increase compared to 2021. As at December 31, 2022, the net
debt-to-EBITDA ratio(1) was 2.5x and the Company had available
liquidity of $259 million (US$191 million).
Subsequent to year-end, the Company amended and
restated the U.S. Farm Credit Agreement to increase the amount
available under the credit facilities to US$550 million and to
extend the term of U.S. Farm Revolving Credit Facility to March 3,
2028.
NORMAL COURSE ISSUER BID
On November 8, 2022, the TSX accepted
Stella-Jones’ Notice of Intention to Make a Normal Course Issuer
Bid ("NCIB") to purchase for cancellation up to 5,000,000 common
shares during the 12-month period commencing November 14, 2022 and
ending November 13, 2023, representing approximately 9.6% of the
public float of its common shares.
In the three-month period ended December 31,
2022, the Company repurchased 828,257 common shares for
cancellation in consideration of $36 million, under its NCIB then
in effect. In 2022, the Company repurchased 4,696,312 common shares
for cancellation in consideration of $181 million, under its NCIBs
then in effect.
QUARTERLY DIVIDEND INCREASED 15%
TO $0.23 PER SHARE
On March 7, 2023, the Board of Directors
declared a quarterly dividend of $0.23 per common share payable on
April 21, 2023 to shareholders of record at the close of
business on April 3, 2023. This dividend is designated to be
an eligible dividend.
(1) Refer to the section "Non-GAAP and other financial measures"
in this press release.
2022-2024 FINANCIAL OBJECTIVES: PROGRESS
IN 2022
In 2022, the Company made important strides in
the achievement of the Company’s 2022-2024 financial objectives, as
summarized in the table below. Its strong 2022 performance places
the Company on a solid footing for 2023 and positions it favourably
to meet or exceed the financial objectives set for 2022 to 2024.
The Company will provide more insights on the above at its upcoming
Investor Day on May 25, 2023 in Toronto, Ontario.
(in millions of dollars, except percentages) |
2022-2024 Financial Objectivespublished
March 9, 2022 (2) |
2022 |
Result |
Sales |
$2,700-$3,000 |
$3,065 |
Target met |
Infrastructure-Related Businesses |
75-80% of sales |
69% |
In Progress |
Residential Lumber |
20-25% of sales |
24% |
Target met |
EBITDA
margin (1) |
> 15% |
14.6% |
In Progress |
Utility
Poles Growth Capex |
$90-$100 |
$33 |
In Progress |
Return to
Shareholders |
$500-$600 |
$230 |
In Progress |
Net Debt-to-EBITDA (1) |
2.0x-2.5x |
2.5x |
Target met |
(1) Refer to the section "Non-GAAP and other
financial measures" in this press release.(2) Refer to the 2021
Annual MD&A for further details and assumptions used in
preparing the 2022-2024 financial objectives.
CONFERENCE CALL
Stella-Jones will hold a conference call to
discuss these results on March 8, 2023, at 10:00 a.m. Eastern
Time. Interested parties can join the call by dialing
1-416-764-8646 (Toronto or overseas) or 1-888-396-8049 (elsewhere
in North America). A live audio webcast of the conference call will
be available on the company’s website, on the Investor relations
section’s home page or here: https://www.gowebcasting.com/12423.
The replay of the webcast will remain available at the same link
until 11:59 p.m., March 15, 2023. Parties unable to call in at this
time may access a recording by calling 1-877-674-7070 and entering
the passcode 447456. This recording will be available on Wednesday,
March 8, 2023 as of 1:00 p.m. until 11:59 p.m. on Wednesday,
March 15, 2023.
ABOUT STELLA-JONES
Stella-Jones Inc. (TSX: SJ) is North America’s
leading producer of pressure-treated wood products. It supplies the
continent’s major electrical utilities and telecommunication
companies with wood utility poles and North America’s Class 1,
short line and commercial railroad operators with railway ties and
timbers. Stella-Jones also provides industrial products, which
include wood for railway bridges and crossings, marine and
foundation pilings, construction timbers and coal tar-based
products. Additionally, the Company manufactures and distributes
premium treated residential lumber and accessories to Canadian and
American retailers for outdoor applications, with a significant
portion of the business devoted to servicing the Canadian market
through its national manufacturing and distribution network. The
Company’s common shares are listed on the Toronto Stock
Exchange.
CAUTION REGARDING FORWARD-LOOKING
INFORMATION
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 items include, among others: general
political, economic and business conditions, evolution in customer
demand for the Company's products and services, product selling
prices, availability and cost of raw materials, climate change,
failure to recruit and retain qualified workforce, information
security breaches or other cyber-security threats, changes in
foreign currency rates, the ability of the Company to raise capital
and factors and assumptions referenced herein and in the Company’s
continuous disclosure filings. 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: The
audited consolidated financial statements for the year
ended December 31, 2022 as well
as management’s discussion and analysis are available on
Stella-Jones’ website at
www.stella-jones.com.
Head Office3100 de la Côte-Vertu Blvd., Suite
300Saint-Laurent, QuébecH4R 2J8 Tel.: (514) 934-8666Fax: (514)
934-5327 |
Exchange ListingsThe Toronto Stock ExchangeStock
Symbol: SJTransfer Agent and
RegistrarComputershare Investor Services Inc. |
Investor RelationsSilvana TravagliniSenior
Vice-President and Chief Financial OfficerTel.: (514) 934-8660Fax:
(514) 934-5327stravaglini@stella-jones.com |
Stella-Jones Inc. |
Consolidated Statements of Income |
|
(expressed in
millions of Canadian dollars, except earnings per common
share) |
|
For thethree-month
periodsended December 31, |
|
For theyearsended
December 31, |
|
2022 |
|
2021 |
|
2022 |
2021 |
|
$ |
|
$ |
|
$ |
$ |
Sales |
665 |
|
545 |
|
3,065 |
2,750 |
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
Cost of sales (including
depreciation and amortization (3 months - $21 (2021 - $17) and 12
months - $74 (2021 - $63)) |
553 |
|
480 |
|
2,541 |
2,294 |
Selling and administrative
(including depreciation and amortization (3 months - $5 (2021 - $3)
and 12 months - $15 (2021 - $11)) |
44 |
|
32 |
|
157 |
127 |
Other losses, net |
7 |
|
1 |
|
8 |
3 |
|
604 |
|
513 |
|
2,706 |
2,424 |
Operating
income |
61 |
|
32 |
|
359 |
326 |
|
|
|
|
|
Financial
expenses |
11 |
|
6 |
|
33 |
23 |
|
|
|
|
|
|
|
|
|
|
Income before income
taxes |
50 |
|
26 |
|
326 |
303 |
|
|
|
|
|
Income tax
expense |
|
|
|
|
Current |
15 |
|
(4 |
) |
79 |
64 |
Deferred |
(1 |
) |
8 |
|
6 |
12 |
|
|
|
|
|
|
14 |
|
4 |
|
85 |
76 |
|
|
|
|
|
Net
income |
36 |
|
22 |
|
241 |
227 |
|
|
|
|
|
Basic and diluted
earnings per common share |
0.61 |
|
0.34 |
|
3.93 |
3.49 |
Stella-Jones Inc. |
Consolidated Statements of Financial Position |
|
(expressed in
millions of Canadian dollars) |
|
|
2022 |
2021 |
|
$ |
$ |
Assets |
|
|
|
|
|
Current
assets |
|
|
Accounts receivable |
287 |
230 |
Inventories |
1,238 |
1,106 |
Income taxes receivable |
— |
9 |
Other current assets |
58 |
43 |
|
1,583 |
1,388 |
Non-current
assets |
|
|
Property, plant and
equipment |
755 |
629 |
Right-of-use assets |
160 |
138 |
Intangible assets |
171 |
158 |
Goodwill |
369 |
341 |
Derivative financial
instruments |
29 |
3 |
Other non-current assets |
6 |
8 |
|
3,073 |
2,665 |
Liabilities and
Shareholders’ Equity |
|
|
Current
liabilities |
|
|
Accounts payable and accrued
liabilities |
201 |
162 |
Income taxes payable |
7 |
1 |
Current portion of long-term
debt |
1 |
33 |
Current portion of lease
liabilities |
41 |
35 |
Current portion of provisions
and other long-term liabilities |
9 |
11 |
|
259 |
242 |
Non-current
liabilities |
|
|
Long-term debt |
940 |
701 |
Lease liabilities |
126 |
109 |
Deferred income taxes |
158 |
137 |
Provisions and other long-term
liabilities |
26 |
15 |
Employee future benefits |
7 |
13 |
|
1,516 |
1,217 |
Shareholders’
equity |
|
|
Capital stock |
194 |
208 |
Retained earnings |
1,192 |
1,161 |
Accumulated other
comprehensive income |
171 |
79 |
|
|
|
|
1,557 |
1,448 |
|
3,073 |
2,665 |
Stella-Jones Inc. |
Consolidated Statements of Cash Flows |
|
(expressed in
millions of Canadian dollars) |
|
2022 |
|
2021 |
|
|
$ |
|
$ |
|
Cash flows from (used
in) |
|
|
Operating
activities |
|
|
Net income |
241 |
|
227 |
|
Adjustments for |
|
|
Depreciation of property,
plant and equipment |
31 |
|
25 |
|
Depreciation of right-of-use
assets |
42 |
|
38 |
|
Amortization of intangible
assets |
16 |
|
11 |
|
Financial expenses |
33 |
|
23 |
|
Income tax expense |
85 |
|
76 |
|
Other |
9 |
|
(12 |
) |
|
457 |
|
388 |
|
|
|
|
Changes in non-cash working
capital components |
|
|
Accounts receivable |
(43 |
) |
(19 |
) |
Inventories |
(75 |
) |
(21 |
) |
Other current assets |
(9 |
) |
(7 |
) |
Accounts payable and accrued
liabilities |
22 |
|
24 |
|
|
(105 |
) |
(23 |
) |
Interest paid |
(32 |
) |
(23 |
) |
Income taxes paid |
(65 |
) |
(91 |
) |
|
255 |
|
251 |
|
Financing
activities |
|
|
Proceeds from short-term
debt |
— |
|
125 |
|
Repayment of short-term
debt |
— |
|
(123 |
) |
Net change in revolving credit
facilities |
139 |
|
(13 |
) |
Proceeds from long-term
debt |
63 |
|
247 |
|
Repayment of long-term
debt |
(33 |
) |
(105 |
) |
Repayment of lease
liabilities |
(41 |
) |
(35 |
) |
Dividends on common
shares |
(49 |
) |
(47 |
) |
Repurchase of common
shares |
(180 |
) |
(108 |
) |
Other |
— |
|
1 |
|
|
(101 |
) |
(58 |
) |
Investing
activities |
|
|
Business combinations |
(46 |
) |
(129 |
) |
Purchase of property, plant
and equipment |
(97 |
) |
(48 |
) |
Additions of intangible
assets |
(11 |
) |
(16 |
) |
|
(154 |
) |
(193 |
) |
Net change in cash and
cash equivalents during the year |
— |
|
— |
|
Cash and cash
equivalents – Beginning of year |
— |
|
— |
|
Cash and cash
equivalents – End of year |
— |
|
— |
|
NON-GAAP AND OTHER FINANCIAL
MEASURES
This section includes information required by
National Instrument 52-112 – Non-GAAP and Other Financial Measures
Disclosure in respect of “specified financial measures” (as defined
therein).
The below-described non-GAAP measures have no
standardized meaning under GAAP and are not likely to be comparable
to similar measures presented by other issuers. The Company’s
method of calculating these measures may differ from the methods
used by others, and, accordingly, the definition of these non-GAAP
financial measures may not be comparable to similar measures
presented by other issuers. In addition, non-GAAP financial
measures should not be viewed as a substitute for the related
financial information prepared in accordance with GAAP.
Non-GAAP financial measures include:
- Gross profit:
Sales less cost of sales
- EBITDA: Operating
income before depreciation of property, plant and equipment,
depreciation of right-of-use assets and amortization of intangible
assets (also referred to as earnings before interest, taxes,
depreciation and amortization)
- Net debt: Sum of
long-term debt and lease liabilities (including the current
portion)
Non-GAAP ratios include:
- Gross profit
margin: Gross profit divided by sales for the
corresponding period
- EBITDA margin:
EBITDA divided by sales for the corresponding period
- Net
debt-to-EBITDA: Net debt divided by trailing 12-month
(TTM) EBITDA
Other specified financial measures include:
- Operating income
margin: Operating income divided by sales for the
corresponding period
Management considers these non-GAAP and other
financial measures to be useful information to assist knowledgeable
investors to understand the Company’s operating results, financial
position and cash flows as they provide a supplemental measure of
its performance. Management uses non-GAAP and other financial
measures in order to facilitate operating and financial performance
comparisons from period to period, to prepare annual budgets, to
assess the Company’s ability to meet future debt service, capital
expenditure and working capital requirements, and to evaluate
senior management’s performance. More specifically:
- Gross profit and gross
profit margin: The Company uses these financial measures
to evaluate its ongoing operational performance.
- EBITDA and EBITDA
margin: The Company believes these measures provide
investors with useful information because they are common industry
measures, used by investors and analysts to measure a company’s
ability to service debt and to meet other payment obligations, or
as a common valuation measurement. These measures are also key
metrics of the Company's operational and financial
performance.
- Net debt and net debt-to
EBITDA: The Company believes these measures are indicators
of the financial leverage of the Company.
The following tables present the reconciliations
of non-GAAP financial measures to their most comparable GAAP
measures.
Reconciliation of operating income to EBITDA(in
millions of dollars) |
Three-month periods endedDecember
31, |
Years endedDecember 31, |
|
2022 |
2021 |
2022 |
2021 |
Operating income |
61 |
32 |
359 |
326 |
Depreciation and amortization |
26 |
20 |
89 |
74 |
EBITDA |
87 |
52 |
448 |
400 |
Reconciliation of Long-Term Debt to Net Debt(in
millions of dollars) |
Years ended December
31, |
|
2022 |
2021 |
Long-term debt, including current portion |
941 |
734 |
Add: |
|
|
Lease liabilities, including current portion |
167 |
144 |
Net Debt |
1,108 |
878 |
EBITDA (TTM) |
448 |
400 |
Net Debt-to-EBITDA |
2.5x |
2.2x |
Source: |
Stella-Jones Inc. |
Stella-Jones Inc. |
|
|
|
Contacts: |
Silvana Travaglini,
CPA |
Stephanie
Corrente |
|
Senior Vice-President and Chief
Financial Officer Stella-Jones |
Director, Corporate
CommunicationsStella-Jones |
|
Tel.: (514) 934-8660 |
|
|
stravaglini@stella-jones.com |
communications@stella-jones.com |
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