Stella-Jones Inc.
TSX : SJ

Stella-Jones Inc.

March 12, 2010 07:00 ET

Stella-Jones Reports Fourth Quarter and Year-End Results

Ninth consecutive year of record sales and net earnings

MONTREAL, QUEBEC--(Marketwire - March 12, 2010) - Stella-Jones Inc. (TSX:SJ)

  • Sales of $411.1 million, up 6.8% from $384.8 million last year
  • Net earnings of $30.1 million compared with $28.5 million last year, up 5.3%
  • Diluted EPS of $2.37, up from $2.25 in 2008
  • Total debt down $44.1 million compared to last year

Stella-Jones Inc. (TSX: SJ) today announced financial results for its fourth quarter and fiscal year ended December 31, 2009. 

Financial highlights (in thousands of dollars, except per share data) Quarters ended Dec. 31, Years ended Dec. 31,
  2009 2008 2009 2008
Sales 65,390 83,731 411,119 384,822
Gross profit 10,614 18,355 76,669 78,398
Cash flow from operations (1) 6,698 12,070 40,936 41,055
Net earnings for the period 3,041 6,327 30,069 28,547
  Per share - basic ($) 0.24 0.50 2.38 2.29
  Per share - diluted ($) 0.24 0.50 2.37 2.25
Weighted average shares outstanding (basic, in '000s) 12,682 12,562 12,638 12,483
(1)Before changes in non-cash working capital components.

2009 RESULTS

Sales reached $411.1 million, an increase of $26.3 million, or 6.8% from last year's sales of $384.8 million. This increase reflects a full-year's contribution, in 2009, from The Burke-Parsons-Bowlby Corporation ("BPB"), compared with nine months in 2008. This represented additional sales of $37.3 million. Organically, sales decreased approximately 7.0%, reflecting weaker demand and softer pricing for the Company's core products, mainly in the second half of 2009. When compared with the previous year, fluctuations in the value of the Canadian dollar, Stella-Jones' reporting currency, versus the U.S. dollar, increased the value of U.S. dollar denominated sales by about $17.7 million.

Railway tie sales amounted to $185.1 million, up 2.2% over last year, as a result of a full year from the BPB operations, offset by weaker industry demand in North America and softer pricing as 2009 progressed. Utility pole sales amounted to $149.7 million, an increase of 8.6% over 2008, due to higher sales of transmission poles in the U.S. and greater market penetration. Industrial lumber sales rose 35.5% to $44.8 million due to solid demand for marine applications in Eastern Canada and a full-year's contribution from the BPB operations, while sales of consumer lumber marginally declined 3.7% to $31.5 million.

Gross profit was $76.7 million or 18.6% of sales, compared with $78.4 million or 20.4% of sales last year. The decrease in gross profit, both in dollars and as a percentage of sales, essentially reflects softer pricing in most product categories resulting from lower demand. This was partly offset by greater efficiencies from the BPB integration.

Net earnings for 2009 increased 5.3% to $30.1 million or $2.37 per share, fully diluted, compared with $28.5 million or $2.25 per share, fully diluted, in 2008. Cash flow from operating activities before changes in non-cash working capital components remained essentially stable at $40.9 million.

Stella-Jones' balance sheet strengthened as 2009 progressed. As at December 31, 2009, the Company's long-term debt, including the current portion, amounted to $87.1 million, representing a ratio of total long-term debt to shareholders' equity of 0.48:1, down from 0.53:1 three months earlier and 0.66:1 at the end of 2008. In addition, a strong cash flow generation and better working capital resulted in a $25.4 million decrease in short-term bank indebtedness, which stood at $56.1 million at the end of 2009.

"Stella-Jones achieved its ninth consecutive year of sales and net earnings growth despite challenges resulting from economic conditions," said Brian McManus, President and Chief Executive Officer of Stella-Jones. "This performance speaks highly about the quality of our people and our operating assets. Enhanced efficiencies across our continental plant network helped to maintain margins at satisfactory levels, while our solid cash flow generation and better working capital enabled us to substantially reduce our short- and long-term debt." 

FOURTH-QUARTER RESULTS

Sales totalled $65.4 million in the fourth quarter of 2009 compared with $83.7 million for the corresponding period in 2008. This decrease is mainly attributable to weak industry demand and soft pricing in most product categories. The stronger year-over-year value of the Canadian dollar, Stella-Jones' reporting currency, decreased the value of U.S. dollar denominated sales by approximately $2.8 million. A fire at the New Westminster, British Columbia facility on November 6, 2009 had no impact on sales. Although local operations were suspended for 12 days, no customer shipments were lost, as the Company's inventory was sufficient and wood treating operations were carried out at the Company's other regional facilities.

Railway tie sales were $22.1 million, down from $34.9 million a year earlier, reflecting lower advanced deliveries to Class 1 railway operators for their regular 2010 maintenance programs, as purchases were deferred to keep tie inventory levels down. Utility pole sales reached $31.1 million, compared with $35.4 million last year mainly due to competitive pricing. Industrial lumber sales amounted to $10.1 million, stable in comparison with $10.2 million a year earlier, as stronger sales in Eastern Canada were offset by lower sales in Western Canada and the United States. Finally, consumer lumber sales reached $2.1 million, versus $3.2 million last year.

Gross profit in the fourth quarter of 2009 totalled $10.6 million, or 16.2% of sales, compared with $18.4 million, or 21.9% of sales, a year earlier. Net earnings reached $3.0 million, or $0.24 per share, fully diluted, versus net earnings of $6.3 million, or $0.50 per share, fully diluted, last year. Cash flow from operating activities before changes in non-cash working capital components was $6.7 million, down from $12.1 million a year earlier.

"The decrease in gross profit, both in dollars and as a percentage of sales, principally reflects softer pricing in most markets, a less favourable product mix, and lower volume that negatively affected the absorption of fixed costs in this period customarily characterized by lower seasonal demand," said George Labelle, Senior Vice-President and Chief Financial Officer.

SEMI-ANNUAL DIVIDEND OF $0.18 PER SHARE

The Board of Directors declared a semi-annual dividend of $0.18 per share on the outstanding common shares of Stella-Jones, payable on May 14, 2010 to shareholders of record at the close of business on April 2, 2010.

OUTLOOK

Stella-Jones anticipates sustained demand in 2010, and gradual recovery in the Company's core markets. In the railway tie category, demand declines and pricing pressures appear to have bottomed out, while demand is holding in the utility pole market although pricing pressures continue to be experienced. Government stimulus measures may drive greater demand for the Company's products, which are integral to infrastructure in the railway and electrical transmission and distribution industries.

"We regard the synergies to be obtained from a successful integration of the proposed Tangent Rail Corporation ("Tangent") acquisition as a key driver of improved profitability going forward. At the same time, to achieve organic growth, we will be seeking new market opportunities as we realize the full potential of past acquisitions. In the year ahead, we will also stay focused on operating efficiencies, cash generation, and preserving the strength of our balance sheet. Accordingly, we are confident that 2010 will mark another significant milestone in our continental growth should the proposed Tangent acquisition close as anticipated," concluded Mr. McManus.

CONFERENCE CALL

Stella-Jones will hold a conference call to discuss these results on Friday, March 12, 2010, 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 1-800-642-1687 and entering the passcode 58013948. This tape recording will be available on Friday, March 12, 2010 as of 12:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, March 19, 2010.

NON-GAAP MEASURE

Cash flow from operations is a financial measure not prescribed by Canadian generally accepted accounting principles ("GAAP") and is not likely to be comparable to similar measures presented by other issuers. Management considers it 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 North American producer and marketer of industrial pressure treated wood products, specializing in the production of railway ties and timbers as well as wood poles supplied to electrical utilities and telecommunications companies. The Company also provides treated consumer lumber products and customized services to lumber retailers and wholesalers for outdoor applications. Other products include marine and foundation pilings, construction timbers, highway guardrail posts and treated wood for bridges. 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: Complete unaudited fourth-quarter and year-end financial statements are available on Stella-Jones' website at www.stella-jones.com

Contact Information

  • Source :
    Stella-Jones Inc.
    or
    Relations avec les investisseurs :
    Stella-Jones Inc.
    George T. Labelle, C.A.
    Premier vice-président et chef des finances
    514-934-5327 (FAX)
    514-934-8665
    glabelle@stella-jones.com
    or
    MaisonBrison
    Martin Goulet, CFA
    514-731-0000
    martin@maisonbrison.com