Stella-Jones Inc.

Stella-Jones Inc.

November 13, 2009 07:00 ET

Stella-Jones Reports Third Quarter Results

MONTREAL, QUEBEC--(Marketwire - Nov. 13, 2009) - Stella-Jones Inc. (TSX:SJ)

- Sales of $104.7 million, compared with $111.8 million last year

- Gross profit margin of 18.8% of sales, versus 18.7% a year earlier

- Net earnings of $8.3 million compared with $6.9 million last year, up 21.5%

- Diluted EPS of $0.65, up from $0.54 in the third quarter of 2008

Stella-Jones Inc. (TSX:SJ) today announced financial results for its third quarter and nine-month period ended September 30, 2009.

Financial highlights
(in thousands of
dollars, except Quarters ended Sept. 30, Nine months ended Sept. 30
per share data) 2009 2008 2009 2008
Sales 104,671 111,828 345,729 301,091
Gross profit 19,636 20,875 66,055 60,043
Cash flow from
operations(1) 10,315 9,522 34,238 29,295
Net earnings for
the period 8,320 6,850 27,028 22,220
Per share -
basic ($) 0.66 0.55 2.14 1.79
Per share -
diluted ($) 0.65 0.54 2.13 1.75
Weighted average
outstanding (basic,
in '000s) 12,679 12,559 12,623 12,432
(1)Before changes in non-cash working capital components.

Sales in the third quarter reached $104.7 million, a decrease of $7.2 million, or 6.4% from last year's sales of $111.8 million, mainly reflecting lower demand in the railway tie product category. 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 approximately $3.6 million.

Railway tie sales amounted to $44.1 million, a decrease of 13.8% over last year, reflecting lower demand from both Class 1 and short-line railway operators during the period as well as softer pricing. Sales of utility poles were down marginally by 2.2% to $36.9 million, with decreases in sales of distribution poles offsetting increased revenues for transmission poles. Sales in the industrial lumber category reached $12.4 million, up from $10.5 million last year, following strong demand for marine applications in eastern Canada, while sales of consumer lumber decreased 9.2% to $11.3 million, primarily as a result of unfavourable summer weather in western Canada.

"Third quarter results continue to reflect lower activity in the railway tie market, as a result of the reduction in freight hauled," said Brian McManus, President and Chief Executive Officer of Stella-Jones. "In addition, certain special projects are awaiting qualification under government-driven infrastructure stimulus programs. Nevertheless, our firm commitment to reviewing the cost efficiency of our operations and optimizing capacity utilization across Stella-Jones' continental plant network further improved profitability."

Gross profit was $19.6 million or 18.8% of sales, compared with $20.9 million or 18.7% of sales last year. The decrease in gross profit dollars reflects lower sales, whereas the increase as a percentage of sales stems from more favourable raw material pricing versus a year ago and increased efficiencies from The Burke-Parsons-Bowlby Corporation ("BPB") integration helped to offset softer pricing in most markets.

Net earnings for the period increased 21.5% to $8.3 million or $0.65 per share, fully diluted, in 2009, compared with $6.9 million or $0.54 per share, fully diluted, in 2008. Cash flow from operating activities before changes in non-cash working capital components rose 8.3% to $10.3 million.

As at September 30, 2009, the Company's long-term debt, including the current portion, amounted to $93.2 million, representing a ratio of total long-term debt to shareholders' equity of 0.53:1, down from 0.57:1 three months earlier. Working capital stood at $171.2 million, stable from $170.0 million at the end of the previous quarter, as cash generated from reduced accounts receivable and inventories resulting from seasonal demand reduced bank indebtedness.

"As a result of our constant focus on cash generation and debt reduction, Stella-Jones produced a solid cash flow, which, combined with working capital improvements, reduced short- and long-term debt by an aggregate amount of $24.4 million during the quarter," mentioned George Labelle, Senior Vice-President and Chief Financial Officer.


For the nine-month period ended September 30, 2009, sales were $345.7 million, up from $301.1 million in the first nine months of 2008. This increase includes the additional three month contribution of $37.3 million from the BPB operations, while the weaker Canadian dollar increased the value of U.S. dollar denominated sales by approximately $20.5 million. Gross profit was $66.1 million, or 19.1% of sales, compared with $60.0 million, or 19.9% of sales, in the prior year. Net earnings totalled $27.0 million, or $2.13 per share, fully diluted, up 21.6% over net earnings of $22.2 million, or $1.75 per share, fully diluted, last year. Cash flow from operating activities before changes in non-cash working capital components was $34.2 million, up from $29.3 million a year earlier.


Challenging market conditions continue to prevail in the railway tie market as Class 1 railway operators are deferring railway tie deliveries until the first quarter of next year in order to keep inventory levels down. Also, certain special projects, which often generate increased activities in the short line and contractor markets, have been put on hold until economic and financing conditions recover. Meanwhile, conditions remain generally more stable in the North American utility pole market. Nevertheless, given uncertainty about the timing of government driven infrastructure projects, Management believes that sales will soften in the short-term until such time as general economic conditions improve.

"Class 1 railway operators have given indications that in the fourth quarter of this year, contrary to years past, they will not be taking advanced deliveries of railway ties for their regular 2010 maintenance programs. Traditionally, they order in the latter part of the year to have ties on hand and available to their maintenance crews early in the following year. Although organic sales growth will continue to be a challenge in the months ahead, an increasingly healthier balance sheet puts Stella-Jones in a stronger position to more aggressively pursue its long-term strategic vision, focused on continental expansion and consolidation, over the coming year," concluded Mr. McManus.


Stella-Jones will hold a conference call to discuss these results on Friday, November 13, 2009, at 10:00 AM Eastern Time. Interested parties can join the call by dialling 1-416-644-3424 (Toronto or overseas) or 1-800-594-3790 (elsewhere in North America). Parties unable to call in at this time may access a tape recording of the meeting by calling 1-877-289-8525 and entering the passcode 4169870#. This tape recording will be available on Friday, November 13, 2009 as of 12:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, November 20, 2009.


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.


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, 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 interim consolidated financial statements and Management's Discussion & Analysis are available on Stella-Jones' website at


3100 de la Cote-Vertu Blvd.
Suite 300
Saint-Laurent, Quebec
H4R 2J8
Tel.: (514) 934-8666
Fax: (514) 934-5327


The Toronto Stock Exchange
Stock Symbol (TSX): SJ


Computershare Investor Services Inc.


George Labelle
Senior Vice-President and
Chief Financial Officer
Tel.: (514) 934-8665
Fax: (514) 934-5327

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