Stella-Jones Reports 2017 First Quarter Results

MONTREAL, QUEBEC--(Marketwired - May 4, 2017) - Stella-Jones Inc. (TSX:SJ) ("Stella-Jones" or the "Company") today announced financial results for its first quarter ended March 31, 2017.

"As anticipated, results for the first quarter of 2017 reflected both lower sales volume and weaker pricing in the railway tie category. Utility poles showed improved performance, reflecting sales synergies directly related to Stella-Jones' expansion in the southeastern United States over the past two years. During the quarter, our new treating facility in Cameron, Wisconsin became fully operational, providing us with additional capacity to service the utility pole market," said Brian McManus, President and Chief Executive Officer.

Financial highlights		Quarters ended March 31,
(in millions of Canadian dollars, except per share data)		2017	2016
Sales		396.9	421.0
Operating income		40.8	54.6
Net income for the period		25.9	35.0
	Per share - basic and diluted ($)	0.37	0.51
Weighted average shares outstanding (basic, in '000s)		69,306	69,138

FIRST QUARTER RESULTS

Sales reached $396.9 million, versus $421.0 million last year. Acquisitions contributed sales of approximately $22.8 million, while the conversion effect from fluctuations in the value of the Canadian dollar, Stella-Jones' reporting currency, versus the U.S. dollar, had a negative impact of $11.3 million on the value of U.S. dollar denominated sales. Excluding these factors, sales decreased approximately $35.5 million, or 8.4%.

Railway tie sales amounted to $158.5 million, compared with sales of $200.3 million in last year's first quarter. Excluding the conversion effect, railway tie sales decreased approximately $35.9 million, or 17.9%, primarily as a result of lower year-over-year industry demand and lower pricing. Last year's railway tie sales also benefitted from the timing of deliveries that had been pushed from the fourth quarter of 2015 into the first quarter of 2016 by certain customers.

Utility pole sales reached $151.0 million in the first quarter of 2017, representing an increase of 14.5% over sales of $131.8 million a year ago. Excluding the contribution from acquisitions and the currency conversion effect, sales increased approximately $1.0 million, reflecting sales synergies from acquisitions in the southeastern United States concluded in 2015 and 2016.

Sales in the residential lumber category totalled $38.6 million, versus $41.9 million a year earlier. The variation mainly reflects unfavourable weather conditions earlier this year compared to last in the northwestern United States, the Company's main U. S. customer base.

Industrial product sales reached $21.9 million, compared with $26.7 million a year ago. Excluding the contribution from acquisitions and the currency conversion effect, sales decreased 18.5%, mainly due to the timing of orders for rail-related products in the United States. Logs and lumber sales amounted to $26.9 million, versus $20.2 million in the first quarter of last year. The variation reflects the timing of lumber purchase and resale activities as well as the timing of timber harvesting.

Operating income stood at $40.8 million, or 10.3% of sales, compared with $54.6 million, or 13.0% of sales in the first quarter of the previous year. The decrease in absolute dollars essentially reflects lower business activity, as explained above, and the effect of currency translation, partially offset by the contribution from acquisitions. The decrease as a percentage of sales reflects lower business activity, weaker pricing for railway ties and a less favourable geographical mix in the utility pole category.

Net income for the first quarter of 2017 was $25.9 million, or $0.37 per diluted share, down from $35.0 million, or $0.51 per diluted share, in the first quarter of 2016.

SOLID FINANCIAL POSITION

As at March 31, 2017, the Company's long-term debt, including the current portion, stood at $698.5 million compared with $694.4 million three months earlier. The increase mainly reflects higher working capital requirements, as per normal seasonal demand patterns, partially offset by the effect of local currency translation on U.S. dollar denominated long-term debt. As at March 31, 2017, Stella-Jones' total debt to total capitalization ratio of 0.40:1 was stable compared with three months earlier.

QUARTERLY DIVIDEND OF $0.11 PER SHARE

On May 3, 2017, the Board of Directors declared a quarterly dividend of $0.11 per common share, payable on June 27, 2017 to shareholders of record at the close of business on June 5, 2017.

OUTLOOK

"Given first-quarter results, we continue to expect sales to be weaker in the first half of 2017 when compared to 2016, with an expected year-over-year increase in the second half of the year. Over the short term, operating margins will remain affected by lower railway tie selling prices and a less favourable geographical sales mix for utility poles. The Company is taking the necessary steps to adjust production levels, maximize operating efficiencies and minimize costs throughout the organization. We will also continue to study any expansion opportunity that offers strategic value in our main product categories. This strategy has helped Stella-Jones become a consistent force in its industry, while steadily enhancing shareholder value," concluded Mr. McManus.

CONFERENCE CALL

Stella-Jones will hold a conference call to discuss these results on May 4, 2017, at 1:30 PM Eastern 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 1-800-585-8367 and entering the passcode 4651988. This recording will be available on Thursday, May 4, 2017 as of 4:30 PM Eastern Time until 11:59 PM Eastern Time on Thursday, May 11, 2017.

NON-IFRS FINANCIAL MEASURES

Operating income is a financial measure not prescribed by IFRS and is not likely to be comparable to similar measures presented by other issuers. Management considers this non-IFRS measure to be useful information to assist knowledgeable investors regarding the Company's financial condition and results of operations as it provides an additional measure of its performance.

ABOUT STELLA-JONES

Stella-Jones Inc. (TSX:SJ) is a leading producer and marketer of pressure treated wood products. The Company supplies North America's railroad operators with railway ties and timbers, and the continent's electrical utilities and telecommunication companies with utility poles. 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.

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: Condensed interim unaudited consolidated financial statements for the first quarter ended March 31, 2017 are available on Stella-Jones' website at www.stella-jones.com