MONTREAL, QUEBEC--(Marketwired - May 1, 2014) - Stella-Jones Inc. (TSX:SJ)
- Sales of $257.5 million, up 15.7% from $222.6 million last year
- 17.1% growth in operating income to $34.7 million, versus $29.7 million in 2013
- Net income up 20.1% to $22.5 million, compared to $18.8 million last year
- Diluted EPS of $0.33 versus $0.27 a year ago
Stella-Jones Inc. (TSX:SJ) ("Stella-Jones" or the "Company") today announced financial results for its first quarter ended March 31, 2014.
"We are pleased with Stella-Jones' solid operating results in the first quarter of 2014. Demand for our core products remained healthy despite unfavourable weather conditions across North America. Moreover, operating income as a percentage of sales rose further, as greater efficiencies achieved throughout our network more than offset higher costs stemming from a tighter procurement market for untreated railway ties and utility poles," said Brian McManus, President and Chief Executive Officer.
||Quarters ended March 31,
|(in thousands of Canadian dollars, except per share data)
|Net income for the period
||Per share - basic ($)
||Per share - diluted ($)
|Weighted average shares outstanding (basic, in '000s)
Effective January 1, 2014, the Company's sales of non-pole-quality logs are reported as revenue in the consolidated statement of income in a new product category and are no longer credited to cost of sales. Comparative figures have been restated to comply with the current year's presentation.
FIRST QUARTER RESULTS
Sales reached $257.5 million, up 15.7% from $222.6 million in the same period last year. The operating assets acquired from The Pacific Wood Preserving Companiesâ ("PWP") on November 15, 2013 contributed sales of $13.2 million, while the conversion effect from 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 $16.2 million when compared with the previous year. Excluding these factors, sales increased approximately $5.5 million, or 2.5%.
Railway tie sales amounted to $108.6 million, up 12.6% from $96.5 million a year earlier. Excluding sales from the PWP assets and the conversion effect, railway tie sales rose approximately $1.9 million, or 1.9%, reflecting solid market demand, partially offset by unfavourable weather conditions that limited railcar availability. Sales of utility poles reached $107.5 million, up from $90.8 million last year. Excluding sales from the PWP assets and the conversion effect, utility pole sales increased $3.1 million, or 3.5%, as a result of higher customer orders for both distribution and transmission poles. Sales in the residential lumber category totalled $17.3 million, versus $17.9 million a year ago, mainly reflecting less favourable weather in Canada. Industrial product sales reached $15.8 million, compared with $11.9 million last year due to the contribution of the PWP assets. Finally, non-pole-quality log sales amounted to $8.3 million, up from $5.5 million a year ago, as a result of the timing of timber harvesting.
Operating income rose 17.1% to $34.7 million, or 13.5% of sales, versus $29.7 million, or 13.3% of sales, last year. While the increase in monetary terms partially reflects the contribution of the PWP assets, the increase as a percentage of sales stems from greater efficiencies throughout the Company's plant network, partially offset by higher year-over-year costs for untreated railway ties and utility poles. Of note, margins from non-pole-quality log sales are nominal as they are sold close to cost of sales. Net income for the first quarter of 2014 increased 20.1% to $22.5 million or $0.33 per share, fully diluted, compared with $18.8 million or $0.27 per share, fully diluted, in the first quarter of 2013.
As at March 31, 2014, the Company's long-term debt, including the current portion, stood at $407.0 million compared with $372.9 million three months earlier. The increase essentially reflects higher working capital requirements, as per normal seasonal demand patterns, and the effect of local currency translation on U.S. dollar denominated long-term debt. As a result of this higher debt, Stella-Jones' total debt to total capitalization ratio was 0.40:1 as at March 31, 2014, versus 0.39:1 three months earlier.
QUARTERLY DIVIDEND OF $0.07 PER SHARE
On April 30, 2014, the Board of Directors declared a quarterly dividend of $0.07 per common share payable on June 27, 2014 to shareholders of record at the close of business on June 2, 2014.
"As we look ahead to the remainder of 2014, we expect demand for our core products to remain healthy, driven by a stronger economy and sound fundamentals in our main sectors of activity. However, the procurement market for untreated railway ties and utility poles remains tight and our margins may be slightly impacted in the short term. Still, we believe that our current inventory position and the strength of our procurement network should allow Stella-Jones to meet demand at an optimal cost. We remain focused on integrating the PWP assets and pursuing the proposed acquisition of two wood treating facilities from Boatright Railroad Products, Inc. expected to close, if the transaction is finalized, in the latter part of the second quarter," concluded Mr. McManus.
Stella-Jones will hold a conference call to discuss these results on May 1, 2014, at 1:30 PM Eastern Time. Interested parties can join the call by dialing 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 1-855-859-2056 and entering the passcode 29419192. This tape recording will be available on Thursday, May 1, 2014 as of 5:30 PM Eastern Time until 11:59 PM Eastern Time on Thursday, May 8, 2014.
NON-IFRS FINANCIAL MEASURE
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.
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 provides residential lumber to retailers and wholesalers 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, 2014 are available on Stella-Jones' website at www.stella-jones.com