Stella-Jones Inc.

Stella-Jones Inc.

November 14, 2008 07:00 ET

Stella-Jones Reports Third Quarter Results

- Q3 sales grow 49.5% to $111.8 million - Net earnings of $6.9 million compared with $7.1 million last year - Diluted EPS of $0.54, versus $0.56 last year

MONTREAL, QUEBEC--(Marketwire - Nov. 14, 2008) - Stella-Jones Inc. (TSX:SJ) today announced financial results for its third quarter and nine-month period ended September 30, 2008. The Company reported strong growth in sales driven by the contribution of The Burke-Parsons-Bowlby Corporation ("BPB"), acquired on April 1, 2008, and by organic growth. However, profitability was in some measure affected by higher raw material and energy costs.


Sales reached $111.8 million, an increase of $37.0 million, or 49.5% over last year's third quarter sales of $74.8 million. The contribution from BPB amounted to approximately $31.5 million, while organically, sales increased by about 7.0%, although last year's third quarter results were affected by a forest industry strike in British Columbia that forced the suspension of operations at the New Westminster treating facility and at the pole peeling joint venture in Maple Ridge. Year-over-year fluctuations in the value of the Canadian dollar, Stella-Jones' reporting currency, did not materially impact the value of U.S. dollar denominated sales when compared with the same period last year.

Driven by the BPB acquisition, railway tie sales reached $55.2 million, an increase of $28.4 million over last year. Sales of utility poles grew 14.6% to $37.6 million with greater demand for both distribution and transmission poles. Sales in the consumer lumber category totalled $12.4 million, up 17.7% from last year, while sales of industrial lumber increased 41.4% to $6.6 million, reflecting the addition of BPB's ancillary product sales.

"In spite of economic instability, demand remained strong in our core railway tie and utility pole markets," said Brian McManus, President and Chief Executive Officer of Stella-Jones. "The integration of the BPB acquisition is progressing as scheduled and we are pleased with the positive steps accomplished at this stage, although higher raw material and energy costs more than offset our ability to further improve BPB's relatively lower margins during the last quarter."

Gross profit in the third quarter of 2008 reached $20.8 million, or 18.6% of sales, compared with $17.9 million, or 23.9% of sales in the same period in 2007. Net earnings were $6.9 million, or $0.54 per share, fully diluted, in the third quarter of 2008, compared with $7.1 million, or $0.56 per share, fully diluted, in the corresponding period in 2007.

"Wood cost increases resulting from wood shortages caused by mill closures and production slowdowns in the Southeastern United States primarily impacted profitability of our U.S. railway tie sales," said George Labelle, Senior Vice-President and Chief Financial Officer. "The weak U.S. housing market is largely driving these mill closures. Meanwhile, energy cost increases directly affected shipping, handling and treating costs in all product categories. The recent reduction in oil prices and the weakening of the Canadian dollar versus the U.S. currency since the end of the third quarter should have a beneficial effect on margins."


Sales totalled $301.1 million, an increase of $79.8 million, or 36.1% over the first nine months of 2007. In addition to BPB's six-month contribution in 2008, higher sales reflect the results of the Arlington, Washington facility for the full period, versus only seven months in 2007. Gross profit reached $59.7 million, or 19.8% of sales, up from $54.1 million, or 24.4% of sales, a year earlier. Net earnings were $22.2 million, or $1.75 per share, fully diluted, compared with $21.3 million, or $1.68 per share, fully diluted, last year.


As at September 30, 2008, the Company's long-term debt, including the current portion, amounted to $96.3 million, representing a ratio of total long-term debt to shareholders' equity of 0.64:1, compared with 0.66:1 at the end of the previous quarter. Total availability under the Company's Canadian and U.S. operating lines of credit was $26.1 million and US$10.4 million, respectively, as at September 30, 2008.


"The current financial and economic climate continues to cause uncertainty. As a result, despite an acknowledged infrastructure deficit, certain projects requiring our products may be delayed. Nonetheless, our primary focus is to fully integrate and optimize the BPB acquisition and we remain confident about our ability to gradually increase BPB's margins close to a level comparable to that of the remainder of our operations by the end of 2009. Margins may also gradually improve as selling prices are adjusted to reflect increases in raw material costs, as per provisions in most of our multi-year contracts, which call for adjustments towards the end of each calendar year," concluded Mr. McManus.


Stella-Jones will hold a conference call to discuss these results on Friday, November 14, 2008, at 1:30 PM Eastern Time. Interested parties can join the call by dialling 1-416-644-3416 (Toronto or overseas) or 1-800-731-5319 (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 21286633# on your phone. This tape recording will be available on Friday, November 14, 2008 as of 3:30 PM Eastern Time until 11:59 PM Eastern Time on Sunday, November 30, 2008.


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.

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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

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