Stella-Jones Reports Record Second Quarter Results
FOR: STELLA-JONES INC.
AUG 10, 2012 - 07:00 ET
- Sales of $203.9 million, up 13.1% from $180.3 million last year
- Operating income of $32.6 million, versus $27.6 million in Q2 2011
- Net income up 20.6% to $20.8 million, compared with $17.3 million last year
- Diluted EPS of $1.30, versus $1.08 a year ago
MONTREAL, QUEBEC--(Marketwire - Aug. 10, 2012) - Stella-Jones Inc. (TSX:SJ) today announced financial results for its second quarter ended June 30, 2012.
"Stella-Jones achieved another strong financial performance in the second quarter driven by robust demand for our core railway tie products," said Brian McManus, President and Chief Executive Officer. "More importantly, our ongoing efforts to enhance operating efficiency combined with tight controls on operating costs resulted in further margin improvements and significant increases in net income and cash flow."
|Financial highlights||Quarters ended
|Six months ended
|(in thousands of Canadian dollars, except per share data)||2012||2011||2012||2011|
|Net income for the period||20,835||17,271||35,841||25,771|
|Per share - basic ($)||1.30||1.08||2.24||1.62|
|Per share - diluted ($)||1.30||1.08||2.24||1.61|
|Cash flow from operations 1||35,963||29,236||63,143||46,424|
|Weighted average shares outstanding (basic, in '000s)||15,976||15,947||15,968||15,939|
|1||Before changes in non-cash working capital components and interest and income tax paid.|
SECOND QUARTER RESULTS
Sales for the quarter ended June 30, 2012 totalled $203.9 million, an increase of $23.6 million, or 13.1%, over last year's sales of $180.3 million. The Russellville, Arkansas operating facility acquired from Thompson Industries, Inc. on December 7, 2011 ("Russellville Facility") contributed railway tie and industrial product sales of approximately $10.1 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 $5.5 million when compared with the previous year. Excluding these factors, sales increased approximately $8.0 million, or 4.4%.
Railway tie sales amounted to $120.1 million, an increase of $24.6 million, or 25.7%, over sales of $95.5 million last year, reflecting solid market demand as well as a $10.0 million contribution from the Russellville Facility. Utility pole sales amounted to $51.7 million, down slightly from $52.4 million in the corresponding period in 2011. The variation reflects the year-over-year timing difference in orders for transmission poles related to special projects, which had resulted in stronger sales in the second quarter of 2011. Meanwhile, sales of distribution poles increased, as demand for regular maintenance projects remained solid. Industrial product sales reached $18.1 million, compared with $20.6 million a year earlier, due to a reduction in the tie recycling business partially offset by higher demand for marine applications in Canada. Sales of residential lumber totalled $14.0 million, up 18.1% from $11.9 million a year earlier as a result of more favourable weather in Canada compared with the same period last year.
Operating income was $32.6 million or 16.0% of sales, compared with $27.6 million or 15.3% of sales last year. The increase in monetary terms mainly reflects higher business activity and the addition of the Russellville Facility, while the increase as a percentage of sales is mainly due to a better absorption of fixed costs resulting from higher business activity and from greater efficiency throughout the Company's plant network.
Net income for the period increased 20.6% to $20.8 million or $1.30 per share, fully diluted, compared with $17.3 million or $1.08 per share, fully diluted, in the second quarter of 2011. Cash flow from operating activities before changes in non-cash working capital components and interest and income tax paid rose 23.0% to $36.0 million.
For the six-month period ended June 30, 2012, sales amounted to $362.7 million, up 16.7% from the same period a year earlier. The Russellville Facility contributed sales of $19.7 million, while the conversion effect from fluctuations in the value of the Canadian dollar, versus the U.S. dollar, increased the year-over-year value of U.S. dollar denominated sales by about $7.0 million. Excluding these factors, sales increased approximately $25.2 million, or 8.1%.
Operating income was $56.7 million or 15.6% of sales, compared with $42.0 million or 13.5% of sales last year. Net income for the period reached $35.8 million or $2.24 per share, fully diluted, up 39.1% from $25.8 million or $1.61 per share, fully diluted, a year earlier. Cash flow from operating activities before changes in non-cash working capital components and interest and income tax paid rose 36.0% to $63.1 million.
FINANCIAL POSITION REMAINS HEALTHY
As at June 30, 2012, the Company's long-term debt, including the current portion, amounted to $192.3 million, versus $180.0 million three months ago. The ratio of total debt, including short-term bank indebtedness, to total capitalization was 0.35:1 as at June 30, 2012, unchanged from three months earlier.
Working capital stood at $314.2 million as at June 30, 2012, up from $273.2 at the beginning of the year. The main elements of this variation were an increase of $27.3 million in accounts receivable, as a result of strong sales growth in the first half of 2012, and a $22.1 million increase in inventories due to higher planned inventory levels of air-dried wood, both to improve future treating cycles and meet anticipated sales growth.
QUARTERLY DIVIDEND OF $0.16 PER SHARE
On August 9, 2012, the Board of Directors declared a quarterly dividend of $0.16 per common share payable on September 28, 2012 to shareholders of record as the close of business on September 4, 2012.
"We expect demand for our core products to remain solid for the remainder of 2012. In addition, we will continue to focus on operating efficiencies and on leveraging the strength of our network. We will also maintain our focus on cash generation and a prudent use of leverage, while we pursue our disciplined acquisition strategy in our core markets," concluded Mr. McManus.
Stella-Jones will hold a conference call to discuss these results on Friday, August 10, 2012, 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 1-855-859-2056 and entering the passcode 98841448#. This tape recording will be available on Friday, August 10, 2012 as of 1:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, August 17, 2012.
NON-IFRS FINANCIAL MEASURES
Operating income and cash flow from operations are financial measures not prescribed by IFRS and are not likely to be comparable to similar measures presented by other issuers. Management considers these measures 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 producer and marketer of pressure treated wood products. The Company supplies North America's railroad operators with railway ties, timbers and recycling services; and the continent's electrical utilities and telecommunications companies with utility poles. Stella-Jones also provides industrial products and services for construction and marine applications, as well as residential lumber to retailers and wholesalers for outdoor 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: Complete unaudited second quarter financial statements are available on Stella-Jones' website at www.stella-jones.com
FOR FURTHER INFORMATION PLEASE CONTACT:
George T. Labelle, CA
Senior Vice-President and Chief Financial Officer
Martin Goulet, CFA