"Stella-Jones' growing reach in the utility pole and residential lumber markets led to solid sales growth in these product categories during the third quarter, more than offsetting the effect of lower year-over-year pricing in the railway tie product category. Furthermore, a strong operating cash flow generation allowed us to significantly reduce our long-term debt and positions us for future expansion," said Brian McManus, President and Chief Executive Officer.
(in millions of Canadian dollars, except per share data)
|Quarters ended Sept. 30,
||Nine-months ended Sept. 30,
|Net income for the period
|Per share - basic and diluted ($)
|Weighted average shares outstanding (basic, in '000s)
Sales reached $517.6 million, up 1.0% from $512.6 million last year. Acquisitions contributed sales of approximately $2.1 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 $9.9 million on the value of U.S. dollar denominated sales. Excluding these factors, sales increased by $12.9 million, or 2.5%.
Railway tie sales amounted to $160.8 million, compared with sales of $186.6 million in last year's third quarter. Excluding the currency conversion effect, railway tie sales declined approximately $21.7 million, or 11.6%, mainly due to lower pricing.
Utility pole sales reached $172.5 million in the third quarter of 2017, representing a 7.8% increase over sales of $160.0 million a year ago. Excluding the contribution from acquisitions and the currency conversion effect, sales increased approximately $14.4 million, or 9.0%, reflecting organic sales growth in the southeastern United States and a gradual return to historical maintenance demand.
Sales in the residential lumber category reached $125.8 million in the third quarter of 2017, up from $107.3 million a year earlier. Excluding the currency conversion effect, residential lumber sales increased approximately $20.2 million, or 18.8%, mainly reflecting higher selling prices due to increased untreated lumber costs and more favourable weather in Canada during the third quarter of 2017 compared to the same period last year.
Industrial product sales reached $25.6 million in the third quarter of 2017, down from $27.5 million in the third quarter of 2016. This variation is mainly due to lower sales of marine pilings in Canada, partially offset by higher sales of rail-related products in the United States. Logs and lumber sales totalled $32.9 million, versus $31.3 million in the third quarter of 2016. This variation reflects the timing of lumber purchase and resale activities, the timing of timber harvesting, as well as higher selling prices due to increased lumber costs.
Operating income stood at $63.1 million, or 12.2% of sales, compared with $67.3 million, or 13.1% of sales in the third quarter of the previous year. The decrease as a percentage of sales essentially reflects lower selling prices for railway ties and a less favourable geographical mix in the utility pole category.
Net income for the third quarter of 2017 was $42.0 million, or $0.61 per diluted share, versus $45.7 million, or $0.66 per diluted share, in the third quarter of 2016.
For the nine-month period ended September 30, 2017, sales amounted to $1.51 billion, versus $1.50 billion for the corresponding period a year earlier. Acquisitions contributed sales of $40.9 million, while the currency conversion effect had a negative impact of $4.3 million on the value of U.S. dollar denominated sales. Excluding these factors, sales decreased approximately $24.4 million, or 1.6%.
Operating income reached $178.4 million, or 11.8% of sales, compared with $205.1 million, or 13.7% of sales, last year. Net income totalled $116.8 million, or $1.68 per diluted share, versus $135.4 million, or $1.96 per diluted share, in the prior year.
SOLID FINANCIAL POSITION
As at September 30, 2017, the Company's financial position remained solid with long-term debt, including the current portion, of $454.1 million, down significantly from $615.8 million three months earlier. The decrease in long-term debt reflects a solid operating cash flow generation during the quarter and, to a lesser extent, the effect of local currency translation on U.S. dollar denominated long-term debt. As at September 30, 2017, Stella-Jones' total debt to total capitalization ratio was 0.30:1, down from 0.37:1 three months earlier.
QUARTERLY DIVIDEND OF $0.11 PER SHARE
On November 2, 2017, the Board of Directors declared a quarterly dividend of $0.11 per common share payable on December 21, 2017 to shareholders of record at the close of business on December 4, 2017.
"Based on current trends, we expect to conclude 2017 with slightly higher sales compared to the previous year. Looking ahead to 2018, conditions prevailing in the railway tie category should yield relatively stable sales. Meanwhile, normal maintenance patterns and improving demand for transmission poles should provide further momentum in the utility pole category. We also expect margins to slightly improve throughout 2018. Our focus remains on growing shareholder value by maximizing operating cash flow through ensuring efficient and cost- effective operations. Funds generated will be invested in working capital and our existing network, while maintaining an optimal dividend policy and examining expansion opportunities that offer strategic value in our main product categories," concluded Mr. McManus.
Stella-Jones will hold a conference call to discuss these results on November 3, 2017, at 10:00 AM 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 83494502. This recording will be available on Friday, November 3, 2017 as of 1:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, November 10, 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.
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.
The announcement came on Wednesday and follows WFP’s plan to strengthen the company through recapitalization and consolidation.
WFP’s goal is to become a global competitor, according to a statement.
The statement also mentions that all employees of the consolidated South Vancouver Island plant have either received compensation or been located to other facilities within WFP.
WFP also consolidated its sawmills in Nanaimo, B.C. in October 2014. President and CEO Don Demens said that the decision was also part of the strategy to make WFP more competitive worldwide.
“This strategy involves the evaluation of new market programs and operating configurations designed to improve our operating results," Demens said.
According to the company, “Since 2011, Western has invested over $260 million in recapitalizing its coastal operations, including more than $94 million in strategic investments towards upgrading technology, with a focus on reducing costs while maintaining product flexibility.”
Stella-Jones is providing this update to inform of lower year-over-year financial results in the fourth quarter. For this period, the company is currently anticipating sales in the range of $340.0-$342.0 million, compared with $357.5 million last year, while operating income is expected to be between $27.0 and $29.0 million, versus $48.3 million a year ago.
2016 will mark the sixteenth consecutive year of sales and net income growth for Stella-Jones. For the fiscal year ended Dec. 31, 2016, consolidated sales are expected to show a year-over-year increase of nearly 18.0 per cent, reaching close to $1.84 billion, while operating income should be between $232.0 and $234.0 million, up from $220.1 million last year.
The year-over-year decrease in sales and profitability in the fourth quarter of 2016 was primarily driven by lower railway tie demand at the end of the year, as anticipated in management's discussion and analysis for the third quarter of 2016. For the current fiscal year, total sales and operating margins are expected to remain comparable to 2016, assuming stable currencies.
Corruven Canada Inc. plans to use the investments, as well as about $2 million in private funds, to install its first industrial-scale corrugating line and build a market for its products in the U.S. and Canada. The company’s technology allows it to process and press veneer rejects into usable products such as packaging and bed platforms. The company says its materials are approximately 75 per cent lighter and six-time strong than traditional building materials.
Supporting the Canadian forestry industry, the Canadian government’s Investments in Forest Industry Transformation Program provided Corruven $2.5 million in funding for the project, while the Atlantic Canada Opportunities Agency contributed the remaining $2 million in government funding.
The startup expects the corrugating line and associated research will create 10 new jobs at its base in Saint-Basile, N.B., as well as an additional 14 if the project proves successful.
Aug. 26, 2016 - Brink Forest Products Ltd. has entered into an agreement with the BID Group of Companies to purchase Vanderhoof Specialty Wood Products Ltd.
Aug. 11, 2016 - With the recent closing of manufacturing plants in the North Bay, Ont., area, one can assume that most people living in the region were relieved to witness the reopening of Columbia Forest Product’s hardwood veneer plant in Rutherglen, Ont. The plant was reopened this past April with USD$1.5 million invested into the facility.
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