Stella-Jones Inc. (TSX: SJ) (“Stella-Jones” or the “Company”) today
announced financial results for its first quarter ended March 31,
2024.
“I am pleased with our performance in the first
quarter, which marks a strong start to the year and builds upon the
momentum we generated in 2023,” said Eric Vachon, President and
Chief Executive Officer of Stella-Jones. “Our Q1 performance
reflects the ongoing robust fundamental market trends in our
infrastructure product categories and an improvement over our solid
fourth quarter results. Although we noted a softer pace of
purchases by utilities in recent quarters, we are confident that
incremental multi-year volume commitments secured from new and
existing customers will be realized, highlighting the enduring
growth potential of our business.”
“The sustained strength of our results is a
testament to our focus on growing our infrastructure business and
leveraging our unique competitive advantages. We are drawing on the
strength of our customer relationships and expansive network to
capitalize on growth opportunities and deliver on our strategic
objectives,” concluded Mr. Vachon.
Financial Highlights (in millions of Canadian
dollars, except per share data and margins) |
Q1-24 |
|
Q1-23 |
|
Sales |
775 |
|
710 |
|
Gross profit(1) |
172 |
|
136 |
|
Gross profit margin(1) |
22.2% |
|
19.2% |
|
EBITDA(1) |
156 |
|
120 |
|
EBITDA margin(1) |
20.1% |
|
16.9% |
|
Operating income |
124 |
|
95 |
|
Operating income margin(1) |
16.0% |
|
13.4% |
|
Net income for the period |
77 |
|
60 |
|
Earnings per share ("EPS") - basic and diluted |
1.36 |
|
1.03 |
|
Weighted average shares outstanding (basic, in ‘000s) |
56,786 |
|
58,801 |
|
(1) Refer to the section "Non-GAAP and other financial
measures" in this press release. |
|
|
|
FIRST QUARTER
RESULTS
Sales in the first quarter of 2024 were up 9% to
$775 million, compared to $710 million last year. Excluding the
contribution from the acquisition of Baldwin Pole and Piling
Company, Inc., Baldwin Pole Mississippi, LLC and Baldwin Pole &
Piling, Iowa Corporation (collectively, “Baldwin”), sales were up
$51 million, or 7%. The increase was driven by a 10% organic sales
growth of the Company’s infrastructure businesses, namely utility
poles, railway ties and industrial products, partially offset by
lower residential lumber and logs and lumber sales when compared to
the same period last year. All infrastructure product categories
benefited from higher year-over-year sales prices, while
residential lumber sales were unfavourably impacted by the decrease
in the market price of lumber when compared to the same period last
year.
Pressure-treated wood
products:
- Utility
poles (52% of Q1-24 sales): Utility poles sales increased
to $402 million in the first quarter of 2024, compared to sales of
$362 million in the corresponding period last year. Excluding the
contribution from the acquisition of the Baldwin assets, utility
poles sales increased by $26 million, or 7%, driven by higher
pricing. While sales volumes were higher compared to the previous
quarter, volumes were below levels realized in the first quarter of
last year. Incremental multi-year commitments were secured from new
and existing customers but the growth in volumes continued to be
impacted and deferred by the slower pace of utility poles purchases
by certain contract customers.
- Railway ties (29% of Q1-24
sales): Railway ties sales increased by $32 million, or
16%, to $227 million in the first quarter of 2024, compared to
sales of $195 million in the same period last year. The increase
was largely attributable to higher volumes for non-Class 1 business
due to the replenished level of ties inventory, as well as sales
price increases to cover higher costs, when compared to the same
period last year.
-
Residential lumber (11% of Q1-24
sales): Sales in residential lumber decreased by three
million dollars, or 3%, to $87 million in the first quarter of
2024, compared to sales of $90 million in the corresponding period
last year. This decrease was mainly driven by lower pricing
attributable to the decrease in the market price of lumber.
- Industrial products (5% of Q1-24
sales): Industrial product sales were $36 million in the
first quarter of 2024, unchanged compared to the corresponding
period last year.
Logs and lumber:
- Logs and lumber
(3% of
Q1-24 sales): Logs and lumber
sales totaled $23 million, down 15% compared to the same period
last year. The decrease in sales compared to the first quarter last
year was largely attributable to less lumber trading activity. Logs
sales remained stable as higher log sales activity was offset by
the lower market price of logs.
Gross profit was $172 million in the first
quarter of 2024 compared to $136 million in the corresponding
period last year, representing a margin of 22.2% and 19.2%,
respectively. The increase in gross profit in absolute dollars and
as a percentage of sales was largely due to the margin expansion of
the Company’s infrastructure product categories, particularly
attributable to the favourable pricing realized for utility poles
and railway ties.
Similarly, operating income totaled $124 million
in the first quarter of 2024 versus operating income of $95 million
in the corresponding period of 2023, while EBITDA increased to $156
million, or a margin of 20.1%, compared to $120 million, or a
margin of 16.9% reported in the first quarter of 2023.
Net income for the first quarter of 2024 was $77
million, or $1.36 per share, compared to net income of $60 million,
or $1.03 per share, in the corresponding period of 2023.
LIQUIDITY AND CAPITAL
RESOURCES
During the quarter ended March 31, 2024,
Stella-Jones used its liquidity to support the seasonal increase in
working capital requirements, maintain its assets, expand
production capacity, as well as repurchase $15 million of shares.
During the quarter, the Company also declared a dividend totaling
$16 million.
During the first quarter of 2024, the Company
amended and restated the syndicated credit agreement in order to
increase the amount available under the unsecured revolving credit
facility to US$600 million and extend the term of the US$475
million tranche to February 27, 2028, and the US$125 million
tranche to February 27, 2026.
As at March 31, 2024, the net debt-to-EBITDA(1)
ratio was above the target range, at 2.7x, largely explained by the
seasonal increase in working capital requirements in the first
quarter of each year.
(1) |
Refer to the section "Non-GAAP and other financial measures" in
this press release. |
|
|
QUARTERLY DIVIDEND
On May 7, 2024, the Board of Directors
declared a quarterly dividend of $0.28 per common share payable on
June 21, 2024 to shareholders of record at the close of
business on June 3, 2024. This dividend is designated to be an
eligible dividend.
ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS
Stella-Jones will hold its Annual and Special
Meeting of Shareholders on May 8, 2024, at 10:00 a.m. Eastern
Daylight Time ("EDT"). Interested parties may attend in-person at:
1250 René-Lévesque Blvd. West, suite 3610 Montréal, Québec or
virtually by webcast at: https://web.lumiagm.com/499511552 entering
the password: stella2024 (case-sensitive).
CONFERENCE
CALL
Stella-Jones will hold a conference call to
discuss these results on May 8, 2024, at 1:30 p.m. EDT.
Interested parties can join the call by dialing 1-866-518-4114. A
live audio webcast of the conference call will be available on the
Company’s website, on the Investor relations section’s home page or
here: https://web.lumiagm.com/411019516. This recording will be
available on Wednesday, May 8, 2024, as of 4:30 p.m. until 11:59
p.m. on Wednesday, May 15, 2024.
ABOUT STELLA-JONES
Stella-Jones Inc. (TSX: SJ) is a leading North
American manufacturer of pressure-treated wood products, focused on
supporting infrastructure that is essential to the delivery of
electrical distribution and transmission, and the operation and
maintenance of railway transportation systems. It supplies the
continent’s major electrical utilities and telecommunication
companies with wood utility poles and North America’s Class 1,
short line and commercial railroad operators with railway ties and
timbers. Stella-Jones’ infrastructure product categories also
include industrial products, namely wood for railway bridges and
crossings, marine and foundation pilings, construction timbers and
coal tar-based products. Additionally, the Company manufactures and
distributes premium treated residential lumber and accessories to
Canadian and American retailers for outdoor applications, with a
significant portion of the business devoted to servicing Canadian
customers through its national manufacturing and distribution
network.
CAUTION REGARDING FORWARD-LOOKING
INFORMATION
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 items include, among others: general
political, economic and business conditions, evolution in customer
demand for the Company's products and services, product selling
prices, availability and cost of raw materials, operational
disruption, climate change, failure to recruit and retain qualified
workforce, information security breaches or other cyber-security
threats, changes in foreign currency rates, the ability of the
Company to raise capital and factors and assumptions referenced
herein and in the Company’s continuous disclosure filings. As a
result, readers are advised that actual results may differ from
expected results. Unless required to do so under applicable
securities legislation, the Company does not assume any obligation
to update or revise forward-looking statements to reflect new
information, future events or other changes after the date
hereof.
Note to readers:
Condensed interim unaudited consolidated financial
statements for the first quarter
ended March 31, 2024 as well as
management’s discussion and analysis are available on Stella-Jones’
website at
www.stella-jones.com.
Head Office 3100 de la Côte-Vertu Blvd., Suite 300
Saint-Laurent, Québec H4R 2J8 Tel.: (514) 934-8666 Fax: (514)
934-5327 |
Exchange Listings The Toronto Stock Exchange Stock
Symbol: SJ Transfer Agent and Registrar
Computershare Investor Services Inc. |
Investor Relations Silvana Travaglini Senior
Vice-President and Chief Financial Officer Tel.: (514) 934-8660
Fax: (514) 934-5327 stravaglini@stella-jones.com |
|
|
|
Stella-Jones Inc.Condensed Interim Consolidated
Statements of Income(Unaudited)For the three-month periods
ended March 31, 2024 and 2023 |
|
(expressed in millions of Canadian dollars,
except earnings per common share)
|
2024 |
|
2023 |
|
|
|
|
|
Sales |
775 |
|
710 |
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Cost of sales (including depreciation and amortization of $28 (2023
- $21)) |
603 |
|
574 |
|
Selling and administrative (including depreciation and amortization
of $4 (2023 - $4)) |
47 |
|
41 |
|
Other losses, net |
1 |
|
— |
|
|
651 |
|
615 |
|
Operating income |
124 |
|
95 |
|
|
|
|
|
Financial expenses |
22 |
|
14 |
|
|
|
|
|
|
|
|
|
Income before income taxes |
102 |
|
81 |
|
|
|
|
|
Income tax expense |
|
|
|
Current |
24 |
|
24 |
|
Deferred |
1 |
|
(3 |
) |
|
|
|
|
|
25 |
|
21 |
|
|
|
|
|
Net income |
77 |
|
60 |
|
|
|
|
|
Basic and diluted earnings per common share |
1.36 |
|
1.03 |
|
|
|
|
|
|
Stella-Jones Inc.Condensed Interim Consolidated
Statements of Financial Position(Unaudited) |
|
(expressed in millions of Canadian dollars)
|
As at |
|
As at |
|
|
March 31, 2024 |
|
December 31, 2023 |
|
Assets |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
Accounts receivable |
398 |
|
308 |
|
Inventories |
1,723 |
|
1,580 |
|
Income taxes receivable |
12 |
|
11 |
|
Other current assets |
42 |
|
48 |
|
|
2,175 |
|
1,947 |
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
934 |
|
906 |
|
Right-of-use assets |
291 |
|
285 |
|
Intangible assets |
168 |
|
169 |
|
Goodwill |
383 |
|
375 |
|
Derivative financial instruments |
25 |
|
21 |
|
Other non-current assets |
7 |
|
5 |
|
|
3,983 |
|
3,708 |
|
Liabilities and Shareholders’ Equity |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable and accrued liabilities |
234 |
|
204 |
|
Income taxes payable |
18 |
|
— |
|
Current portion of long-term debt |
1 |
|
100 |
|
Current portion of lease liabilities |
56 |
|
54 |
|
Current portion of provisions and other long-term liabilities |
32 |
|
26 |
|
|
341 |
|
384 |
|
Non-current liabilities |
|
|
|
|
Long-term debt |
1,444 |
|
1,216 |
|
Lease liabilities |
245 |
|
240 |
|
Deferred income taxes |
181 |
|
175 |
|
Provisions and other long-term liabilities |
29 |
|
31 |
|
Employee future benefits |
9 |
|
10 |
|
|
2,249 |
|
2,056 |
|
Shareholders’ equity |
|
|
|
|
Capital stock |
189 |
|
189 |
|
Retained earnings |
1,376 |
|
1,329 |
|
Accumulated other comprehensive income |
169 |
|
134 |
|
|
|
|
|
|
|
1,734 |
|
1,652 |
|
|
3,983 |
|
3,708 |
|
|
|
|
|
|
Stella-Jones Inc.Condensed Interim Consolidated
Statements of Cash Flows(Unaudited)For the three-month
periods ended March 31, 2024 and 2023 |
|
(expressed in millions of Canadian dollars)
|
2024 |
|
2023 |
|
Cash flows from (used in) |
|
|
Operating activities |
|
|
Net income |
77 |
|
60 |
|
Adjustments for |
|
|
Depreciation of property, plant and equipment |
11 |
|
9 |
|
Depreciation of right-of-use assets |
16 |
|
12 |
|
Amortization of intangible assets |
5 |
|
4 |
|
Financial expenses |
22 |
|
14 |
|
Income tax expense |
25 |
|
21 |
|
Other |
3 |
|
2 |
|
|
159 |
|
122 |
|
|
|
|
Changes in non-cash working capital components |
|
|
Accounts receivable |
(94 |
) |
(103 |
) |
Inventories |
(117 |
) |
(138 |
) |
Other current assets |
7 |
|
(2 |
) |
Accounts payable and accrued liabilities |
11 |
|
11 |
|
|
(193 |
) |
(232 |
) |
Interest paid |
(22 |
) |
(15 |
) |
Income taxes paid |
(6 |
) |
(7 |
) |
|
(62 |
) |
(132 |
) |
Financing activities |
|
|
Net change in revolving credit facilities |
41 |
|
217 |
|
Proceeds from long-term debt |
168 |
|
— |
|
Repayment of long-term debt |
(102 |
) |
— |
|
Repayment of lease liabilities |
(15 |
) |
(11 |
) |
Repurchase of common shares |
(15 |
) |
(30 |
) |
Other |
— |
|
(1 |
) |
|
77 |
|
175 |
|
Investing activities |
|
|
Business combinations |
— |
|
(13 |
) |
Purchase of property, plant and equipment |
(23 |
) |
(28 |
) |
Property insurance proceeds |
10 |
|
— |
|
Additions of intangible assets |
(2 |
) |
(2 |
) |
|
(15 |
) |
(43 |
) |
Net change in cash and cash equivalents during the
period |
— |
|
— |
|
Cash and cash equivalents – Beginning of
period |
— |
|
— |
|
Cash and cash equivalents – End of period |
— |
|
— |
|
|
|
|
|
|
NON-GAAP AND OTHER FINANCIAL
MEASURES
This section includes information required by
National Instrument 52-112 – Non-GAAP and Other Financial Measures
Disclosure in respect of “specified financial measures” (as defined
therein).
The below-described non-GAAP measures have no
standardized meaning under GAAP and are not likely to be comparable
to similar measures presented by other issuers. The Company’s
method of calculating these measures may differ from the methods
used by others, and, accordingly, the definition of these non-GAAP
financial measures may not be comparable to similar measures
presented by other issuers. In addition, non-GAAP financial
measures should not be viewed as a substitute for the related
financial information prepared in accordance with GAAP.
Non-GAAP financial measures include:
- Gross profit: Sales less cost of sales
- EBITDA: Operating
income before depreciation of property, plant and equipment,
depreciation of right-of-use assets and amortization of intangible
assets (also referred to as earnings before interest, taxes,
depreciation and amortization)
- Net debt: Sum of long-term debt and lease
liabilities (including the current portion)
Non-GAAP ratios include:
- Gross profit margin: Gross profit divided by
sales for the corresponding period
- EBITDA margin: EBITDA divided by sales for the
corresponding period
- Net debt-to-EBITDA: Net debt divided by
trailing 12-month (TTM) EBITDA
Other specified financial measures include:
- Operating income
margin: Operating income divided by sales for the
corresponding period
Management considers these non-GAAP and other
financial measures to be useful information to assist knowledgeable
investors to understand the Company’s operating results, financial
position and cash flows as they provide a supplemental measure of
its performance. Management uses non-GAAP and other financial
measures in order to facilitate operating and financial performance
comparisons from period to period, to prepare annual budgets, to
assess the Company’s ability to meet future debt service, capital
expenditure and working capital requirements, and to evaluate
senior management’s performance. More specifically:
- Gross profit and gross
profit margin: The Company uses these financial measures
to evaluate its ongoing operational performance.
- EBITDA and EBITDA
margin: The Company believes these measures provide
investors with useful information because they are common industry
measures, used by investors and analysts to measure a company’s
ability to service debt and to meet other payment obligations, or
as a common valuation measurement. These measures are also key
metrics of the Company's operational and financial performance and
are used to evaluate senior management’s performance.
- Net debt and net debt-to
EBITDA: The Company believes these measures are indicators
of the financial leverage of the Company.
The following tables present the reconciliations
of non-GAAP financial measures to their most comparable GAAP
measures.
Reconciliation of operating income to EBITDA (in
millions of dollars) |
Three-month periods ended March 31, |
|
2024 |
|
2023 |
|
Operating income |
124 |
|
95 |
|
Depreciation and amortization |
32 |
|
25 |
|
EBITDA |
156 |
|
120 |
|
|
|
|
|
|
Reconciliation of Long-Term Debt to Net Debt (in
millions of dollars) |
As at March 31, 2024 |
|
As at December 31, 2023 |
|
Long-term debt, including current portion |
1,445 |
|
1,316 |
|
Add: |
|
|
|
|
Lease liabilities, including current portion |
301 |
|
294 |
|
Net Debt |
1,746 |
|
1,610 |
|
EBITDA (TTM) |
644 |
|
608 |
|
Net Debt-to-EBITDA |
2.7 |
x |
2.6 |
x |
|
|
|
|
|
Contacts: |
Silvana Travaglini, CPA |
Stephanie Corrente |
|
Senior Vice-President and Chief Financial Officer Stella-Jones |
Director, Corporate Communications Stella-Jones |
|
Tel.: (514) 934-8660 |
|
|
stravaglini@stella-jones.com |
communications@stella-jones.com |
|
|
|
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