Stella-Jones Inc. (TSX: SJ) (“Stella-Jones” or the “Company”) today
announced financial results for its fourth quarter and year ended
December 31, 2020.
“Stella-Jones’ record performance in 2020
exemplifies the resiliency of our business model, the strength of
our continental network and our team’s ability to effectively adapt
and deliver strong results for stakeholders, despite the challenges
faced throughout the year. Sales were up for the 20th consecutive
year, reaching $2.6 billion, which drove the 23% increase in EBITDA
to a record $385 million. The unprecedented rise in residential
lumber demand and pricing, and the continued solid sales growth in
utility poles and railway ties allowed us to generate cash from
operations of $178 million which we deployed to invest in our
network and return capital to shareholders. In line with our
capital allocation strategy, today we announced a dividend increase
of 20% and an increase to the maximum number of shares to be
repurchased under the Normal Course Issuer Bid, demonstrating our
confidence in Stella-Jones’ strong cashflow generation,” stated
Éric Vachon, President and CEO of Stella-Jones.
“While the impact of the ongoing global pandemic
on the demand for our products and operations remains uncertain, we
are currently projecting organic sales growth in 2021, driven by
our utility poles and residential lumber product categories. We
continue to actively implement our strategy, focusing on network
efficiencies, innovation and accretive acquisitions, in order to
enhance our business resilience and the Company’s long-term value
creation. With ample financial flexibility we are well positioned
to continue to drive growth and generate consistent value for
shareholders,” concluded Mr. Vachon.
Financial Highlights (in millions of Canadian
dollars, except per share data and margin) |
Q4-20 |
Q4-19 |
2020 |
2019 |
Sales(1) |
533 |
445 |
2,551 |
2,189 |
Gross profit(2) |
85 |
70 |
446 |
358 |
Gross profit margin(2) |
16.0% |
15.7% |
17.5% |
16.4% |
EBITDA(2) |
70 |
59 |
385 |
313 |
EBITDA margin (2) |
13.1% |
13.3% |
15.1% |
14.3% |
Operating income |
50 |
41 |
309 |
242 |
Operating income margin(2) |
9.4% |
9.2% |
12.1% |
11.1% |
Net income for the period |
34 |
28 |
210 |
163 |
Earnings per share - basic and diluted |
0.52 |
0.41 |
3.12 |
2.37 |
Weighted average shares outstanding (basic, in ‘000s) |
66,654 |
67,898 |
67,260 |
68,761 |
(1) Prior period figures have been
adjusted to conform to the current period presentation.(2)
This is a non-IFRS financial measure which does not have a
standardized meaning prescribed by IFRS and may therefore not be
comparable to similar measures presented by other issuers.
FOURTH QUARTER RESULTS
Sales for the fourth quarter of 2020 amounted to
$533 million, up from sales of $445 million for the same period in
2019. Excluding the negative impact of the currency conversion of
$4 million, pressure-treated wood sales rose $78 million, or 19%,
mainly driven by higher pricing and demand for residential lumber,
volume gains for Class 1 railway ties customers and an improved
sales mix for utility poles. The increase in logs and lumber sales
stems mainly from the significant rise in the market price of
lumber in the second half of 2020.
Pressure-treated wood
products:
- Utility poles:
Utility poles sales amounted to $201 million, up from $195 million
for the same period last year. Excluding the negative currency
conversion effect, sales increased 4%, primarily due to a healthier
sales mix, including the impact of the value-added fire-resistant
wrapped pole sales.
- Railway ties:
Railway ties sales grew to $147 million, up from $134 million last
year. Excluding the negative currency conversion effect, railway
ties sales rose 11%, mainly driven by higher volumes for Class 1
customers.
- Residential
lumber: Residential lumber sales reached $117 million,
almost double the $61 million generated for the same period in
2019, due to the higher market price of lumber and continued strong
demand for home improvement products.
- Industrial
products: Industrial product sales amounted to $23
million, largely in line with the $24 million of sales generated a
year ago.
Logs and lumber:
- Logs and lumber:
Logs and lumber sales totalled $45 million, up 45% compared to the
same period last year, driven by the higher market price of
lumber.
The improvement in sales led to an increase in
gross profit, which grew 21% to $85 million, compared to the prior
year period, while operating income was $50 million, or 9.4% of
sales, compared with $41 million, or 9.2% of sales last year.
EBITDA rose to $70 million, up 19%, compared to $59 million
reported in the fourth quarter of 2019. The increase was primarily
driven by higher sales price for residential lumber, which exceeded
the higher cost of lumber, and an improved sales mix for utility
poles. Adjusting for other net losses, EBITDA for the fourth
quarter ended December 31, 2020 and 2019 were $73 million and $60
million, representing EBITDA margins of 13.7% and 13.5%,
respectively.
Net income totaled $34 million, or $0.52 per
share, versus $28 million, or $0.41 per share last year.
2020 RESULTS
Sales for the year ended December 31, 2020
reached $2,551 million, up $362 million versus sales of $2,189
million in 2019. Excluding the positive impact of the currency
conversion of $19 million, pressure-treated wood sales rose $309
million, or 15%, driven by volume and pricing gains in the
Company’s three core product categories, as well as a favourable
sales mix for utility poles and railway ties. The increase in logs
and lumber sales stems mainly from the significant rise in the
market price of lumber.
Pressure-treated wood
products:
- Utility poles (35% of 2020
sales): Utility poles sales increased to $888 million in
2020 from sales of $797 million in 2019. Excluding the positive
currency conversion effect, utility poles sales increased by $83
million, or 10%, driven by strong maintenance demand in the first
quarter of 2020, more project-related volume and higher pricing.
The pricing improvement stems from upward price adjustments in
response to raw material cost increases and a more favourable sales
mix, including the impact of value-added fire-resistant wrapped
poles.
- Railway ties (29% of 2020
sales): Railway ties sales were $733 million in 2020
compared to sales of $689 million in 2019. Excluding the positive
currency conversion effect, railway ties sales increased $37
million, or 5%, largely due to greater volumes for Class 1
customers and a favourable sales mix.
- Residential lumber (26% of
2020 sales): Sales in the residential lumber category rose
to $665 million in 2020, up 41% from sales of $471 million in 2019.
The significant increase in sales was driven by strong home
improvement demand and the record rise in the market price of
lumber.
- Industrial products (4% of
2020 sales): Industrial product sales were $119 million in
2020, slightly down compared to sales of $120 million in 2019,
primarily as a result of lower maintenance and project
activities.
Logs and lumber:
- Logs and lumber (6% of 2020
sales): Sales in the logs and lumber product category were
$146 million in 2020, up 30% compared to $112 million in 2019,
primarily attributable to the higher market price of lumber.
Driven by the strong sales growth, gross profit
and operating income increased 25% and 28% to $446 million and $309
million, respectively, compared to last year. Similarly, EBITDA
increased 23% to a record high of $385 million, or a margin of
15.1%, up from $313 million, or a margin of 14.3% last year. This
increase was primarily driven by sales price increases for
residential lumber in the second half of the year, which exceeded
the higher cost of lumber, and stronger residential lumber demand.
Favourable sales mix for utility poles as well as railway ties also
contributed to the improvement. Adjusting for other net losses,
comprised of realized losses related to the diesel and petroleum
derivative commodity contracts and site remediation provisions,
EBITDA for the years ended December 31, 2020 and 2019 were $397
million and $313 million, representing EBITDA margins of 15.6% and
14.3%, respectively.
Net income was $210 million, or $3.12 per share,
versus net income of $163 million, or $2.37 per share, last
year.
STRONG LIQUIDITY AND CAPITAL
RESOURCES Stella-Jones generated $178 million of cash from
operations in 2020. It invested $55 million in its property, plant
and equipment and intangible assets, and returned $100 million of
capital to shareholders through the payment of dividends and the
repurchase of shares. As at December 31, 2020, the Company
maintained a strong financial position with a net debt-to-EBITDA
ratio of 1.9x and available liquidity of $190 million.
Subsequent to year-end, the amount available under the demand
loan facility was increased from US$50 million to US$100 million
until June 30, 2021, providing the Company with additional
flexibility to invest in the inventory required to support the
anticipated sales growth in 2021.
NORMAL COURSE ISSUER BID During
the year, the Company’s Board of Directors approved a normal course
issuer bid (“NCIB”) that permits the Company to purchase for
cancellation, up to 2,500,000 common shares during the 12-month
period commencing August 10, 2020 and ending August 9, 2021,
representing 3.7 % of its issued and outstanding common shares as
at July 31, 2020 (the “Reference Date”). In 2020, the Company
repurchased 1,331,455 common shares for approximately $60 million
under the NCIB, including 996,802 common shares in the fourth
quarter. As at the close of business on March 9, 2021, Stella-Jones
had repurchased a total of 801,261 common shares for approximately
$37 million.
Subsequent to year-end, on March 9, 2021, the
Company received approval from the Toronto Stock Exchange (“TSX”)
to amend its NCIB in order to increase the maximum number of common
shares that may be repurchased for cancellation by the Company
during the 12-month period ending August 9, 2021, from 2,500,000 to
3,500,000 common shares, representing approximately 6.8 % of the
public float of its common shares as at the Reference Date. The
amendment to the NCIB will be effective on March 15, 2021 and will
continue until August 9, 2021 or such earlier date as Stella-Jones
has acquired the maximum number of common shares permitted under
the NCIB.
All other terms and conditions of the NCIB
remained unchanged. Purchases under the NCIB are made on behalf of
Stella-Jones by a registered broker through the facilities of the
TSX.
QUARTERLY DIVIDEND INCREASED 20% TO
$0.18 PER SHAREOn March 9, 2021, the Board of Directors
declared a quarterly dividend of $0.18 per share, representing an
increase of 20% over the previous quarterly dividend, on the
outstanding common shares of the Company, payable on April 24, 2021
to shareholders of record at the close of business on April 5,
2021. This dividend is designated to be an eligible dividend.
OUTLOOK
The Company is targeting to deliver EBITDA in
the range of $385 to $410 million in 2021. This guidance
anticipates a reduction of approximately $50 million in sales from
the deterioration of the value of the U.S. dollar relative to the
Canadian dollar.
Excluding the impact of the currency conversion,
the Company is projecting sales growth in the low to mid-single
digit range in 2021. Utility poles and residential lumber sales are
expected to increase in the mid to high-single digit range compared
to 2020, while railway ties and industrial product sales are
projected to be relatively comparable to those generated in 2020.
For utility poles, the sustained healthy replacement maintenance
demand, including an increase in value-added fire-resistant wrapped
pole sales, is expected to contribute to higher year-over-year
sales. For residential lumber, the forecasted increase in sales is
driven by the continued strong demand for home improvement
projects, current estimates of higher pricing, as well as a
projected increase in market reach.
The Company’s financial guidance is based on its
current outlook for 2021 and takes into account a number of
economic and market assumptions. Please refer to management’s
discussion and analysis for a complete list of assumptions.
CONFERENCE CALL
Stella-Jones will hold a conference call to
discuss these results on March 10, 2021, at 10:00 a.m. Eastern
Daylight 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 8518287. This recording will be available on Wednesday,
March 10, 2021 as of 1:00 p.m. Eastern Daylight Time until 11:59
p.m. Eastern Daylight Time on Wednesday, March 17, 2021.
NON-IFRS FINANCIAL MEASURES
EBITDA (operating income before depreciation of
property, plant and equipment, depreciation of right-of-use assets
and amortization of intangible assets), gross profit, and EBITDA
margin are financial measures not prescribed by IFRS and are not
likely to be comparable to similar measures presented by other
issuers. Management considers these non-IFRS measures to be useful
information to assist knowledgeable investors understand the
Company’s operating results, financial condition and cash flows as
they provide an additional measure about its performance. Please
refer to the non-IFRS financial measures described in the
Management’s Discussion and Analysis.
ABOUT STELLA-JONES
Stella-Jones Inc. (TSX: SJ) is a leading
producer and marketer of pressure-treated wood products. The
Company supplies North America’s electrical utilities and
telecommunication companies with utility poles, and the continent’s
railroad operators with railway ties and timbers. 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.
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 factors may include, without excluding other
considerations, general economic and business conditions (including
the impact of the coronavirus pandemic), evolution in customer
demand for the Company's products and services, product selling
prices, availability and cost of raw materials, changes in foreign
currency rates, and the ability of the Company to raise capital. 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: The audited consolidated financial
statements for the year ended December 31, 2020 and the condensed
interim unaudited consolidated financial statements for the fourth
quarter ended December 31, 2020 as well as management’s discussion
and analysis are available on Stella-Jones’ website at
www.stella-jones.com.
Source: |
Stella-Jones Inc. |
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Contacts: |
Silvana Travaglini, CPA,
CA |
Pierre Boucher, CPA,
CMA |
|
Senior Vice-President and Chief
Financial Officer Stella-Jones |
Jennifer McCaughey, CFA
MaisonBrison Communications |
|
Tel.: (514) 940-8660 |
Tel.: (514) 731-0000 |
|
stravaglini@stella-jones.com |
pierre@maisonbrison.com
jennifer@maisonbrison.com |
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