Stella-Jones Reports Strong 2016 Third Quarter Results

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  • Sales of $512.6 million, up 18.4% from $433.1 million a year ago
  • 16.1% increase in net income to $45.7 million, or $0.66 per diluted share, versus $39.3 million, or $0.57 per diluted share, last year
  • Significant debt reduction of $92.5 million during the quarter resulting from strong cash flow generation

Montreal, Quebec – November 8, 2016 - Stella-Jones Inc. (TSX: SJ) ("Stella-Jones" or the "Company") today announced financial results for its third quarter ended September 30, 2016.

"Stella-Jones' sales and net income growth in the third quarter reflects the contribution from acquisitions and our greater reach in the residential lumber product category. As anticipated, year-over-year railway tie sales were lower following strong demand in the previous twelve months, while market conditions remained relatively soft in the utility pole category. Still, improved working capital resulted in a solid cash flow generation that we directed towards reducing our debt," said Brian McManus, President and Chief Executive Officer.


Sales reached $512.6 million, up 18.4% from $433.1 million a year ago. The acquisition of Ram Forest Group Inc. and Ramfor Lumber Inc. (together, "Ram") on October 1, 2015, contributed sales of approximately $30.5 million. The acquisitions of Lufkin Creosoting Co., Inc. ("Lufkin Creosoting") and of 440 Investments, LLC, the parent company of Kisatchie Treating, LLC, Kisatchie Pole & Piling, LLC, Kisatchie Trucking, LLC and Kisatchie Midnight Express, LLC (collectively, "Kisatchie"), both completed on June 3, 2016, added combined sales of $20.6 million, while acquisitions in the southeastern United States completed in the second half of 2015 added sales of approximately $6.5 million. The conversion effect from fluctuations in the value of the Canadian dollar, Stella-Jones' reporting currency, versus the U.S. dollar, had a positive impact of $3.0 million on the value of U.S. dollar denominated sales when compared with last year's third quarter. Excluding these factors, organic growth was approximately $18.9 million, or 4.4%.

Railway tie sales amounted to $186.6 million, down 7.0% from $200.6 million last year, primarily as a result of lower industry demand in the third quarter following a strong first half in 2016.

Sales of utility poles reached $160.0 million, compared with $142.3 million last year. Excluding the currency conversion effect and the contribution from acquisitions, sales declined approximately 6.2%. During the quarter, year-over-year sales of distribution poles were lower as a result of reduced maintenance demand in certain regions, while sales of transmission poles increased slightly versus last year.

Sales of residential lumber totalled $107.3 million, up from $53.2 million last year. This strong increase reflects sales of $30.5 million from the Ram acquisition, as well as the impact of the transition from treating services only for wholesalers to a value-added full service direct offering for retailers.

Industrial product sales declined to $27.5 million, from $28.4 million a year ago, due to the timing of orders for rail-related products in the United States. Logs and lumber sales reached $31.3 million, versus $8.5 million last year, due to procurement efforts to support residential lumber requirements and the timing of timber harvesting.

Operating income amounted to $67.3 million, or 13.1% of sales, versus $62.9 million, or 14.5% of sales, last year. The increase in absolute dollars reflects the contribution from acquisitions and the effect of currency translation. As a percentage of sales, the decrease is mainly attributable to greater logs and lumber sales, which are made at a value close to their cost of sales, a less favourable product mix this year compared to 2015 and softness in selling prices for certain regions.

Net income for the third quarter of 2016 increased 16.1% to $45.7 million, or $0.66 per diluted share, compared with $39.3 million, or $0.57 per diluted share, in the third quarter of 2015.

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Source: Stella-Jones