- Sales of
$949 million , up 13% - 17% organic sales growth in infrastructure-related businesses
- EBITDA(1) of
$193 million , or a margin(1) of 20.3%, up from 14.1% in Q3 2022 - Net income of
$110 million , or$1.91 per share, up 79% from EPS in Q3 2022 - Acquired utility pole manufacturing business of
Baldwin Pole and Piling ("Baldwin") - Normal Course Issuer Bid announced for 2023-2024
“In Q3, Stella-
“As we approach the end of the year, I am pleased with the performance and milestones we have achieved so far in 2023. They highlight our ability to capitalize on positive industry trends by leveraging our expansive North American presence and the invaluable collective expertise of our people to drive long-term profitable growth for our shareholders,” concluded
Financial Highlights (in millions of Canadian dollars, except per share data and margins) | Q3-23 | Q3-22 | YTD Q3-23 | YTD Q3-22 | ||||
Sales | 949 | 842 | 2,631 | 2,400 | ||||
Gross profit(1) | 215 | 139 | 551 | 412 | ||||
Gross profit margin(1) | 22.7 | % | 16.5 | % | 20.9 | % | 17.2 | % |
EBITDA(1) | 193 | 119 | 488 | 361 | ||||
EBITDA margin(1) | 20.3 | % | 14.1 | % | 18.5 | % | 15.0 | % |
Operating income | 166 | 98 | 410 | 298 | ||||
Operating income margin(1) | 17.5 | % | 11.6 | % | 15.6 | % | 12.4 | % |
Net income for the period | 110 | 65 | 270 | 205 | ||||
Earnings per share ("EPS") - basic and diluted | 1.91 | 1.07 | 4.63 | 3.30 | ||||
Weighted average shares outstanding (basic, in ‘000s) | 57,690 | 60,682 | 58,258 | 62,078 |
(1) Refer to the section "Non-GAAP and other financial measures" in this press release
THIRD QUARTER RESULTS
Sales in the third quarter of 2023 increased by 13% to
Pressure-treated wood products:
- Utility poles (46% of Q3-23 sales): Utility poles sales amounted to
$438 million , up from$331 million for the same period last year. Excluding the contribution from acquisitions and the currency conversion effect, utility poles sales increased by$68 million , or 21%. The increase was driven by higher pricing as sales volumes remained relatively unchanged when compared to the same quarter last year but were higher versus the prior quarter. In the third quarter of 2023, production volumes continued to increase, benefiting from additional capacity stemming from capital projects. This incremental production enabled the Company to increase inventories to the level required to secure and deliver on longer-term sales commitments.
- Railway ties (24% of Q3-23 sales): Sales of railway ties amounted to
$230 million , versus$199 million in the corresponding period last year. Excluding the currency conversion effect, sales of railway ties increased by$26 million , or 13%, largely attributable to sales price increases, in response to higher costs. Volumes were relatively stable compared to the same period last year as lower non-Class 1 volumes, due to the reduced level of treated ties inventory following the limited fibre supply availability in 2022, were offset by higher sales volumes for Class 1 customers, largely attributable to timing of shipments.
- Residential lumber (21% of Q3-23 sales): Sales in residential lumber decreased
$24 million to$202 million in the third quarter of 2023, compared to sales of$226 million in the corresponding period last year. Excluding the currency conversion effect, residential lumber sales decreased$25 million , or 11%. While sales volumes were higher in the third quarter of 2023 compared to the same quarter last year, the volume gains were not sufficient to offset lower pricing attributable to the decrease in the market price of lumber.
- Industrial products (5% of Q3-23 sales): Industrial product sales were
$42 million in the third quarter of 2023, relatively unchanged compared to sales of$40 million in the corresponding period last year.
- Logs and lumber (4% of Q3-23 sales): Sales in the logs and lumber product category were
$37 million in the third quarter of 2023, compared to$46 million in the corresponding period last year. The decrease in sales compared to the third quarter last year was largely attributable to less lumber trading activity. Logs sales remained stable as higher log sales activity was largely offset by the lower market price of logs.
Gross profit(1) was
Net income for the third quarter of 2023 was
(1) Refer to the section "Non-GAAP and other financial measures" in this press release
NINE-MONTH RESULTS
For the first nine months of 2023, sales amounted to
Gross profit(1) increased to
Net income in the first nine months of 2023 was
(1) Refer to the section "Non-GAAP and other financial measures" in this press release
LIQUIDITY AND CAPITAL RESOURCES
During the third quarter ended
During the first nine months of 2023, the Company has returned
As at
(1) Refer to the section "Non-GAAP and other financial measures" in this press release
ACQUISITION OF UTILITY POLE MANUFACTURING BUSINESS
During the third quarter, the Company acquired substantially all of the assets of the wood utility pole manufacturing business of Baldwin for a total consideration of
ANNOUNCEMENT OF NORMAL COURSE ISSUER BID
On
QUARTERLY DIVIDEND
On
2023-2025 FINANCIAL OBJECTIVES
The Company provided updated three-year financial objectives at its Investor Day on
(in millions of dollars, except percentages and ratios) | Updated 2023-2025 Objectives (2) |
Sales | > |
EBITDA margin (1) | 16 |
Return to Shareholders: cumulative | > |
Net Debt-to-EBITDA (1)(3) | 2.0x-2.5x |
Key Highlights:
- Projected compound annual growth rate ("CAGR") for sales of 6% for the 2023-2025 period, driven by a 9% CAGR for the Company's infrastructure-related businesses, expected to account for 75%-80% of total sales:
- Utility poles: 15% sales CAGR, supported by a growth capital expenditure program of
$115 million ; - Railway ties: low single-digit annual sales growth;
- Utility poles: 15% sales CAGR, supported by a growth capital expenditure program of
- Residential lumber: annual sales target of
$600-$650 million , representing less than 20% of total sales; - Expansion of EBITDA margin(1) to 16% through 2025 driven by improvement in product mix.
(1) Refer to the section "Non-GAAP and other financial measures" in this press release.
(2) Foreign Exchange: assumes Canadian dollar will trade, on average, at approximately
(3) May temporarily exceed range to finance strategic growth opportunities related to its infrastructure-related businesses.
PUBLICATION OF ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) REPORT
On
CONFERENCE CALL
Stella-
ABOUT STELLA-
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, 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 third quarter ended
Head Office | Exchange Listings | Investor Relations |
3100 de la Côte- | ||
Stock Symbol: SJ | Senior Vice-President and Chief Financial Officer | |
H4R 2J8 | Tel.: 514-934-8660 | |
Tel.: 514-934-8666 | Transfer Agent and Registrar | Fax: 514-934-5327 |
Fax: 514-934-5327 | Computershare Investor Services Inc. | stravaglini@stella-jones.com |
Source: | ||
Contacts: | Senior Vice-President and Chief Financial Officer Stella-Jones Tel.: 514-934-8660 stravaglini@stella-jones.com | Director, Corporate Communications Stella-Jones communications@stella-jones.com |
Condensed Interim Consolidated Statements of Income (Unaudited) | ||||||
(expressed in millions of Canadian dollars, except earnings per common share) | ||||||
For the three-month periods ended | For the nine-month periods ended | |||||
2023 | 2022 | 2023 | 2022 | |||
Sales | 949 | 842 | 2,631 | 2,400 | ||
Expenses | ||||||
Cost of sales (including depreciation and amortization (3 months - $23 (2022 - | 734 | 703 | 2,080 | 1,988 | ||
Selling and administrative (including depreciation and amortization (3 months - | 48 | 41 | 137 | 113 | ||
Other losses, net | 1 | — | 4 | 1 | ||
783 | 744 | 2,221 | 2,102 | |||
Operating income | 166 | 98 | 410 | 298 | ||
Financial expenses | 17 | 10 | 47 | 22 | ||
Income before income taxes | 149 | 88 | 363 | 276 | ||
Income tax expense | ||||||
Current | 40 | 22 | 95 | 64 | ||
Deferred | (1 | ) | 1 | (2 | ) | 7 |
39 | 23 | 93 | 71 | |||
Net income | 110 | 65 | 270 | 205 | ||
Basic and diluted earnings per common share | 1.91 | 1.07 | 4.63 | 3.30 |
Condensed Interim Consolidated Statements of Financial Position (Unaudited) | ||
(expressed in millions of Canadian dollars) | ||
As at | As at | |
Assets | ||
Current assets | ||
Accounts receivable | 400 | 287 |
Inventories | 1,413 | 1,238 |
Income taxes receivable | 4 | — |
Other current assets | 67 | 58 |
1,884 | 1,583 | |
Non-current assets | ||
Property, plant and equipment | 883 | 755 |
Right-of-use assets | 192 | 160 |
Intangible assets | 173 | 171 |
383 | 369 | |
Derivative financial instruments | 30 | 29 |
Other non-current assets | 5 | 6 |
3,550 | 3,073 | |
Liabilities and Shareholders’ Equity | ||
Current liabilities | ||
Accounts payable and accrued liabilities | 242 | 201 |
Income taxes payable | 22 | 7 |
Current portion of long-term debt | 103 | 1 |
Current portion of lease liabilities | 48 | 41 |
Current portion of provisions and other long-term liabilities | 19 | 9 |
434 | 259 | |
Non-current liabilities | ||
Long-term debt | 1,088 | 940 |
Lease liabilities | 152 | 126 |
Deferred income taxes | 157 | 158 |
Provisions and other long-term liabilities | 29 | 26 |
Employee future benefits | 6 | 7 |
1,866 | 1,516 | |
Shareholders’ equity Capital stock | 189 | 194 |
Retained earnings | 1,324 | 1,192 |
Accumulated other comprehensive income | 171 | 171 |
1,684 | 1,557 | |
3,550 | 3,073 |
Condensed Interim Consolidated Statements of Cash Flows (Unaudited) | ||||||||
(expressed in millions of Canadian dollars) | For the three-month periods ended | For the nine-month periods ended | ||||||
Cash flows from (used in) Operating activities | 2023 | 2022 | 2023 | 2022 | ||||
Net income | 110 | 65 | 270 | 205 | ||||
Adjustments for Depreciation of property, plant and equipment | 9 | 7 | 28 | 22 | ||||
Depreciation of right-of-use assets | 14 | 10 | 38 | 30 | ||||
Amortization of intangible assets | 4 | 4 | 12 | 11 | ||||
Financial expenses | 17 | 10 | 47 | 22 | ||||
Income tax expense | 39 | 23 | 93 | 71 | ||||
Other | (1 | ) | 2 | 4 | 2 | |||
192 | 121 | 492 | 363 | |||||
Changes in non-cash working capital components Accounts receivable | 25 | 66 | (98 | ) | (78 | ) | ||
Inventories | (48 | ) | 56 | (163 | ) | 61 | ||
Other current assets | (1 | ) | (10 | ) | (11 | ) | (26 | ) |
Accounts payable and accrued liabilities | 5 | (10 | ) | 38 | 36 | |||
(19 | ) | 102 | (234 | ) | (7 | ) | ||
Interest paid | (21 | ) | (10 | ) | (50 | ) | (23 | ) |
Income taxes paid | (22 | ) | (20 | ) | (83 | ) | (48 | ) |
130 | 193 | 125 | 285 | |||||
Financing activities Net change in revolving credit facilities | 36 | (81 | ) | 251 | (34 | ) | ||
Proceeds from long-term debt | — | — | — | 63 | ||||
Repayment of long-term debt | — | — | (1 | ) | (33 | ) | ||
Repayment of lease liabilities | (13 | ) | (11 | ) | (36 | ) | (30 | ) |
Dividends on common shares | (13 | ) | (12 | ) | (40 | ) | (37 | ) |
Repurchase of common shares | (45 | ) | (59 | ) | (105 | ) | (142 | ) |
Other | 1 | 1 | 1 | 1 | ||||
(34 | ) | (162 | ) | 70 | (212 | ) | ||
Investing activities | ||||||||
Business combinations | (52 | ) | (8 | ) | (85 | ) | (8 | ) |
Purchase of property, plant and equipment | (42 | ) | (20 | ) | (103 | ) | (57 | ) |
Additions of intangible assets | (2 | ) | (3 | ) | (7 | ) | (8 | ) |
(96 | ) | (31 | ) | (195 | ) | (73 | ) | |
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.
- 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 | Nine-month periods ended | ||
2023 | 2022 | 2023 | 2022 | |
Operating income | 166 | 98 | 410 | 298 |
Depreciation and amortization | 27 | 21 | 78 | 63 |
EBITDA | 193 | 119 | 488 | 361 |
Reconciliation of Long-Term Debt to Net Debt (in millions of dollars) | As at | As at |
Long-term debt, including current portion | 1,191 | 941 |
Add: | ||
Lease liabilities, including current portion | 200 | 167 |
Net Debt | 1,391 | 1,108 |
EBITDA (TTM) | 575 | 448 |
Net Debt-to-EBITDA | 2.4x | 2.5x |
Source:
2023 GlobeNewswire, Inc., source