Stella-Jones Announces First Quarter Results

A strong start to the year following record financial performance in 2023

Stella-Jones Inc. (“Stella-Jones” or the “Company”) announced financial results for its first quarter ended March 31, 2024.

• Sales of $775 million, up 9%, driven by organic sales growth in infrastructure product categories
• Record first quarter EBITDA up 30% to $156 million, a margin of 20.1%
• Net income of $77 million or $1.36 per share, up 32% from Q1 2023 EPS

“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.

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.

For full first quarter results click here.

About Stella-Jones

Stella-Jones Inc. is North America’s leading producer of pressure-treated wood products. 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 also provides industrial products, which include 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. The Company’s common shares are listed on the Toronto Stock Exchange.

Contact:

Stephanie Corrente – Director, Corporate Communications – communications@stella-jones.com

Silvana Travaglini, CPA – Senior VP and CFO – stravaglini@stella-jones.com – (514) 934-8660

Source: Stella-Jones Inc.