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“Our strong performance was further bolstered by the contributions of our most recent accretive acquisitions. The timely addition of Cahaba has allowed us to seize growth opportunities, while Texas Electric Cooperatives' pole treating facility represents a strategic addition to our network, and I am very pleased with its contribution thus far,” added Mr. Vachon. “2022 marks a 22nd consecutive year of increased sales for Stella-Jones and the completion of the first year of our three-year plan, marked by exceptional utility poles sales growth, which we expect will continue in 2023. From where we stand, we are well on our way to meet or exceed our objectives, and remain favourably positioned for the future, with continued growth in sales, profitability and in turn, shareholder value,” he concluded. Financial Highlights
(in millions of Canadian dollars, except per share data and margins)Q4-22Q4-2120222021Sales6655453,0652,750Gross profit(1)11265524456Gross profit margin(1)16.8%11.9%17.1%16.6%EBITDA(1)8752448400EBITDA margin(1)13.1%9.5%14.6%14.5%Operating income6132359326Operating income margin(1)9.2%5.9%11.7%11.9%Net income for the period3622241227Earnings per share - basic and diluted0.610.343.933.49Weighted average shares outstanding (basic, in ‘000s)59,44964,29261,42165,002
(1) Refer to the section "Non-GAAP and other financial measures" in this press release.
FOURTH QUARTER RESULTSSales for the fourth quarter of 2022 increased by 22% to $665 million, compared to sales of $545 million for the same period in 2021. Excluding the $34 million favourable impact of currency conversion and the contribution from the acquisitions of Cahaba Pressure Treated Forest Products, Inc. and Cahaba Timber, Inc. (together "Cahaba") and Texas Electric Cooperatives, Inc. (“TEC”) of $19 million, pressure-treated wood sales rose $60 million, or 12%. The growth was driven by the sales of the Company’s infrastructure-related businesses, namely utility poles, railway ties and industrial products, which grew by 17% compared to the same period last year. Higher pricing across all product categories, particularly utility poles and railway ties, and increased demand for utility poles were partially offset by lower railway ties and residential lumber volumes.
Logs and lumber:
Gross profit(1) was $112 million in the fourth quarter of 2022, versus $65 million, in the fourth quarter of 2021, representing a margin(1) of 16.8% and 11.9% respectively. The increase was primarily attributable to pricing gains outpacing cost increases in the fourth quarter of 2022 for certain infrastructure-related product categories, as well as the improvement in the gross profit of residential lumber compared to the marginal gross profit generated in the fourth quarter of last year. The gross profit of residential lumber in the fourth quarter of 2021 was impacted by the drop in demand in the second half of the year and the resulting higher cost of inventory on hand. Acquisitions and the effect of the positive currency conversion further contributed to the higher gross profit in the fourth quarter of 2022, compared to the same period last year.
Operating income totaled $61 million in the fourth quarter of 2022 versus operating income of $32 million in the corresponding period of 2021 while EBITDA(1) increased to $87 million, compared to $52 million reported in the fourth quarter of 2021.
Net income for the fourth quarter of 2022 was $36 million, or $0.61 per share, compared to net income of $22 million, or $0.34 per share, in the corresponding period of 2021.
2022 RESULTS(1) Refer to the section "Non-GAAP and other financial measures" in this press release.
Operating income totaled $359 million in 2022 versus operating income of $326 million in 2021 while EBITDA(1) increased 12% to $448 million in 2022, compared to $400 million in 2021. Despite the higher EBITDA, the EBITDA margin(1) in 2022 remained relatively unchanged at 14.6% versus 14.5% in 2021 as it was impacted by other losses recognized in the year. Excluding other losses of eight million dollars, primarily related to the retirement of idled equipment, the Company's EBITDA margin was closer to its target of 15% in 2022.
(1) Refer to the section "Non-GAAP and other financial measures" in this press release.LIQUIDITY AND CAPITAL RESOURCESGross profit(1) was $524 million in 2022 compared to $456 million in 2021, representing a margin(1) of 17.1% and 16.6%, respectively. The increase in gross profit, in absolute dollars and as a percentage of sales, was largely attributable to favourable price adjustments realized for infrastructure-related product categories, which outpaced higher costs. The increase in absolute dollars was partially offset by lower demand for railway ties, residential lumber and logs and lumber. The full year contribution of the Cahaba acquisition and the positive impact of the currency conversion also benefited gross profit for the year ended December 31, 2022.
NORMAL COURSE ISSUER BID
On November 8, 2022, the TSX accepted Stella-Jones’ Notice of Intention to Make a Normal Course Issuer Bid ("NCIB") to purchase for cancellation up to 5,000,000 common shares during the 12-month period commencing November 14, 2022 and ending November 13, 2023, representing approximately 9.6% of the public float of its common shares.
In the three-month period ended December 31, 2022, the Company repurchased 828,257 common shares for cancellation in consideration of $36 million, under its NCIB then in effect. In 2022, the Company repurchased 4,696,312 common shares for cancellation in consideration of $181 million, under its NCIBs then in effect.
QUARTERLY DIVIDEND INCREASED 15% TO $0.23 PER SHARE
On March 7, 2023, the Board of Directors declared a quarterly dividend of $0.23 per common share payable on April 21, 2023 to shareholders of record at the close of business on April 3, 2023. This dividend is designated to be an eligible dividend.
(1) Refer to the section "Non-GAAP and other financial measures" in this press release.
2022-2024 FINANCIAL OBJECTIVES: PROGRESS IN 2022
In 2022, the Company made important strides in the achievement of the Company’s 2022-2024 financial objectives, as summarized in the table below. Its strong 2022 performance places the Company on a solid footing for 2023 and positions it favourably to meet or exceed the financial objectives set for 2022 to 2024. The Company will provide more insights on the above at its upcoming Investor Day on May 25, 2023 in Toronto, Ontario.(in millions of dollars, except percentages) 2022-2024 Financial Objectives
published March 9, 2022 (2)2022ResultSales$2,700-$3,000$3,065Target metInfrastructure-Related Businesses75-80% of sales69%In ProgressResidential Lumber20-25% of sales24%Target metEBITDA margin (1)> 15%14.6%In ProgressUtility Poles Growth Capex$90-$100$33In ProgressReturn to Shareholders$500-$600$230In ProgressNet Debt-to-EBITDA (1)2.0x-2.5x2.5xTarget met
(1) Refer to the section "Non-GAAP and other financial measures" in this press release.
(2) Refer to the 2021 Annual MD&A for further details and assumptions used in preparing the 2022-2024 financial objectives.
CONFERENCE CALL
ABOUT STELLA-JONES
Stella-Jones Inc. (TSX: SJ) 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 the Canadian market through its national manufacturing and distribution network. The Company’s common shares are listed on the Toronto Stock Exchange.Stella-Jones will hold a conference call to discuss these results on March 8, 2023, at 10:00 a.m. Eastern Time. Interested parties can join the call by dialing 1-416-764-8646 (Toronto or overseas) or 1-888-396-8049 (elsewhere in North America). 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://www.gowebcasting.com/12423. The replay of the webcast will remain available at the same link until 11:59 p.m., March 15, 2023. Parties unable to call in at this time may access a recording by calling 1-877-674-7070 and entering the passcode 447456. This recording will be available on Wednesday, March 8, 2023 as of 1:00 p.m. until 11:59 p.m. on Wednesday, March 15, 2023.
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: The audited consolidated financial statements for the year ended December 31, 2022 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.comStella-Jones Inc.Consolidated Statements of Income (expressed in millions of Canadian dollars, except earnings per common share) For the
three-month periods
ended December 31,
For the
years
ended December 31, 2022 2021 20222021 $ $ $$Sales665 545 3,0652,750 Expenses Cost of sales (including depreciation and amortization (3 months - $21 (2021 - $17) and 12 months - $74 (2021 - $63))553 480 2,5412,294Selling and administrative (including depreciation and amortization (3 months - $5 (2021 - $3) and 12 months - $15 (2021 - $11))44 32 157127Other losses, net7 1 83 604 513 2,7062,424Operating income61 32 359326 Financial expenses11 6 3323 Income before income taxes50 26 326303 Income tax expense Current15 (4)7964Deferred(1)8 612 14 4 8576 Net income36 22 241227 Basic and diluted earnings per common share0.61 0.34 3.933.49Stella-Jones Inc.Consolidated Statements of Financial Position (expressed in millions of Canadian dollars) 20222021 $$Assets Current assets Accounts receivable287230Inventories1,2381,106Income taxes receivable—9Other current assets5843 1,5831,388Non-current assets Property, plant and equipment755629Right-of-use assets160138Intangible assets171158Goodwill369341Derivative financial instruments293Other non-current assets68 3,0732,665Liabilities and Shareholders’ Equity Current liabilities Accounts payable and accrued liabilities201162Income taxes payable71Current portion of long-term debt133Current portion of lease liabilities4135Current portion of provisions and other long-term liabilities911 259242Non-current liabilities Long-term debt940701Lease liabilities126109Deferred income taxes158137Provisions and other long-term liabilities2615Employee future benefits713 1,5161,217Shareholders’ equity Capital stock194208Retained earnings1,1921,161Accumulated other comprehensive income17179 1,5571,448 3,0732,665Stella-Jones Inc.Consolidated Statements of Cash Flows (expressed in millions of Canadian dollars) 2022 2021 $ $ Cash flows from (used in) Operating activities Net income241 227 Adjustments for Depreciation of property, plant and equipment31 25 Depreciation of right-of-use assets42 38 Amortization of intangible assets16 11 Financial expenses33 23 Income tax expense85 76 Other9 (12) 457 388 Changes in non-cash working capital components Accounts receivable (43) (19)Inventories (75) (21)Other current assets (9) (7)Accounts payable and accrued liabilities22 24 (105)(23)Interest paid(32)(23)Income taxes paid(65)(91) 255 251 Financing activities Proceeds from short-term debt— 125 Repayment of short-term debt— (123)Net change in revolving credit facilities139 (13)Proceeds from long-term debt63 247 Repayment of long-term debt(33)(105)Repayment of lease liabilities(41)(35)Dividends on common shares(49)(47)Repurchase of common shares(180)(108)Other— 1 (101)(58)Investing activities Business combinations(46)(129)Purchase of property, plant and equipment(97)(48)Additions of intangible assets(11)(16) (154)(193)Net change in cash and cash equivalents during the year— — Cash and cash equivalents – Beginning of year— — Cash and cash equivalents – End of year— —
NON-GAAP AND OTHER FINANCIAL MEASURESThis 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).
Non-GAAP financial measures include:
Non-GAAP ratios include:
Other specified financial measures include:
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:
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
December 31, Years ended
December 31, 2022202120222021Operating income6132359326Depreciation and amortization26208974EBITDA8752448400 Reconciliation of Long-Term Debt to Net Debt
(in millions of dollars)Years ended December 31, 20222021Long-term debt, including current portion941734Add: Lease liabilities, including current portion167144Net Debt1,108878EBITDA (TTM)448400Net Debt-to-EBITDA2.5x2.2xSource:Stella-Jones Inc.Stella-Jones Inc. Contacts:Silvana Travaglini, CPAStephanie Corrente Senior Vice-President and Chief Financial Officer
Stella-Jones Director, Corporate Communications
Stella-Jones Tel.: (514) 934-8660 stravaglini@stella-jones.comcommunications@stella-jones.com