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Stella-Jones Q4 profit rises on higher railway tie sales, tops views

Published: 09:00 16 Mar 2012 EDT

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Stella-Jones (TSE:SJ) reported a 26 percent rise in its fourth quarter profits on Friday, well beating analyst estimates, as the company's revenues increased largely on demand for its core products.

For the three months that ended December 31, the company, which makes treated wood products for the railway, electrical, and telecommunications industries, posted net earnings of $13.4 million, or $0.83 per share, up 26 percent from $10.7 million, or $0.67 per share, a year ago.

Total sales rose 11 percent to $145.5 million, from $133.1 million in the same period last year.

Analysts polled by Thomson Reuters had anticipated $0.72 per share, on $142.3 million in revenues.

"2011 marked Stella-Jones' eleventh year of uninterrupted growth in net income," said president and CEO, Brian McManus.

"These results reflect the successful execution of our operating strategy based on continental expansion and industry consolidation. Demand for our core railway tie and utility pole products remained solid throughout the year, as evidenced by double-digit sales growth excluding acquisitions and currency variations.

"More importantly, our continued focus on optimizing network efficiency and overall operations led to solid improvements in profitability."

The company said its sales boost was largely attributed to strong demand for its core products, including increased advanced deliveries of its railway ties, as well as a $1.7 million contribution from the operations of Thompson Industries, which it acquired in December 2011.

Railway tie sales rose over 19 percent to $74.4 million. Sales of utility poles increased four percent to $50.6 million, as the company reported higher sales of transmission poles.

Meanwhile, industrial product sales increased four percent to $20.6 million, offsetting a nine percent decline in residential lumber sales, to $2.0 million.

Stella-Jones said Friday its board of directors has modified its dividend policy. The company will now declare a quarterly dividend, as opposed to on a semi-annual basis.

The first $0.15 per share quarterly dividend will be payable on April 30, to shareholders on record as of April 2.

Looking forward, Stella-Jones said it continues to anticipate solid demand for its core products - mainly in rail and utility.

"Our short-term priority is to integrate the Thompson operations and benefit from greater market penetration, synergies and additional operating efficiencies from a larger network," McManus continued.

"Already well established as one of the largest North American providers of industrial treated wood products, Stella-Jones will continue to assess prospective business opportunities that create additional value for its shareholders."

For the full year fiscal 2011, the St. Laurent, Quebec-based company reported a 62 percent hike in net income, to $55.7 million, or $3.48 per share. Revenues rose 14 percent to $640.2 million.

In the 2011 calendar year, Stella-Jones' stock gained 21.66 percent.

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