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Stella-Jones Q2 profit up over 20%, increases quarterly dividend

Published: 09:33 10 Aug 2012 EDT

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Stella-Jones (TSE:SJ) said Friday morning second quarter net profit increased more than 20 per cent on higher railway tie sales, prompting a 6.7 per cent increase of its quarterly dividend.

For the period that ended June 30, the maker of pressure-treated wood products reported net income of $20.8 million, or $1.30 per diluted share, up from $17.3 million, or $1.08 per diluted share, in the second quarter of 2011.

Results beat analyst earnings expectations of $1.22 per share.

Revenue was $203.9 million in the quarter, up 13.1 per cent from $180.3 million last year. Analysts expected revenue of $205.20 million.

Operating income totalled $32.6 million, up from $27.6 million in the year-earlier period.

"Stella-Jones achieved another strong financial performance in the second quarter driven by robust demand for our core railway tie products," said the company’s president and CEO, Brian McManus, in a statement Friday.

"More importantly, our ongoing efforts to enhance operating efficiency combined with tight controls on operating costs resulted in further margin improvements and significant increases in net income and cash flow."

Railway tie sales rose 25.7 per cent to $120.1 million in the quarter, reflecting tie sales of $10.0 million from the operating facility acquired from Thompson Industries in December 2011, as well as "solid market demand", said Stella-Jones.

Utility pole sales fell slightly to $51.7 million, from $52.4 million in the second quarter of last year, while sales of distribution poles increased, driven by stable demand for regular maintenance projects.

Sales of industrial products were down, totalling $18.1 million from $20.6 million a year earlier.

Meanwhile, the company reported that revenue of residential lumber climbed over 18 per cent to $14.0 million, a result of more favourable weather in Canada this year.

The company’s board of directors announced a 6.7 per cent increase in its quarterly dividend to 16 cents per share, payable September 28 to shareholders of record as of September 4.

Looking ahead, the company said it expects demand of core products to remain solid for the rest of the year.

It said it will continue to focus on operating efficiencies, leveraging its network, generating cash and pursuing its acquisition strategy in its core markets.

Stella-Jones makes treated wood products for the railway, electrical, and telecommunications industries. Shares closed at $57.72 Thursday.

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