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Stella-Jones Q1 profit jumps 25% as sales rise on acquisition

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Stella-Jones (TSE:SJ) advanced 2.7 per cent after it said net income in the first quarter rose 25 per cent as sales increased 36.7 per cent to $217.0 million, citing "sustained demand" for the company's core railway tie and utility pole products. The latest quarter represents the first full period that includes the operating results of McFarland Cascade Holdings, which it acquired last November. 

The company, a maker of pressure-treated wood products, said net income for the three months that ended March 31 totalled $18.8 million, or $1.09 per share, versus $15.0 million, or 94 cents per share, a year earlier. 

Cash flow from operating activities, before changes in non-cash working capital components and interest and income tax paid, rose 26.3 per cent to $34.3 million.

Sales reached $217.0 million, an increase 36.7 per cent over last year's sales for the same period of $158.8 million. The company said the operating facilities acquired from McFarland contributed sales of roughly $65.0 million, while the conversion effect from fluctuations in the value of the Canadian dollar, Stella-Jones' reporting currency, versus the U.S. dollar, had a positive impact of $0.5 million on the value of U.S. dollar denominated sales when compared with the previous year's first quarter. 

Excluding these factors, sales decreased about $7.3 million, as a result of a slower start for rail related industrial products, the company said, and "more traditional seasonal demand patterns" for utility poles and residential lumber.

Railway tie sales amounted to $96.5 million, an increase of 0.5 per cent from a year earlier, while utility pole sales came in at $90.8 million, up from $43.5 million in the corresponding period last year. 

Industrial product sales fell to $11.9 million, compared with $15.2 million last year, mainly as a result of a slower start in rail projects, and sales in the residential lumber category jumped to $17.9 million from $4.2 million a year earlier on account of the McFarland operations. 

"Stella-Jones' role as a supplier of basic infrastructure will continue to serve us well and we expect demand for our core products to remain healthy for the remainder of 2013," said president and CEO Brian McManus. 

"In the short-term, the integration of the McFarland operations into our network and the ramp-up of our new facility in Georgia are our main priorities. We will use our enhanced abilities from an expanded network to better serve our customers and capture new business opportunities."

 As at the end of the quarter, Stella-Jones had total debt of $382.6 million.

The company also announced on Wednesday a quarterly dividend of 20 cents per common share payable on June 28, to shareholders of record at the close of business on June 3.

Shares of Stella-Jones rose 2.4 per cent in Toronto afternoon trade, to $86.49, stretching year-to-date gains to more than 12.8 per cent. 

Quick facts: Stella-Jones Inc

Price: 37.03 CAD

TSX:SJ
Market: TSX
Market Cap: $2.53 billion
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