• Sales increased 12.6% to $2.12 billion in fiscal 2018
• EBITDA up 0.5% to $244.4 million versus a year ago
• Net income and diluted EPS stood at $137.6 million and $1.98 per share for the year
• Quarterly dividend increased by 16.7% to $0.14 per share
• Solid financial position maintained with a total debt to EBITDA ratio of 2.1x

MONTREAL, March 15, 2019 (GLOBE NEWSWIRE) -- Stella-Jones Inc. (TSX: SJ) (“Stella-Jones” or the “Company”) today announced financial results for its fourth quarter and fiscal year ended December 31, 2018.

“We finished the year with very solid results. Sales for the quarter increased 14.7% to $432.8 million and EBITDA increased 10.0% to $41.8 million, despite a $7.9 million non-cash mark-to-market loss on derivative commodity contracts. For the year, sales amounted to $2.1 billion and increased in all product categories, driven by a combination of sales price increases, market demand and acquisitions. Our EBITDA was up marginally for the year, while our net income was down primarily due to a one-off non-cash tax benefit resulting from the U.S. tax reform in 2017. Stella-Jones remains in a very healthy financial position and today announced a dividend increase, for the fifteenth consecutive year.

Looking to 2019, based on current market conditions, currencies and lumber prices, we expect Stella-Jones to generate higher year-over-year sales and margin improvement. As always, we will continue to remain focused on optimizing our operations across the organization while diligently seeking market opportunities in all product categories,” said Brian McManus, President and Chief Executive Officer.

2018 RESULTS
Sales for the year ended December 31, 2018 reached $2,123.9 million, up 12.6% versus last year’s sales of $1,886.1 million. Acquisitions contributed sales of approximately $60.5 million, while the currency conversion effect had a negative impact of $12.9 million. Excluding these factors, sales increased approximately $190.2 million, or 10.1%.

Railway tie sales for 2018 amounted to $662.4 million, representing an increase of 1.7%, from sales of $651.5 million in 2017. The currency conversion effect decreased sales by about $6.9 million. Excluding the currency conversion effect, railway tie sales increased approximately $17.8 million, or 2.7%, primarily as a result of price increases in the second half of the year, partially offset by the Company supporting the transition of a Class 1 railroad customer from a “treating services only” program to a full service “black-tie” program in the first half of the year.

Utility pole sales reached $725.0 million in 2018, up 10.9% from sales of $654.0 million in 2017. Acquisitions contributed sales of $1.4 million, while the currency conversion effect decreased sales by about $3.4 million. Excluding the contribution from acquisitions and the currency conversion effect, utility pole sales increased approximately $73.0 million, or 11.2%, primarily driven by increased sales in the U.S. Southeast, increased projects related to transmission poles, healthy demand for replacement programs and increased sales prices.

Sales in the residential lumber category totalled $474.7 million in 2018, up 29.6% from sales of $366.2 million in 2017. Acquisitions contributed sales of approximately $43.9 million, while the currency conversion effect decreased sales by about $1.7 million when compared with 2017. Excluding these factors, residential lumber sales increased approximately $66.3 million, or 18.1%. This favourable variance is primarily explained by higher selling prices as a result of higher lumber costs passed through to customers and to increased volume due to the Company’s expanding market presence.

Industrial product sales reached $109.0 million in 2018, compared with $94.5 million last year. Acquisitions contributed sales of approximately $14.4 million, while the currency conversion effect decreased sales by about $0.9 million when compared with 2017. Excluding the contribution from acquisitions and the currency conversion effect, sales increased 1.1%, explained in most part by demand for rail-related products and projects requiring laminated products, partially offset by lower demand for bridges and timbers.

Sales in the logs and lumber product category totalled $152.8 million in 2018, compared with $119.9 million in 2017. Excluding the contribution from acquisitions, sales for this product category increased 26.8%. This significant variance reflects higher selling prices due to higher lumber costs coupled with increased harvesting activities to procure raw material to support strong pole sales.

Operating income was $206.3 million, or 9.7% of sales, compared with $207.4 million, or 11.0% of sales, in 2017. While operating income in absolute dollars is in line with last year, it is lower on a percentage of sales basis. The decrease as a percentage of sales is mainly attributable to the Company supporting the transition of a Class 1 railroad customer from a “treating services only” program to a full service “black-tie” program in the first half of the year. To accelerate this transition, the Company acquired untreated railway ties from the Class 1 railroad customer which increased cost of sales once these ties were treated and sold. Operating income was also negatively impacted by the increasing cost of untreated railway ties and certain untreated species of poles combined with the lag effect of passing these increases to customers. In addition, the higher lumber costs for the year, which were passed through to customers via higher selling prices, have contributed to increased cost of sales in the residential product category but have also put downward pressure on margins as a percentage of sales.

Net income for 2018 decreased 18.0% to $137.6 million, or $1.98 per diluted share, down from $167.9 million, or $2.42 per diluted share, in 2017. The year-over-year decrease is primarily explained by a one-off non-cash tax benefit of $30.0 million, recorded in the fourth quarter of 2017, resulting from the remeasurement of deferred tax liabilities following a reduction in the U.S. top federal corporate income tax rate.

FOURTH QUARTER RESULTS
Sales for the fourth quarter of 2018 amounted to $432.8 million, up 14.7% from sales of $377.4 million for the same period in 2017. Acquisitions contributed sales of approximately $11.4 million, while the conversion effect had a positive impact of $9.0 million on sales. Excluding these factors, sales increased approximately $35.0 million, or 9.3%.

Sales of railway ties reached $127.0 million, versus $118.0 million last year. Excluding the currency conversion effect, railway tie sales rose 4.8%, driven by price increases. Utility pole sales amounted to $192.0 million, up 17.9% from $162.9 million last year. Excluding the contribution from acquisitions and the currency conversion effect, sales grew 15.0% as a result of greater market reach in the U.S. Southeast, increased project activity requiring transmission poles, healthy demand for replacement programs and requirements following the California wildfires in late 2018. Residential lumber sales reached $60.3 million, up from $48.6 million last year. Excluding the contribution from acquisitions and the currency conversion effect, sales grew 8.0%, reflecting stronger volume in Canada, partially offset by lower selling prices in the U.S. Industrial product sales amounted to $23.1 million, up from $20.0 million a year ago. Excluding acquisitions and the currency conversion effect, sales decreased 6.0% as a result of lower bridge and timber demand. Finally, logs and lumber sales stood at $30.4 million, versus $27.9 million last year. Excluding the currency conversion effect, sales grew 7.9%, driven, in most part, by heightened pole procurement efforts to support the utility pole product category, partially offset by lower selling prices on lumber.

Gross profit amounted to $67.0 million, or 15.5% of sales, in the fourth quarter of 2018, versus $53.5 million, or 14.2% of sales, in the fourth quarter of 2017. The increase as a percentage of sales mainly reflects better year-over-year overhead absorption driven by greater production activity while product margins were comparable to the previous year. Operating income totalled $31.8 million, or 7.4% of sales, in the fourth quarter of 2018, versus $29.0 million, or 7.7% of sales, last year and was impacted by a non-cash loss of $7.9 million related to the mark-to-market fair value of diesel and petroleum derivative commodity contracts.

Net income for the period reached $20.6 million, or $0.30 per diluted share, compared with $51.1 million, or $0.74 per diluted share, in the prior year. The year-over-year decrease is attributable to a one-off non-cash tax benefit in the fourth quarter of 2017, stemming from the remeasurement of deferred tax liabilities following a reduction in the U.S. top federal corporate income tax rate.

SOLID FINANCIAL POSITION
As at December 31, 2018, the Company’s long-term debt, including the current portion, stood at $513.5 million compared with $455.6 million as at December 31, 2017. The increase mainly reflects higher working capital requirements, financing required for the acquisitions of Prairie Forest Products and Wood Preservers Incorporated, as well as the effect of local currency translation on U.S. dollar denominated long-term debt. As at December 31, 2018, Stella-Jones’ total debt to EBITDA was 2.1x, up from 1.9x as at December 31, 2017.

QUARTERLY DIVIDEND INCREASED 16.7 % TO $0.14 PER SHARE
On March 14, 2019, the Board of Directors declared a quarterly dividend of $0.14 per share, representing an increase of 16.7 % over the previous quarterly dividend, on the outstanding common shares of the Corporation, payable on April 26, 2019 to shareholders of record at the close of business on April 5, 2019. This dividend is designated to be an eligible dividend.

OUTLOOK
For 2019, based on current market conditions and assuming stable currencies and the current level of lumber prices, Management expects higher year-over-year sales for Stella-Jones, driven by stronger pricing for railway ties and utility poles as well as increased market reach for the residential lumber and the utility pole product categories. Management also expects improved year-over-year margins across all product categories. Higher margins will be primarily driven by increased pricing and volume for railway ties coupled with improved product mix for utility poles. Furthermore, it is important to note that the 2019 EBITDA will be positively impacted by the implementation of IFRS 16 while net income will be negatively impacted by higher financing expenses. The Company plans on spending a similar level of capital expenditures in 2019 as compared to 2018 ($51.6 million in 2018), which will include a plant expansion in Cameron, Wisconsin.

For additional details per product category, please refer to the Management’s Discussion and Analysis for the years ended December 31, 2018 and 2017.

CONFERENCE CALL
Stella-Jones will hold a conference call to discuss these results on March 15, 2019, at 10:00 AM Eastern Time. Interested parties can join the call by dialing 1-647-788-4922 (Toronto or overseas) or 1-877-223-4471 (elsewhere in North America). Parties unable to call in at this time may access a recording by calling 1‑800-585-8367 and entering the passcode 2087356. This recording will be available on Friday, March 15, 2019 as of 3:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, March 22, 2019.

NON-IFRS FINANCIAL MEASURES
EBITDA (operating income before depreciation of property, plant and equipment and amortization of intangible assets), operating income and operating margins are financial measures not prescribed by IFRS and are not likely to be comparable to similar measures presented by other issuers. Management considers these non-IFRS measures to be useful information to assist knowledgeable investors regarding the Company’s financial condition and results of operations as it provides an additional measure of its performance. Please refer to the non-IFRS financial measures section in the Management’s Discussion and Analysis.

ABOUT STELLA-JONES
Stella-Jones Inc. (TSX: SJ) is a leading producer and marketer of pressure treated wood products. The Company supplies North America’s railroad operators with railway ties and timbers, and the continent’s electrical utilities and telecommunication companies with utility poles. Stella-Jones also manufactures and distributes residential lumber and accessories to retailers for outdoor applications, as well as industrial products for construction and marine applications. The Company’s common shares are listed on the Toronto Stock Exchange.

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 factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Company's products and services, the impact of price pressures exerted by competitors, the ability of the Company to raise the capital required for acquisitions, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results.

Note to readers:  The audited consolidated financial statements for the year ended December 31, 2018 and the condensed interim unaudited consolidated financial statements for the fourth quarter ended December 31, 2018 as well as management’s discussion and analysis are available on Stella-Jones’ website at www.stella-jones.com.