CanWel Building Materials Announces Record Second Quarter 2020 Financial Results
CanWel Building Materials Group Ltd. (“CanWel” or “the Company”) announced its second quarter 2020 financial results(1) for the period ended June 30, 2020.
For the three-month period ended June 30, 2020(1), consolidated revenues increased by 7.1% to $412.9 million when compared to $385.7 million in the same period in 2019. Despite the general economic impact of the COVID-19 global pandemic (the “Pandemic”), sales for the Distribution segment increased by $31.3 million or 8.4%, demonstrating the Company’s continued resilience and steady overall end-market demand for its products. The year-over-year increase in the Company’s sales is attributable to improvements in both sales volumes and pricing. Quarantine-related home improvement activities resulted in increased demand from consumers spending more time and effort on home renovation and repair projects. Additionally, construction materials pricing generally increased during the second quarter of 2020, as the economy started to re-open in certain jurisdictions that previously had restricted activity. The Company’s sales by product group in the quarter were made up of 67% construction materials, compared to 62% last year, with the remaining balance resulting from specialty and allied products of 28%, and forestry and other of 5%.
Gross margin dollars increased 8.3% to $58.9 million, compared to $54.4 million during the corresponding period in 2019. Gross margin percentage also increased to 14.3% of revenues versus 14.1% during the same period in 2019. The increase in margin dollars and margin percentage is mainly attributable to the improvements in sales and construction materials pricing during the second quarter of 2020.
EBITDA(2) for the period increased 20.1% to a quarterly record at $32.8 million compared to $27.3 million during the second quarter of 2019, largely due to the improvements in both sales volumes and construction materials pricing as a result of the quarantine-related home improvement activities during the second quarter of 2020. As a result, net earnings for the quarter ended June 30, 2020 increased 62.8% to $12.7 million compared to net earnings of $7.8 million in the same quarter of 2019.
Subsequent to quarter-end, on July 15, 2020, CanWel paid a $0.14 per share dividend to its shareholders of record on June 30, 2020. On June 15, 2020, CanWel’s Board of Directors adjusted the Company’s quarterly common share dividend from $0.14 to $0.12 per share, effective for the dividend which is expected to be paid on October 15, 2020, to shareholders of record on September 30, 2020(3).
For the six-month period ended June 30, 2020(1), the Company generated EBITDA of $49.3 million, on revenues of $739.7 million. Gross margin and gross margin percentage during the period amounted to $102.4 million, and 13.8%, respectively. This compares to 2019 EBITDA of $42.4 million on revenues of $667.6 million. Gross margin and gross margin percentage during the 2019 period amounted to $95.5 million and 14.3%. Net earnings for the six-month period ended June 30, 2020 were $13.6 million versus $7.5 million in the comparative period of 2019.
On a year-over-year basis, as at June 30, 2020, CanWel reduced its total loans and borrowings by approximately $90 million through cost savings, operational efficiencies and working capital reduction.
“I am very pleased and encouraged by the surge in end market demand and pricing for our products, combined with our ability to work through an unprecedented challenging environment in the global economy caused by COVID-19,” commented Amar S. Doman, Chairman of the Board. “While we remain cautious and continue to closely monitor our operations to mitigate any possible macroeconomic impact, these financial results are a testament to the diversified business model we have been building for years, which also enables us to be meaningfully flexible with our balance sheet when required. We continue to wish our entire team at CanWel, our suppliers, along with our customers, and the first responders the very best and thank them for their relentless efforts and commitment while we live through this global pandemic period.”
On March 11, 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) a global pandemic (the “Pandemic”), resulting in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, government and business closures, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally and significant economic uncertainty.
As part of a supply chain for the construction industry, CanWel remains classified as an essential service for the majority of its operations in Canada and the U.S., and therefore has not been required to shut down. However, the Company has taken specific health and safety measures in response to COVID-19, including limiting the number of employees, customers and others on its premises, mandatory self-imposed quarantine periods for employees, team separation and staggered work hours, temporary suspension of all non-essential business travel, heightened hygienic and disinfecting practices, technology enabled remote work initiatives, following government and other safety protocols.
Additionally, the Company has taken steps to mitigate the Pandemic’s impact on its customers, operations and cash flows by optimizing its working capital, implementing salary and working hour reductions, initiating employee layoffs, deferring or eliminating certain non-essential operating expenditures, minimizing capital expenditures and evaluating ongoing cost savings opportunities. Management is actively monitoring the Pandemic, economic and regulatory developments, and their impact on the Company’s operations, continually adapting to the changing operating environment.
The ultimate impact of the COVID-19 pandemic on the Company’s full-year 2020 results remains difficult to quantify as it will depend on the duration of the pandemic, the impact of government policies, and the pace of economic recovery. The Company remains confident that its business model, cash flow profile, and liquidity will be more than sufficient to address a varied range of COVID-19 scenarios that may occur in 2020. The Company will continue to firmly manage the business in the short term and make continued progress with respect to its long-term growth strategies.
For the full second quarter results, click here.
(1) Please refer to our Q2 2020 MD&A and Financial Statements for further information. Our Q2 2020 Financial Statements filings are reported under International Financial Reporting Standards (“IFRS”).
(2) In the discussion, reference is made to EBITDA, which represents earnings from continuing operations before interest, including amortization of deferred financing costs, provision for income taxes, depreciation and amortization. This is not a generally accepted earnings measure under IFRS and does not have a standardized meaning under IFRS, and therefore the measure as calculated by CanWel may not be comparable to similarly-titled measures reported by other companies. EBITDA is presented as we believe it is a useful indicator of a company’s ability to meet debt service and capital expenditure requirements and because we interpret trends in EBITDA as an indicator of relative operating performance. EBITDA should not be considered by an investor as an alternative to net earnings or cash flows as determined in accordance with IFRS. For a reconciliation of EBITDA to the most directly comparable measures calculated in accordance with IFRS refer to “Reconciliation of Net Earnings to Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)”.
(3) Please refer to our press release dated June 15, 2020 for further information.
Founded in 1989, CanWel is headquartered in Vancouver, British Columbia and trades on the Toronto Stock Exchange under the symbol CWX and is Canada’s only fully integrated national distributor in the building materials and related products sector. CanWel operates: multiple treating plant and planing facilities in Canada and the United States; distribution centres coast-to-coast in all major cities and strategic locations across Canada; in the United States near Portland, Oregon San Francisco and Los Angeles, California and in 14 locations in the State of Hawaii through its wholly owned Honsador Building Products Group. CanWel distributes a wide range of building materials, lumber, renovation and electrical products. In addition, through its CanWel Fibre division, CanWel operates a vertically integrated forest products company based in Western Canada, operating from British Columbia to Saskatchewan, also servicing the US Pacific Northwest. CanWel owns approximately 117,000 acres of private timberlands, strategic Crown licenses and tenures, log harvesting and trucking operations, several post and pole peeling facilities and two pressure-treated specialty wood production plants and a specialty saw mill.
Ali Mahdavi – Investor Relations – firstname.lastname@example.org – (416) 962-3300
Source: CanWel Building Materials Group Ltd.