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Stella-Jones Reports First Quarter Results

General News
Stella-Jones Logo - Secondary Manufacturer

Stella-Jones Inc. (“Stella-Jones” or the “Company”) announced financial results for its first quarter ended March 31, 2022.

“With 2022 underway, we are pleased to report first quarter results that delivered on our expectations,” stated Éric Vachon, President and CEO of Stella-Jones.“ Sales increased quarter-over-quarter primarily due to strong organic growth in our infrastructure-related businesses and contributions from the recent Cahaba acquisitions. This growth was largely offset by lower residential lumber sales which, coupled with increasing input costs, pressured our margins. While contractual price adjustments are being implemented to cover escalating costs across the industry supply chain, we anticipate a certain degree of lag until the cost environment stabilizes.”

“In terms of market dynamics, customer demand for utility poles remains robust, based on planned infrastructure investments as well as ongoing replacement programs by utility and telecommunication companies. The trend for railway ties is also positive for 2022, although we are experiencing longer than expected tightness in the market supply for untreated ties. Residential lumber sales in the first quarter were higher than expected, but the peak summer season will be more telling as to the overall performance of this business for the year. In short, we are laying the foundation to achieve our three-year strategic plan and our performance for the first quarter provides a good start,” concluded Mr. Vachon.

First Quarter Results

Sales for the first quarter of 2022 amounted to $651 million, up from sales of $623 million for the same period in 2021. Excluding the contribution from the acquisitions of Cahaba Pressure Treated Forest Products, Inc. and Cahaba Timber, Inc. of $15 million dollars, pressure-treated wood sales rose $21 million, or 4%, mainly driven by strong organic growth across the Company’s infrastructure-related businesses, namely utility poles, railway ties and industrial products, offset in large part by a decrease in sales for residential lumber and logs and lumber product categories when compared to their exceptional sales growth in the first quarter of 2021.

Pressure-Treated Wood Products

  • Utility poles (39% of Q1-22 sales): Utility poles sales amounted to $254 million in the first quarter of 2022, up from $206 million for the same period last year. Excluding the contribution from acquisitions, sales increased 16%, driven by the continued improvement in maintenance demand, upward price adjustments in response to cost increases and a better sales mix, mainly due to the impact of additional fire-resistant wrapped pole sales volumes.
  • Railway ties (27% of Q1-22 sales): Sales of railway ties amounted to $175 million in the first quarter of 2022, up from $158 million for the corresponding period last year. The sales growth was almost all attributable to favourable sales price adjustments for Class 1 customers, largely to cover higher fibre costs, and higher pricing for non-Class 1 customers. Overall, volumes were relatively unchanged compared to the same period last year.
  • Residential lumber (20% of Q1-22 sales): Residential lumber sales totaled $132 million in the first quarter of 2022, down from $166 million of sales generated in the first quarter of 2021. This decrease was largely attributable to lower sales volume, offset in part by the higher market price of lumber. While sales in the first quarter of 2022 were lower compared to the strong sales realized in the same quarter last year, they exceeded the $58 million of sales generated in the first quarter of the pre-pandemic year 2019, due to both pricing and volume gains.
  • Industrial products (5% of Q1-22 sales): Industrial product sales amounted to $33 million in the first quarter of 2022, slightly up compared to the $28 million of sales generated a year ago, largely due to increased demand for pilings and timber.

Logs and Lumber

  • Logs and lumber (9% of Q1-22 sales): Logs and lumber sales totaled $57 million in the first quarter of 2022, down from $65 million compared to the same period last year. In the course of procuring residential lumber, excess lumber is obtained and resold. The decrease in sales is largely due to less lumber trading activity compared to same period last year.

Gross profit was $100 million in the first quarter of 2022, versus $112 million, in the first quarter of 2021, representing a margin of 15.4% and 18.0% respectively. The absolute dollar decrease in gross profit is largely explained by the lower sales volume for residential lumber, compared to the exceptionally strong demand in the corresponding period last year. The decrease in gross profit margin in the first quarter of 2022 was driven by cost increases, which outpaced sales price increases, largely due to the time lag in contractual price adjustments.

Similarly, operating income totaled $67 million in the first quarter of 2022 versus operating income of $82 million in the corresponding period of 2021, while EBITDA decreased to $88 million, down 11%, compared to $99 million reported in the first quarter of 2021.

As a result, net income for the first quarter of 2022 was $46 million, or $0.73 per share, compared to net income of $56 million, or $0.85 per share, in the corresponding period of 2021.

Liquidity and Capital Resources

During the period ended March 31, 2022, Stella-Jones used its liquidity to support the seasonal increase in working capital requirements, invest in its property, plant and equipment and continue to repurchase shares. As at March 31, 2022, given the Company’s seasonal working capital requirements, its net debt-to-EBITDA ratio(1) increased to 2.7x and it had available liquidity of $86 million (US$69 million).

Normal Course Issuer Bid

On November 8, 2021, the TSX accepted Stella-Jones’ Notice of Intention to Make a Normal Course Issuer Bid (“NCIB”) to purchase for cancellation up to 4,000,000 common shares during the 12-month period commencing November 12, 2021 and ending November 11, 2022 (“2021-2022” NCIB).

On March 8, 2022, the Company received approval from the TSX to amend its 2021-2022 NCIB, effective as of March 14, 2022, in order to increase the maximum number of common shares that may be repurchased for cancellation by the Company during the 12-month period ending November 11, 2022 from 4,000,000 to 5,000,000 common shares. On May 10, 2022, the Board of Directors of the Company approved the replacement of the automatic share repurchase plan entered into on November 8, 2021 with its designated broker, allowing for share purchases during self-imposed blackout periods, by a new automatic share repurchase plan (“New Automatic Plan”). The New Automatic Plan will apply to the purchase of shares by the designated broker at all times throughout the remaining term of the 2021-2022 NCIB and takes effect on May 16, 2022.

In the three-month period ended March 31, 2022, the Company repurchased 999,382 common shares for cancellation in consideration of $40 million, under its NCIB 2021-2022. Since the beginning of the 2021-2022 NCIB on November 12, 2021, the Company repurchased 1,720,930 common shares for cancellation in consideration of $70 million.

Quarterly Dividend

On May 10, 2022 the Board of Directors declared a quarterly dividend of $0.20 per common share payable on June 22, 2022 to shareholders of record at the close of business on June 1, 2022. This dividend is designated to be an eligible dividend.


Stella-Jones’ sales are primarily to critical infrastructure-related businesses. While all product categories can be impacted by short-term fluctuations, the overall business is mostly based on replacement and maintenance-driven requirements, which are rooted in long-term planning. Corresponding to this longer-term horizon and to better reflect the expected sales run-rate for residential lumber and reduce the impact of commodity price volatility, the Company shifted its guidance to a three-year outlook in early 2022. Below are key highlights of the 2022-2024 outlook with a more comprehensive version, including management assumptions, available in the Company’s MD&A.

Key Highlights:

  1. Compound annual sales growth rate in the mid-single digit range from 2019 pre-pandemic levels to 2024;
  2. EBITDA margin of approximately 15% for the 2022-2024 period;
  3. Capital investment of $90 to $100 million to support the growing demand of its infrastructure-related customer base, in addition to the $50 to $60 million of annual capital expenditures;
  4. Residential lumber sales expected to stabilize between 20-25% of total sales while infrastructure-related businesses expected to grow and represent 75-80% of total sales by 2024;
  5. Anticipated returns to shareholders between $500 and $600 million during three-year outlook period;
  6. Leverage ratio of 2.0x-2.5x between 2022-2024, but may temporarily exceed range to pursue acquisitions.

For the full first quarter results, click here.

About Stella-Jones

Stella-Jones Inc. (TSX: SJ) is North America’s leading producer of pressure-treated wood products. It supplies all the continent’s major electrical utilities and telecommunication companies with wood utility poles and North America’s Class 1, short line and commercial railroad operators with railway ties and timbers. Stella-Jones also provides industrial products, which include wood for railway bridges and crossings, marine and foundation pilings, construction timbers and coal tar-based products. Additionally, the Company manufactures and distributes premium residential lumber and accessories to Canadian and American retailers for outdoor applications, with a significant portion of the business devoted to servicing the Canadian market through its national manufacturing and distribution network. The Company’s common shares are listed on the Toronto Stock Exchange.


Silvana Travaglini – Senior Vice-President & Chief Financial Officer – – (514) 940-8660

Source: Stella-Jones Inc.