BUSINESS

Rebuilding from summer floods in Alberta helps Stella-Jones Q3 lumber sales

11/08/2013 03:11 EST | Updated 01/23/2014 06:58 EST
MONTREAL - Stella-Jones Inc. says rebuilding from summer floods in Alberta helped boost treated lumber sales in the third quarter as the company's profit soared 34 per cent to $27.7 million.

The Montreal-based concern earned 40 cents per diluted share for the period ended Sept. 30, one cent short of analyst expectations. It earned $20.7 million, or 32 cents per share, a year earlier.

Revenues increased 37 per cent to $268.1 million, from $195.4 million last year, largely due to the November 2012 acquisition of McFarland Cascade Holdings.

The U.S. company contributed $86.2 million of additional sales, while currency fluctuations had a positive impact of $4.7 million.

"Stella-Jones' focus on improving operating efficiency across its network produced solid operating results in the third quarter," said president and CEO Brian McManus.

"A strong performance by the McFarland operations led to greater penetration of the utility pole market in the United States," he added.

Residential lumber sales soared to $39.3 million, up from $12.3 million a year earlier. It included $25 million from McFarland's operations and "unexpected strong demand in southern Alberta" following summer flooding.

Railway tie sales decreased 13 per cent to $99.4 million due to a lag in shipments from a Class 1 railway customer that is increasing the services it purchases from Stella-Jones.

Sales of utility poles more than doubled to $112.8 million, up from $53.1 million, mainly due to $59.9 million in sales from McFarland.

Meanwhile, its new wood treatment operations in Georgia contributed about $2.3 million in sales.

Industrial product sales increased to $16.5 million.

McManus said demand should remain healthy in coming quarters "as fundamentals in our core markets remain favourable."

Sara O'Brien of RBC Capital Markets cut her target price slightly despite expecting "double-digit" earnings growth in fiscal 2014 and beyond from acquisitions and internal growth

"Ultimately, we expect Stella-Jones to become a high dividend payout company in a few years, sustaining its current trading multiple," she wrote in a report.

On the Toronto Stock Exchange, Stella-Jones shares were down $1.76, or 6.44 per cent, at $25.55 in afternoon trading Friday.