Stella-Jones' 1Q 2022 sales amounted to $651 million, up from sales of $623 million for the same period in 2021.
“With 2022 underway, we are pleased to report 1Q 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."
Segments:
Logs and lumber sales totaled $57 million in the 1Q 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.
Utility poles sales amounted to $254 million in the 1Q 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 fireresistant wrapped pole sales volumes.
Residential lumber sales totaled $132 million in the 1Q 2022, down from $166 million of sales generated in the 1Q 2021. This decrease was largely attributable to lower sales volume, offset in part by the higher market price of lumber. While sales in the 1Q 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 1Q of the pre-pandemic year 2019, due to both pricing and volume gains.
Outlook
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.
Key highlights:
- Compound annual sales growth rate in the mid-single digit range from 2019 pre-pandemic levels to 2024;
- EBITDA margin of approximately 15% for the 2022-2024 period;
- 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;
- 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;
- Anticipated returns to shareholders between $500 and $600 million during three-year outlook period;
- Leverage ratio of 2.0x-2.5x between 2022-2024, but may temporarily exceed range to pursue acquisitions.
Stella-Jones Inc. is North America’s leading producer of pressure-treated wood products.
