Stella-Jones' sales in the Q3 2023 increased by 13% to $949 million, compared to sales of $842 million last year. The increase was driven by a 17% organic sales growth in the Company’s infrastructure-related businesses, namely utility poles, railway ties and industrial products, offset in large part by lower residential lumber and logs and lumber sales when compared to the same period last year.
Led by the continued strong organic sales growth, particularly for the Company’s largest product category, utility poles, EBITDA increased to $193 million in the Q3 2023 compared to $119 million in the Q3 last year and EBITDA margin expanded from 14.1% in 2022 to 20.3% in 2023.
Gross profit was $215 million in the Q3 2023, compared to $139 million in the corresponding period last year, representing a margin of 22.7% and 16.5%, respectively. The increase in gross profit in absolute dollars was largely due to the margin expansion of the Company’s infrastructure-related businesses, particularly stemming from utility poles, and the contribution of the wood utility pole manufacturing businesses acquired in late 2022 and 2023. As a percentage of sales, the gross profit margin also benefited from a better product mix, led by the strong growth of utility poles sales. Similarly, operating income totaled $166 million in the Q3 2023 versus operating income of $98 million in the corresponding period of 2022.
Net income for the Q3 2023 was $110 million, or $1.91 per share, compared to net income of $65 million, or $1.07 per share, in the corresponding period of 2022.
“In Q3, Stella-Jones made notable progress in its growth trajectory, delivering not only another quarter of strong sales growth, but record increase in profitability," said Eric Vachon, President and CEO of Stella-Jones. “These results were supported by the ongoing robust performance of our infrastructure-related businesses, and by residential lumber delivering in line with our expectations. While utility poles sales continued to benefit from favourable pricing dynamics, we also saw a progressive improvement in utility poles sales volumes in the quarter, as well as significant production volume gains, stemming from capital projects and the recent acquisition of Baldwin. Combined with replenished railway tie inventory levels, we are confident in the sustained growth of the Company as we move into 2024. Additionally, in the Q3, we published our 2022 Environmental, Social and Governance Report, in which we introduced our ESG strategy and targets to contribute to a more sustainable future."
"As we approach the end of the year, I am pleased with the performance and milestones we have achieved so far in 2023. They highlight our ability to capitalize on positive industry trends by leveraging our expansive North American presence and the invaluable collective expertise of our people to drive long-term profitable growth for our shareholders,” concluded Mr. Vachon.
Nine months results
For the first nine months of 2023, sales amounted to $2,631 million, versus $2,400 million for the corresponding period last year, driven by a 15% organic sales growth of the Company’s infrastructure-related businesses. The year-over-year organic growth in pressure-treated wood sales stemmed from favourable pricing across all the infrastructure-related product categories and higher residential lumber volumes. These factors were partially offset by a decrease in pricing for residential lumber and lower volumes for infrastructure-related product categories. The lower logs and lumber sales compared to the same period last year was largely attributable to a decline in the market price of lumber and less lumber trading activity.
Gross profit increased to $551 million, or 20.9% of sales, from $412 million or 17.2% of sales, in the corresponding period last year. Operating income amounted to $410 million, versus $298 million a year ago, while EBITDA was $488 million, compared to $361 million in the prior year and EBITDA margin expanded from 15.0% in 2022 to 18.5% in 2023.
Net income in the first nine months of 2023 was $270 million, or $4.63 per share, versus net income of $205 million, or $3.30 per share, in the corresponding period last year. Earnings per share was positively impacted by the increase in net income and the Company’s repurchase of shares through its normal course issuer bids.
Stella-Jones Inc. is North America’s leading producer of pressure-treated wood products.
