Stella-Jones Inc. announced financial results for its 3Q ended September 30, 2018. Sales for the 3Q 2018 reached $630 million, versus sales of $517.6 million for the corresponding period last year.
Operating income stood at $67.9 million, or 10.8% of sales, compared with $63.1 million, or 12.2% of sales in the corresponding period last year. While operating income in absolute dollars is higher than last year, it is lower on a percentage of sales basis. This variation is primarily explained by the increasing cost of untreated railway ties and certain untreated species of poles. In addition, the higher lumber costs, which are passed through in a timely manner to customers via higher selling prices, have contributed to increased cost of sales but have also put downward pressure on margins as a percentage of sales.
Net income for the 3Q 2018 was $45.8 million, or $0.66 per diluted share, versus $42.0 million, or $0.61 per diluted share, in the 3Q 2017.
“3Q results demonstrated strong sales growth and continued improvement in operating margins on a sequential basis. Sales increased in all product categories driven by sales prices, market demand and acquisitions. While margins are up when compared to previous 2018 quarters, the pace of improvement was mitigated by the timing of customer price adjustments for higher untreated railway tie costs.”
“Looking forward, we are encouraged by the improving market conditions in the railway tie product category and the rising demand for utility poles. Given current market conditions and the recent decrease in residential lumber prices, we are on track to improve our operating margins in 2019. As always, we will continue to remain focused on optimizing our operations across the organization while diligently seeking market opportunities in all product categories,” said Brian McManus, President and CEO.
Stella-Jones Inc. is a leading producer and marketer of pressure treated wood products. The Company supplies North America’s railroad operators with railway ties and timbers, and the continent’s electrical utilities and telecommunication companies with utility poles.
