MONTREAL, QUEBEC -  Stella-Jones Inc. (TSX:SJ) today announced financial results for its second quarter ended June 30, 2013.

"Demand for Stella-Jones' core products remained healthy during the second quarter, as we continue to leverage our enhanced presence in the treated wood products market. Gross profit as a percentage of sales increased from the same period a year ago as a result of our focus on our main markets and on improving operating efficiencies, including on-going progress in the integration of our latest acquisition, McFarland Cascade Holdings, Inc. ("McFarland")," said Brian McManus, President and Chief Executive Officer.

SECOND QUARTER RESULTS

Sales for the quarter ended June 30, 2013 totalled $273.2 million, up 34.0% over last year's sales of $203.9 million. The operating facilities acquired from McFarland on November 30, 2012 contributed sales of approximately $75.0 million, while the conversion effect from fluctuations in the value of the Canadian dollar, Stella-Jones' reporting currency, versus the U.S. dollar, had a positive impact of $1.8 million on the value of U.S. dollar denominated sales when compared with the previous year's second quarter. Excluding these factors, sales decreased approximately $7.5 million, as a result of more traditional seasonal demand patterns in 2013 versus the prior year, lower sales of industrial products, and reduced railcar availability in Western Canada due to flooding in southern Alberta.

Railway tie sales amounted to $119.8 million, essentially stable compared with sales of $120.1 million last year, reflecting healthy industry demand. Utility pole sales amounted to $95.1 million, up from $51.7 million in the corresponding period in 2012. This increase is mainly attributable to utility pole sales of $46.0 million from the McFarland operations. Sales of residential lumber reached $41.3 million, up from $14.0 million a year earlier as a result of additional residential lumber sales of $26.7 million from the McFarland operations. Finally, industrial product sales totalled $17.0 million, compared with $18.1 million a year earlier, due to a reduction in the tie recycling business and in rail projects requiring industrial products compared to the second quarter of last year, as well as a reduction in sales of certain non-core products.

Gross profit as a percentage of sales increased to 21.2% in the second quarter of 2013, from 20.8% last year, as a result of greater efficiencies across the Company's plant network, including the McFarland facilities, as well as reduced low margin non-core product sales. Operating income as a percentage of sales decreased to 15.0% compared with 16.0% of sales last year. This reflects the higher level of selling and administrative expenses following the McFarland acquisition and a loss on the disposal of surplus assets from previous acquisitions. In monetary terms, operating income was $41.0 million in the second quarter of 2013, up 25.7% from $32.6 million in the prior year.

Net income for the period increased 26.8% to $26.4 million or $1.53 per share, fully diluted, compared with $20.8 million or $1.30 per share, fully diluted, in the second quarter of 2012. Cash flow from operating activities before changes in non-cash working capital components and interest and income tax paid rose 33.9% to $48.2 million.

SIX-MONTH RESULTS

For the six-month period ended June 30, 2013, sales amounted to $490.2 million, up 35.1% from the same period a year earlier. The McFarland operations contributed sales of approximately $140.0 million while the year-over-year conversion effect from fluctuations in the value of the Canadian dollar, versus the U.S. dollar, increased the value of U.S. dollar denominated sales by $2.3 million. Excluding these factors, sales decreased approximately $14.8 million, reflecting more traditional seasonal demand in 2013 versus prior year.

Operating income was $70.6 million or 14.4% of sales, compared with $56.7 million or 15.6% of sales last year. Net income for the period reached $45.2 million or $2.62 per share, fully diluted, up 26.1% from $35.8 million or $2.24 per share, fully diluted, a year earlier. Cash flow from operating activities before changes in non-cash working capital components and interest and income tax paid rose 30.7% to $82.5 million.

HEALTHY FINANCIAL POSITION AND INVESTMENT IN INCREMENTAL CAPACITY

As at June 30, 2013, the Company's long-term debt, including the current portion, amounted to $373.7 million, down from $382.6 million three months ago. At that same date, the ratio of total debt to total capitalization was 0.41:1, down from 0.44:1 three months earlier.

During the second quarter of 2013, Stella-Jones invested $5.9 million in purchases of property, plant and equipment, primarily for the addition of various equipment upgrades and incremental capacity. This amount includes $1.8 million to continue the construction of a new treating facility in Cordele, Georgia, where wood treatment operations are expected to begin in August 2013, and an initial amount of $1.4 million for a new treating cylinder at the New Westminster, British Columbia facility.

QUARTERLY DIVIDEND OF $0.20 PER SHARE

On August 8, 2013, the Board of Directors declared a quarterly dividend of $0.20 per common share payable on September 30, 2013 to shareholders of record at the close of business on September 2, 2013.

OUTLOOK

"Demand for our core products should remain healthy for the remainder of 2013, as higher freight volume supports further investment in the North American rail network and demand for utility poles is expected to hold over the short-term. More importantly, we believe that utility pole demand should pick-up over the mid-term, as an increasing number of installed poles are approaching the end of their normal service life and will need to be replaced. Increased forecasted demand by some of our larger utility pole customers supports this belief. Stella-Jones is investing in additional capacity to meet this anticipated demand," concluded Mr. McManus.

CONFERENCE CALL

Stella-Jones will hold a conference call to discuss these results on Friday, August 9, 2013, at 10:00 AM Eastern Time. Interested parties can join the call by dialling 647-427-7450 (Toronto or overseas) or 1-888-231-8191 (elsewhere in North America). Parties unable to call in at this time may access a tape recording of the meeting by calling 1-855-859-2056 and entering the passcode 17280571. This tape recording will be available on Friday, August 9, 2013 as of 1:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, August 16, 2013.

NON-IFRS FINANCIAL MEASURES

Operating income and cash flow from operations are financial measures not prescribed by IFRS and are not likely to be comparable to similar measures presented by other issuers. Management considers these measures to be useful information to assist knowledgeable investors in evaluating the cash generating capabilities of the Company.

ABOUT STELLA-JONES

Stella-Jones Inc. (TSX:SJ) is a leading producer and marketer of pressure treated wood products. The Company supplies North America's railroad operators with railway ties, timbers and recycling services; and the continent's electrical utilities and telecommunications companies with utility poles. Stella-Jones also provides industrial products and services for construction and marine applications, as well as residential lumber to retailers and wholesalers for outdoor applications. The Company's common shares are listed on the Toronto Stock Exchange.

Except for historical information provided herein, this press release may contain information and statements of a forward-looking nature concerning the future performance of the Company. These statements are based on suppositions and uncertainties as well as on management's best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Company's products and services, the impact of price pressures exerted by competitors, the ability of the Company to raise the capital required for acquisitions, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results.

Note to readers: Condensed interim unaudited consolidated financial statements for the second quarter are available on Stella-Jones' website at www.stella-jones.com

Source: Stella-Jones Inc.