MONTREAL - Stella-Jones Inc. (TSX:SJ) expects the economic recovery as well as acquisitions to generate stronger results this year despite a slump in fourth-quarter profits, the manufacturer of railway ties and utility poles said Friday.
"In 2010, we anticipate sustained demand for our core products and a gradual recovery toward normal levels of growth later in the year," CEO Brian McManus said in a conference call.
Montreal-based Stella-Jones saw a dip in fourth-quarter revenue and earnings as sales slowed to railways, which suffered a slump in freight volumes.
It earned $3 million or 24 cents per share for the quarter ended Dec. 31, less than half the year-earlier profit of $6.3 million or 50 cents per share.
Lower prices and demand drove quarterly sales down to $65.4 million from $83.7 million booked during the corresponding quarter of 2008.
The greatest decline came in sales of railway ties, which sagged to $22.1 million from $34.9 million the year before.
Despite its fourth-quarter performance, Stella-Jones said sales and profits for the full year improved over 2008 and represented the company's ninth consecutive year of record sales and profits.
The company booked net earnings of $30.1 million or $2.37 per share for all of 2009, an improvement of 5.3 per cent from $28.5 million or $2.25 per share recorded in 2008.
Sales rose 6.8 per cent to $411.1 million from $384.8 million the year before, led by an 8.6 per cent spike in sales of utility polls.
"Looking at 2009 as a whole, the year reaffirmed Stella-Jones' strong industry position," McManus told analysts.
The 2008 acquisition of Burke-Parsons-Bowlby Corp. contributed $26 million in revenues last year and offset a seven per cent dip in revenues from its existing operations.
The purchase of Tangent Rail Corp., which is expected to close by April, will reinforce Stella-Jones' position as North America's second-largest provider of railway ties, McManus said.
The treated wood products, switching, track maintenance and railway tie disposal company had US$178 million of sales in 2009 and US$28 million of operating earnings before depreciation, interest and amortization.
"We believe it will be a significant driver of profitability going forward as it could yield appreciable synergies," he said. "We are confident that 2010 will be at least as successful as 2009."
Stella-Jones said it trimmed its total debt by $44.1 million over the year, reporting total long-term debt of $87.1 million as of Dec. 31.
The company declared a semi-annual dividend of 18 cents per share, payable May 14.
Its shares fell 37 cents, or 1.39 per cent, to $26.22 in early afternoon trading on the Toronto Stock Exchange.