TRADING SYMBOL: Toronto Stock Exchange - HWD
LANGLEY, BC, May 9, 2013 /CNW/ - This press release discusses financial results for Hardwoods Distribution Inc. ("Hardwoods" or the "Company") for the three months ended March 31, 2013.
Hardwoods is one of North America's largest wholesale distributors of hardwood lumber and related sheet good products, operating a network of 31 distribution centres in the US and Canada.
First Quarter Highlights
- (For the three months ended March 31, 2013)
- Sales increased 19.3% to $87.0 million, compared to the first quarter of 2012
- Gross profit increased by 21.3% to $15.9, compared to the same period in 2012
- First quarter gross profit margin increased to 18.3%, from 18.0% in the first quarter of 2012
- First quarter EBITDA climbed 100.7% to $5.1 million
- First quarter profit increased 159.6% to $3.2 million
- Hardwoods' Board of Directors declared a quarterly dividend of $0.035 per share, payable July 31, 2013 to shareholders of record as of July 19, 2013
"We achieved our best quarterly sales and EBITDA results in over five years as a rebounding US residential construction market, higher product prices and our market expansion strategies contributed to strong results," said Lance Blanco, President and CEO of Hardwoods.
"Most of our sales growth came from the US market, where higher volume demand was driven primarily by the ongoing recovery in the US housing market. According to the US Census Bureau, the seasonally adjusted annual rate of US housing starts increased 47% to 1.036 million at the end of the first quarter, compared to the same period last year. Our US operations were successful in capitalizing on this growing demand, with each of our US regions achieving double digit year-over-year sales growth."
"Higher product prices were another factor in our sales momentum, with first quarter market prices for the full range of Hardwoods' products increasing between 5% and 15% year-over-year. The higher prices reflect increased volume demand, as well as the impact of a 22.63% US preliminary countervailing duty on imported plywood from China. The countervailing duty was announced on February 28, 2013 and contributed to an immediate increase in both domestic and imported panel prices. Subsequent to the quarter end, on April 29th, the US announced an additional anti-dumping duty of 22.14% on Chinese panel products. The full market impact of this additional duty has not yet been determined," said Mr. Blanco.
"While volumes and prices were up during the quarter, we were successful in keeping tight control of expenses during the quarter. This enabled our topline gains to flow through to the bottom line. EBITDA doubled and profit climbed 159.6% as a result of the efficiency of our business model. Overall we are very pleased with our results, particularly given that the first quarter is traditionally a slower period of the year for Hardwoods."
"Moving forward, the outlook for our business remains positive. US housing starts, while growing at a double digit pace, are still below historical norms and have further upside potential. With 65% to 70% of our revenue generated in the US, and over half of it coming from residential construction, we are well positioned to capitalize on this recovery."
"We will continue working to enhance value for our shareholders as we respond to market opportunities and implement our strategy. We will also continue to pursue well-priced strategic acquisition opportunities," said Mr. Blanco.
Summary of Results
|Selected Unaudited Consolidated Financial Information (in thousands of Canadian dollars)|
|For the three months||For the three months|
|Ended March 31,||Ended March 31,||$ Increase||% Increase|
|Total sales||$ 86,983||$ 72,939||$ 14,044||19.3%|
|Sales in the US (US$)||63,912||51,100||12,812||25.1%|
|Sales in Canada||22,560||21,788||772||3.5%|
|Gross profit %||18.3%||18.0%|
|Profit from operating activities||4,814||2,260||2,554||113.0%|
|Add: Depreciation and amortization||329||302||27||8.9%|
|Earnings before interest, taxes, depreciation and|
|amortization and non-controlling interest ("EBITDA")||$ 5,143||$ 2,562||$ 2,581||100.7%|
|Depreciation and amortization||(329)||(302)||(27)||-8.9%|
|Net finance expense||167||(340)||507||149.1%|
|Income tax expense||(1,801)||(695)||(1,106)||-159.1%|
|Profit for the period||$ 3,180||$ 1,225||$ 1,955||159.6%|
|Basic profit per share||$ 0.19||$ 0.08|
|Fully diluted profit per share||0.19||0.07|
|Average Canadian dollar exchange rate for one US dollar||1.008||1.001|
Results from Operations - Three Months Ended March 31, 2013
For the three months ended March 31, 2013, total sales increased by 19.3% to $87.0 million, from $72.9 million during the same period in 2012. The year-over-year sales growth was entirely made up of organic growth and reflects a 25.1% increase in sales activity at the US operations as measured in US dollars and a 3.5% increase in Canadian sales. While volume growth was largely driven by the rebound in the US residential construction market, steady demand from other key end-use markets, such as commercial construction and renovations, provided additional modest growth.
First quarter gross profit increased 21.3% to $15.9 million, from $13.1 million during the same period last year. This improvement reflects the higher sales revenue for the period, combined with a higher gross profit margin. As a percentage of sales, gross profit was 18.3% in the first quarter of 2013, compared to 18.0% in the same period last year. This increase reflects margin recovery as market conditions and product prices strengthened.
Operating expenses for the three-month period were $11.1 million, up modestly from $10.9 million during the same period in 2012. The 2.2% increase reflects additional personnel costs incurred to support the significant increase in sales. As a percentage of sales, first quarter 2013 operating expenses declined to 12.7%, from 14.9% in 2012.
First quarter EBITDA increased 100.7% to $5.1 million, from $2.6 million during the same period in 2012. The significant improvement in EBITDA reflects the higher gross profit, partially offset by the modest increase in operating expenses.
Profit for the period also increased sharply, increasing to $3.2 from $1.2 million in 2012. This primarily reflects the higher EBITDA and a $0.5 million increase in net finance income, partially offset by a $1.1 million increase in income tax expense.
With approximately 65% to 70% of Hardwoods' sales in the US and over half of them focused on the residential construction market, Hardwoods is well positioned to capitalize on the multi-year strengthening trend forecast for the US residential construction market. A continued increase in product prices is expected to accompany the stronger housing activity, reflecting the changing supply/demand equation. Given that hardwood products are typically applied at the final stages of house construction (typically 9 to 12 months after house construction starts), Hardwoods expects to see higher demand for its products continuing well into 2014.
The outlook for the US market is tempered by uncertainty over the impact of the new antidumping and countervailing duties against imported hardwood plywood panels produced in China. Approximately 14% of Hardwoods' total sales in 2012 was comprised of hardwood plywood manufactured in China and resold to customers in the United States. Hardwoods is watching this case closely and investigating a range of alternative supply solutions. During the first quarter, the Company further improved its import capabilities from Indonesia, Malaysia, and Russia.
The outlook for the Canadian market is generally neutral with housing starts expected to decline marginally in 2013 following changes to Canada's mortgage insurance rules last year. Growth in the Canadian renovation and commercial construction markets is expected to be modest at 3.6% and 3.4% respectively.
Hardwoods' primary goal in 2013 will be to capture the US growth potential, both in terms of volume and pricing. Entering year three of its successful market expansion strategy, the Company will also continue to:
- Leverage its ability to source high quality products from a range of international markets.
- Strengthen its presence in commercial and institutional construction markets.
- Solidify its presence in large geographic markets, primarily through the introduction of new products, and through the expansion of production capabilities at its Paxton branches.
Overall Hardwoods' outlook for 2013 is positive. Priorities for 2013 will be to continue optimizing and growing the business organically, while also pursuing well-priced, strategic acquisition opportunities.
Non-GAAP Measures - EBITDA
References to "EBITDA" are to earnings before interest, income taxes, depreciation and amortization, where interest is defined as net finance income or costs as per the consolidated statement of comprehensive income. In addition to profit or loss, the Company considers EBITDA to be a useful supplemental measure of a company's ability to meet debt service and capital expenditure requirements, and the Company interprets trends in EBITDA as an indicator of relative operating performance.
EBITDA is not an earnings measure recognized by IFRS and does not have a standardized meaning prescribed by IFRS. Investors are cautioned that EBITDA should not replace profit or loss or cash flows (as determined in accordance with IFRS) as an indicator of our performance. The Company's method of calculating EBITDA may differ from the methods used by other issuers. Therefore, the Company's EBITDA may not be comparable to similar measures presented by other issuers. For a reconciliation between EBITDA and profit or loss as determined in accordance with IFRS, please refer to the discussion of Results of Operations described in section 3.0 of Management's Discussion and Analysis (MD&A) for the three months ended March 31, 2013.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
This news release includes forward-looking statements. These involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are identified by the use of terms and phrases such as "anticipate", "believe", "estimate", "expect", "may", "plan", "will", and similar terms and phrases, including references to assumptions. Such statements may involve, but are not limited to: that with approximately 65% to 70% of Hardwoods' sales in the US and over half of them focused on the residential construction market, Hardwoods is well positioned to capitalize on the multi-year strengthening trend forecast for the US residential construction market; that a continued increase in product prices is expected to accompany the stronger housing activity, reflecting the changing supply/demand equation.; that given that hardwood products are typically applied at the final stages of house construction (typically 9 to 12 months after house construction starts), Hardwoods expects to see higher demand for its products continuing well into 2014; Hardwoods perspective that the outlook for the US market is tempered by uncertainty over the impact of the new antidumping and countervailing duties against imported hardwood plywood panels produced in China; that the Company's outlook for the Canadian market is generally neutral with housing starts expected to decline marginally in 2013 following changes to Canada's mortgage insurance rules last year; the Company's perspective that growth in the Canadian renovation and commercial construction markets is expected to be modest at 3.6% and 3.4% respectively; that Hardwoods' primary goal in 2013 will be to capture the US growth potential, both in terms of volume and pricing; that entering year three of its successful market expansion strategy, the Company will also continue to leverage its ability to source high quality products from a range of international markets, strengthen its presence in commercial and institutional construction markets, and solidify its presence in large geographic markets, primarily through the introduction of new products, and through the expansion of production capabilities at its Paxton branches; that overall Hardwoods' outlook for 2013 is positive; and that the Company's priorities in 2013 will be to continue optimizing and growing the business organically, while also pursuing well-priced, strategic acquisition opportunities.
These forward-looking statements reflect current expectations of management regarding future events and operating performance as of the date of this news release. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to: national and local business conditions; political or economic instability in local markets; competition; consumer preferences; spending patterns and demographic trends; legislation or governmental regulation (including trade outcomes that impact upon our business); acquisition and integration risks.
Although the forward-looking statements contained in this news release are based upon what management believes to be reasonable assumptions, management cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements reflect management's current beliefs and are based on information currently available.
All forward-looking information in this news release is qualified in its entirety by this cautionary statement and, except as may be required by law, the Company undertakes no obligation to revise or update any forward looking information as a result of new information, future events or otherwise after the date hereof.
SOURCE: Hardwoods Distribution Inc.
For further information:
Chief Financial Officer
Phone: (604) 881-1990
Fax: (604) 881-1995