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Stella-Jones boosts dividend after delivering 'blow-out' results

Stella-Jones Inc. is boosting its semi-annual dividend by 20 per cent after a "blow-out" profit from the producer of railway ties and utility poles.

The Montreal-based company said it would increase the dividend payout to 24 cents per share twice a year.

The treated wood producer said Friday that its profit more than tripled in the fourth quarter to $10.8-million from $3-million a year ago.

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It earned 67 cents per diluted share, up from 24 cents a year earlier. Analysts had expected 52 cents in earnings.

Sales for the fourth quarter were $133.1-million, an increase from $65.4-million in the comparable period, boosted by higher demand and the contribution from last April's acquisition of Tangent Rail Corp.

Sales of railway ties rose to $62.4-million, nearly triple a year earlier. Tangent contributed $26.6-million of revenue.

Utility pole revenues increased 57 per cent to $48.7-million.

Organic growth for railway ties was up 63 per cent and 56 per cent in utility poles.

For the full year, earnings rose to $34.4-million from $30.1-million in 2009, while sales increased 36.5 per cent to $561-million despite a stronger Canadian dollar.

"Stella-Jones achieved its tenth consecutive year of sales and net earnings growth, as recessionary pressures eased in our core markets," said president and CEO Brian McManus.

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Strong free cash flow allowed the company to reduce its total debt by $44-million during the second half of the year, including $15-million in accelerated repayments during the fourth quarter.

"Stella-Jones is now widely recognized as one of the largest suppliers of treated wood products on the continent. This has positioned the company to pursue a larger share of the business of existing customers, and has strengthened our approach to new customers."

The company expects deliveries will soften in the first quarter, but demand for its core products will further accelerate in 2011 as global economic conditions continue to improve.

Increased freight volume by North American railways should lead to greater investments in the continental rail network as operators seek optimal line efficiency.

Regular maintenance projects should steadily improve demand for utility poles.

Pierre Lacroix of Desjardins Securities said Stella-Jones reported "blow-out" quarterly results.

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"The firm remains ready to study acquisition opportunities in core markets, with the aim of continuing its continental expansion and industry consolidation," he wrote in a report.

Ben Vendittelli of Laurentian Bank Securities said Stella-Jones is benefiting from a strong recovery in rail tie demand in late 2010 that should continue throughout 2011.

"Continued market share gains should also benefit the company in 2011-2012," he wrote.

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