VANCOUVER, British Columbia– CanWel Building Materials Group Ltd. (“CanWel” or “the Company”) (TSX:CWX; CWX.NT.A) announced today its third quarter 2019 financial results(1) for the period ended September 30, 2019.
For the three-month period ended September 30, 2019(1), consolidated revenues increased by 6.6% to $373.2 million when compared to $350.2 million in the same period in 2018. Sales for the Distribution segment increased by $24.5 million or 7.3%, largely due to the inclusion of the results from the Lignum acquisition in 2019 and the Company’s 2018 acquisitions, and the Company’s continuing focus on its product mix strategies and target customer base. These improvements in the quarter were partially offset by the impact of construction materials pricing which generally continued on a downward trend until late in the quarter. The Company’s sales by product group in the quarter were made up of 57% construction materials, compared to 58% last year, with the remaining balance resulting from specialty and allied products of 37%, and forestry and other of 6%.
Gross margin dollars increased by 3.0% to $52.3 million, compared to $50.8 million during the corresponding period in 2018. Gross margin percentage was slightly lower at 14.0% of revenues versus 14.5% during the same period in 2018. The increase in gross margin dollars is mainly attributable to the inclusion of the results from the Lignum Acquisition in 2019 and the 2018 acquisitions, while the lower gross margin percentage is primarily driven by the downward trend in construction materials pricing.
EBITDA(2) and Adjusted EBITDA(3) for the period amounted to $25.0 million and $25.3 million, respectively, compared to $20.1 million during the third quarter of 2018. EBITDA and Adjusted EBITDA during the third quarter of 2019 was impacted by the adoption of IFRS 16, in the amount of $5.1 million. Excluding the impact of IFRS 16 adoption, Adjusted EBITDA increased by $113,000 or 0.6%, consistent with the comparative quarter in 2018. As a result of the foregoing factors, net earnings for the quarter ended September 30, 2019 were $6.4 million compared to net earnings of $8.5 million in the same quarter of 2018.
During the three-month period ended September 30, 2019, CanWel paid a $0.14 per share dividend to its shareholders of record on September 30, 2019.
For the nine-month period ended September 30, 2019(1), the Company generated EBITDA and Adjusted EBITDA of $67.4 million and $67.8 million, respectively, on revenues of $1.04 billion. Gross margin and gross margin percentage during the same period amounted to $147.8 million, and 14.2%, respectively. This compares to 2018 EBITDA and Adjusted EBITDA of $63.2 million on revenues of $1.03 billion. Gross margin and gross margin percentage during the 2018 period amounted to $154.3 million and 15.0%. EBITDA and Adjusted EBITDA were positively impacted by the adoption of IFRS 16, in the amount of $15.3 million. Excluding the impact of IFRS 16 adoption, EBITDA for the nine months ended September 30, 2019 decreased by $10.6 million or 16.8%, largely due to the aforementioned downward macro-economic trends. As a result of the foregoing factors, net earnings for the nine-month period ended September 30, 2019 were $13.8 million versus $29.6 million in the comparative period of 2018.
“We successfully continued to push through the macro headwinds during the quarter and drive top line growth while increasing gross margin dollars and stabilizing margins,” commented Amar S. Doman, Chairman of the Board. “We are encouraged with the housing starts number showing signs of year-over-year improvement in our key markets in the US and Canada, which should bode well for overall volumes and activity level as we work through the fourth quarter and turn our focus on 2020. We are well positioned to benefit from improvement in pricing for lumber, plywood and OSB.”
Reconciliation of Net Earnings to Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) and Adjusted EBITDA:
|Three months ended September 30,||Nine months ended September 30,|
|(in thousands of dollars)||$||$||$||$|
|Provision for income taxes||2,653||3,995||5,376||11,570|
|Depreciation of property, plant and equipment||3,141||2,875||9,962||8,380|
|Amortization of right-of-use assets||5,370||–||16,212||–|
|Amortization of intangible assets||1,698||1,681||5,124||5,002|
Founded in 1989, CanWel is headquartered in Vancouver, British Columbia and trades on the Toronto Stock Exchange under the symbols CWX and CWX.NT.A and is Canada’s only fully integrated national distributor in the building materials and related products sector. CanWel operates: multiple treating plant and planing facilities in Canada and the United States; distribution centres coast-to-coast in all major cities and strategic locations across Canada; in the United States near Portland, Oregon, San Francisco and Los Angeles, California and in 14 locations in the State of Hawaii through its wholly owned Honsador Building Products Group. CanWel distributes a wide range of building materials, lumber, renovation and electrical products. In addition, through its CanWel Fibre division, CanWel operates a vertically integrated forest products company based in Western Canada, operating from British Columbia to Saskatchewan, also servicing the US Pacific Northwest. CanWel owns approximately 117,000 acres of private timberlands, strategic Crown licenses and tenures, log harvesting and trucking operations, several post and pole peeling facilities and two pressure-treated specialty wood production plants and a specialty saw mill.