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Press release from Marketwire

Stella-Jones Reports First Quarter Results

Annual and Special meeting of shareholders later this morning

Thursday, June 02, 2011

Stella-Jones Reports First Quarter Results07:00 EDT Thursday, June 02, 2011MONTREAL, QUEBEC--(Marketwire - June 2, 2011) - Stella-Jones Inc. (TSX:SJ)Sales of $130.5 million, up 31.3% from $99.4 million last yearOperating income of $14.4 million, versus $10.5 million in Q1 2010Net income up 46.9% to $8.5 million, compared with $5.8 million last yearStella-Jones Inc. (TSX:SJ) today announced financial results for its first quarter ended March 31, 2011. These results are the first presented by the Company following the adoption, on January 1, 2011, of International Financial Reporting Standards ("IFRS"). Results for the prior year have been restated. Financial highlightsQuarters ended March 31,(in thousands of Canadian dollars, except per share data)20112010Sales130,48599,360Operating income14,41810,474Net income for the period8,5005,788 Per share - basic ($)0.530.46 Per share - diluted ($)0.530.45Cash flow from operations 117,56412,823Weighted average shares outstanding (basic, in '000s)15,93212,6881 Before changes in non-cash working capital components and interest and income tax paid.FIRST-QUARTER RESULTS Sales reached $130.5 million, an increase of $31.1 million, or 31.3% over last year's first-quarter sales of $99.4 million. The operating facilities acquired from Tangent Rail Corporation ("Tangent") on April 1, 2010, contributed sales of approximately $37.7 million. The conversion effect from fluctuations in the value of the Canadian dollar, Stella-Jones' reporting currency, versus the U.S. dollar, decreased the value of U.S. dollar denominated sales by about $3.4 million when compared with the previous year. Organically, sales decreased approximately 3.0%, primarily reflecting lower sales of industrial products and residential lumber. Railway tie sales for the first quarter of 2011 amounted to $76.5 million, an increase of 58.7% over last year, reflecting tie sales of approximately $29.5 million from the Tangent operations as well as increased market demand. Excluding Tangent's sales and adjusting for a negative foreign exchange effect of $2.5 million due to a lower average conversion rate on U.S. dollar denominated tie sales, year-over-year comparable railway tie sales increased $1.3 million. Utility pole sales amounted to $35.7 million, down 2.3% from a year ago. This slight decrease was mostly due to the negative conversion effect of U.S. dollar denominated sales. Excluding this factor, sales declined only $137,000. Industrial product sales rose 49.6% to $15.1 million, an increase entirely attributable to Tangent's coal tar distillation and used tie pickup and disposal operations. Sales of residential lumber declined 29.8% to $3.2 million, primarily as a result of less favourable weather compared with last year. Operating income was $14.4 million or 11.0% of sales, compared with $10.5 million or 10.5% of sales last year. The increase in absolute dollars essentially reflects the contribution of the Tangent operations while the increase in operating income as a percentage of sales results from further efficiency gains.Net income for the period increased 46.9% to $8.5 million or $0.53 per share, fully diluted, compared with $5.8 million or $0.45 per share, fully diluted, in 2010. Cash flow from operating activities before changes in non-cash working capital components and interest and income tax paid rose 37.0% to $17.6 million."Stella-Jones reported solid first quarter results, as demand held in our core product categories and we further implemented efficiency measures throughout our network," said Brian McManus, President and Chief Executive Officer. "The year-over-year performance is even more satisfactory as it followed strong advanced deliveries of railway ties in the fourth quarter, whereas reverse conditions had stimulated last year's first-quarter deliveries. Meanwhile, demand for transmission poles remained driven by special projects. However, demand for ancillary products was partially affected by severe winter weather in our main markets."SOLID FINANCIAL POSITION AND LONG-TERM DEBT REDUCTION As at March 31, 2011, the Company's long-term debt, including the current portion, amounted to $118.7 million, down from $125.8 million as at December 31, 2010. The ratio of total long-term debt to shareholders' equity was 0.42:1 as at March 31, 2011, down from 0.45:1 three months earlier. "A strong cash flow generation enabled Stella-Jones to further reduce its debt. Subsequent to the end of the quarter, on April 1, 2011, we proceeded with the accelerated repayment of a capital amount of US$15.0 million on a debenture of US$25.0 million. Moreover, as a clear sign of confidence in regards to our business strategy, Stella-Jones' lenders reduced the interest rate applicable to the remaining capital balance of this debenture and on another debenture of US$25.0 million," added George Labelle, Senior Vice-President and Chief Financial Officer. OUTLOOK "We expect railway tie demand to grow in 2011. In response to an improving global economy, freight volumes are rising in North America. As a result, operators seeking optimal line efficiency are investing in their continental rail networks. Meanwhile, demand for utility poles is expected to remain solid. While the integration of Tangent's operations will allow us to achieve further efficiency gains and synergies, we should also uncover growth opportunities in core markets. Our healthy cash flow and strong financial position constitute a solid foundation, as we methodically pursue continental expansion and industry consolidation," concluded Mr. McManus.CONFERENCE CALL Stella-Jones will hold a conference call to discuss these results on Thursday, June 2, 2011, at 1:30 PM Eastern Time. Interested parties can join the call by dialling 416-644-3426 (Toronto or overseas) or 1-800-731-5319 (elsewhere in North America). Parties unable to call in at this time may access a tape recording of the meeting by calling 1-877-289-8525 and entering the passcode 4437448#. This tape recording will be available on Thursday, June 2, 2011 as of 4:00 PM Eastern Time until 11:59 PM Eastern Time on Thursday, June 9, 2011. 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:Complete unaudited first-quarter financial statements are available on Stella-Jones' website at FOR FURTHER INFORMATION PLEASE CONTACT: Stella-Jones Inc.Source:ORSenior Vice-President and Chief Financial OfficerGeorge T. Labelle, CA(514) 934-8665(514) 934-5327 (FAX)glabelle@stella-jones.comORMaisonBrisonMartin Goulet, CFA(514)