IPSCO Continues Strong Earnings
Performance
Solid Demand Continues for Plate,
Energy Tubular and Large Diameter Pipe Products
*Results Are Reported in U.S. Dollars on a U.S. GAAP Basis*
Lisle, Illinois, April 26 2006 - IPSCO Inc. (NYSE/TSX:IPS) announced
today net income for the first quarter of 2006 of $150.7 million
($3.12 per diluted share) compared to $154.8 million ($3.06 per
diluted share) for the first quarter of 2005 and $170.2 million
($3.52 per diluted share) in the fourth quarter of 2005.
"IPSCO continues to generate industry leading results based
on the sustained strength in its core markets for plate and energy
sector products, operating consistently at a high rate of
profitability," said David Sutherland, President and Chief
Executive Officer. "Over the past two years IPSCO's operating
income has averaged $246 per ton, a mark which ranks at the top of
our industry."
Sales for the quarter were a record $902.9 million, an increase of
17.8% or $136.2 million over the same quarter last year and 5.9%
or $50.7 million over the prior quarter. Total shipments for the
quarter were 1,005,000 tons, a new quarterly record for IPSCO and
an increase of 150,000 tons compared to last year and 52,000 tons
higher than the prior quarter.
Both steel mill product and tubular shipments set new quarterly
records. Steel mill product shipments of 658,000 tons increased
6.5% over last year and 7.1% over the prior quarter while tubular
shipments of 347,000 tons increased 46.0% over the prior year,
primarily due to greater large diameter shipments. Tubular
shipments were 2.4% greater than the prior quarter. IPSCO’s
composite first quarter product price of $898 per ton was also a
new quarterly record and was up $2 per ton from a year ago and $4
per ton higher than the prior quarter.
"We are pleased with the strength and sustained demand for
IPSCO’s products. The record sales levels experienced this
quarter can be attributed not only to the ongoing strength of the
plate, energy tubular and large diameter pipe markets, but also to
the execution of our strategy. This strategy includes operational
excellence and the development of strong relationships with
significant customers in the markets we serve, as reflected in
recent independent customer satisfaction surveys," said David
Sutherland. "These relationships continue to grow as we
further enhance our asset base to meet customer needs."
Gross income for the quarter was $279.5 million. Gross income as a
percent of sales was 31.0% in the first quarter of 2006 versus
34.9% in the first quarter of 2005. The decline in margins as a
percent of sales was driven by lower average steel mill product
selling prices, higher steel mill input costs, and higher tubular
product costs. Compared to the prior quarter, margins improved
slightly from 30.3% based on higher average pricing.
Selling, general and administration expenses were $32.4 million
for the quarter, $14.0 million higher than the same period last
year and $6.6 million higher than the prior quarter. IPSCO adopted
FAS 123(R) Share-Based Payment in January of 2006. The impact of
share price appreciation and adoption of the new accounting
standard impacted pre-tax earnings by $10.0 million ($0.13 per
diluted share) compared to the prior year and $8.1 million ($0.10
per diluted share) compared to the prior quarter.
The first quarter 2006 effective tax rate of 39% was significantly
higher than the prior year and prior period. The higher effective
tax rate impacted net earnings by $0.15 and $0.72 per diluted
share as compared to those periods respectively. As compared to
last year, the first quarter earnings benefited by $0.14 per
diluted share from share repurchase activity during 2005.
Operating income in the first quarter was $246 per ton compared to
$291 per ton in the first quarter of 2005 and $244 per ton in the
prior quarter. IPSCO generated $120.1 million cash from operations
in the quarter.
Outlook
Robust end user demand for steel mill products is expected for all
of 2006. IPSCO’s steel mill capacity is fully committed through
the second quarter. The favorable pricing environment which has
been better than previously anticipated will be partially offset
by increased costs. Operations are expected to maintain strong
performance as scheduled maintenance outages are minimal during
the year.
We expect high oil and gas prices to continue to drive high rig
counts and demand for OCTG products. First quarter 2006 rig counts
were 35% higher in Canada and 18% higher in the U.S. than first
quarter of last year. North American energy tubular demand is
anticipated to be at the highest levels that weather conditions
and rig availability will allow for all of 2006. In addition, our
spiral pipe facilities are booked at full capacity through the
third quarter of 2007.
We anticipate that our second quarter energy tubular sales volumes
will experience the normal seasonal reduction as a result of the
spring thaw and road restrictions in Western Canada. However, due
to the strong market conditions we are running all small diameter
pipe mills at capacity in order to meet customer needs for product
following spring break up. Excluding foreign exchange gains or
losses and assuming an effective tax rate of 39%, we forecast
second quarter 2006 earnings to be in the range of $2.60 to $2.80
per diluted share.
IPSCO has scheduled the live webcast of its 2006 first quarter
conference call at 10:00 AM EDT on Wednesday, April 26, 2006.
During the call IPSCO President and CEO, David Sutherland, Senior
Vice President and CFO, Vicki Avril and Executive Vice President -
Steel and Chief Commercial Officer, John Tulloch will discuss
IPSCO Inc.'s first quarter results.
Persons wishing to listen to the web cast may access it in the Investor
Information, Presentations section on the Company’s website
at www.ipsco.com. The conference call, including the question and
answer portion, will also be archived on IPSCO’s web site for
three months.
IPSCO, traded as "IPS" on both the New York Stock
Exchange and Toronto Stock Exchange, operates steel mills at three
locations and pipe mills at six locations in the United States and
Canada. As a low cost North American steel producer, IPSCO has a
combined annual steel making capacity of 3,500,000 tons. The
Company's tubular facilities produce a wide range of tubular
products including line pipe, oil and gas well casing and tubing,
standard pipe and hollow structurals. Steel can also be further
processed at IPSCO's five temper leveling and coil processing
facilities.
This news release contains forward-looking information with
respect to IPSCO's operations and beliefs. Actual results may
differ from these forward-looking statements due to numerous
factors, including, but not limited to: weather conditions
affecting the oil patch; drilling rig availability; demand for oil
and gas; supply, demand and price for scrap metal and other raw
materials; supply, demand and price for electricity and natural
gas; demand and prices for products produced by the Company;
general economic conditions; and changes in financial markets.
These and other factors are outlined in IPSCO's regulatory filings
with the Securities and Exchange Commission and Canadian
securities regulators, including those in IPSCO's Annual Report
for 2005, and its MD&A, particularly as discussed under the
heading "Business Risks and Uncertainties” in its Form
10-K.
Company Contact:
Tom Filstrup
Director of Investor Relations
Tel. 630-810-4772
tfilstrup@ipsco.com
Release 06-08
2006 First Quarter Financial Statements
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Tons Shipped by Quarter
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Sales Information By Product Group
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