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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
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