St Lawrence Cement Group reported sales of $140.3m for the first quarter of 2005 compared to $141.4m for the same period last year. The net loss was $23.6m ($0.56 basic per share) compared to a net loss of $19.3m ($0.47 basic per share) for the first quarter of 2004. The Company has historically posted a net loss in the first quarter of each fiscal year as a result of the seasonal nature of the construction business in its markets. Sales volumes of cement, aggregates and ready-mix concrete decreased in the first quarter compared to last year, reflecting the poor weather conditions in our markets. On the other hand, our Ontario construction services operation was able to benefit from the weather conditions with an increased volume of snow removal work.
Operating loss was $33.8m compared to an operating loss of $26.1m for the first quarter of last year. Selling and administrative costs increased to $25.7m compared to $22.1m in the first quarter of last year, due mainly to higher pension and incentive plan expenses, as well as $0.9m of costs related to the implementation of a finance service centre for North America with its sister company Holcim (US). This centre, which is located in Vaughan, Ontario, will improve service levels and internal efficiency.
In the first quarter of 2004, the Company acquired the assets of a sand and gravel operation in Ontario. The Company also acquired the remaining outstanding shares in Cayuga Materials and Construction Ltd, an Ontario based company. St. Lawrence Cement had acquired a 40 per cent participation in Cayuga in 1999. Finally, the Company also acquired the remaining 50 per cent of the shares in 1259824 Ontario Inc, a ready-mix producer based in Leamington. Total consideration for these acquisitions was $61.5m.
Demand for cement in Canada and the US for 2005 is projected to be slightly above the strong levels of 2004. Price increases announced in the final quarter of 2004 have been implemented in all markets. Despite cost pressures coming from higher energy and imported cement prices, the Company expects to improve sales and margins in 2005.
The Company has been engaged for the past several years in the process of obtaining the necessary permits for a replacement cement plant in Greenport, New York. Altogether, 17 federal, state and local permits and approvals were needed before construction could begin. Among the required permits, the New York State Department of State (DOS) certification was key to qualify for other approvals. On April 19, 2005, St. Lawrence Cement received a negative determination from the DOS, which ruled that the proposed plant was inconsistent with the state’s Coastal Zone Policies.
Following careful review of the impacts of the DOS decision, the Board of Directors of St. Lawrence Cement has decided not to appeal the DOS decision and to withdraw the proposed replacement cement plant in Greenport, New York, from the permitting process. Consequently, the company will record a write-off of approximately $65m before taxes (US$ 54m) which amounts to $37m on an after tax basis (US$ 31m) and will be reported in the second quarter of 2005.
