Lumber Reports Robust YoY Net Profit

  • Lumber Depot Ltd. reported a 62.3% increase in net profit to $107.20Mn (EPS: $0.15) for the six months ended October 31, 2021 aided by a significant expansion in “Other Income”, modest topline growth (8.6%) and a reduction in admin and other expenses (3.1%). Continued growth seen in the construction sector supported revenue growth of 8.6%. Of note, other income jumped from $0.73Mn to $9.21Mn. 
  • Despite the strong performance, the company was not immune to the ongoing supply chain challenges as this resulted in an increase in the cost for construction inputs. Consequently cost of goods sold increased by 4.0%. Increases in finance cost (+10.2%) and finance income (-57.6%) also weighed on earnings. 
  • That being said, revenues and profits for the three-month period ended October 31, 2021, were directly affected by the lock-down period effected during the late summer as it resulted in 17 lost sales days during the quarter. It also caused unprecedented disruptions to the construction planning and work cycle. Despite this, the earnings result was resilient. 
  • Management believes that curfews, travel restrictions and new workplace rules have presented additional risks to its supply chain, strained consumer and business confidence, and have resulted in increased volatility in commodity prices, exchange rates and some borrowing costs in the short term. However, management is confident that its team has the capacity to navigate these challenges. 
  • Lumber Depot’s stock price has appreciated by 108.4% since the start of the year and closed Tuesday’s trading session at $3.21 per share. At this price the stock currently trades at a P/E of 11.5x, which is below the junior market distribution sector average of 16.0x.

(Sources: Lumber Depot Financials, NCBCM Research)