IPSCO Reports
Record Results in 2004
Tonnage Shipped Up 13.5%, Tubular Shipments Up 20%;
Entering 2005 with Solid Fundamentals;
Board Authorizes Dividend Increase
Results Are Reported In U.S. Dollars
Lisle, Illinois, February 14, 2005 - IPSCO Inc. (NYSE/TSX: IPS) announced today record sales of $2.5 billion for the full year 2004, an increase of $1.2 billion over 2003. Net income was $439 million compared to $17 million last year. Net income attributable to common shareholders was $431 million, compared to $5 million in 2003. Basic and diluted earnings per share in 2004 were $8.92 and $8.24, respectively, compared to $0.09 per share for both basic and diluted earnings per share in 2003. Operating income per ton shipped for the year was $184, compared to $18 per ton in 2003.
Fourth quarter net income was $190 million. Net income attributable to common shareholders was $189 million ($3.85 per basic share and $3.71 per diluted share), up from the $9.7 million ($0.20 per both basic and diluted share, respectively) reported last year. Sales for the quarter were a record $780 million, up $398 million from $382 million in the fourth quarter of 2003. Operating income per ton in the fourth quarter was $299.
IPSCO’s record revenue for 2004 resulted from significantly higher year-over-year base prices in all product lines, higher volumes of steel mill and tubular product shipments, and raw material surcharges. Higher sales of energy tubular products resulted from increased drilling activity in Canada and the United States and the completion of two major large diameter projects, Cheyenne Plains and the East Texas Expansion. The stronger Canadian dollar also increased reported sales by $57.5 million over 2003.
For the eighth consecutive year IPSCO shipped record tonnage, amounting to 3,561,000 tons, or 13.5% more than a year earlier. Shipments of 2,432,700 tons of discrete plate, cut plate and hot rolled coil (steel mill products) were 11% higher than a year earlier. About 32%, or 1,128,300 tons, of IPSCO’s total shipments in 2004 were tubular products, up from 30% in 2003, and 20% higher than last year’s tubular shipments.
"We are pleased to report IPSCO’s third consecutive year of record sales and production levels. We were able to take advantage of favorable market conditions including strong pricing and demand for steel,” said David Sutherland, President and Chief Executive Officer. “Our balanced product mix combined with good operating results from our low cost structure continues to produce operating margins per ton that are among the best in class. We have made significant reductions in our debt levels and dilution to our common shareholders, while at the same time making value added growth investments and increasing dividends. Clearly this was a superb year and the IPSCO team responded very well to the opportunity that the market provided. While IPSCO employees were faced with dramatically changing raw material and operating demands, adverse weather including the hurricane in Alabama and new product offerings, these challenges were met while also setting new safety records for the Company. 2004 will stand as a milestone year for the Company, with new financial strength going forward. We will continue looking for opportunities to create and deliver additional shareholder value.”
Sales volume for the fourth quarter was 895,600 tons. Quarterly sales of steel mill products were 624,200 tons, 3% less than in the fourth quarter of 2003. Tubular product sales of 271,400 tons in the fourth quarter were up 7% over the year earlier period. Total tons shipped were flat compared to the same quarter last year.
Results for the fourth quarter were very strong. Several factors enhanced the already positive operating performance during the quarter, including an unusually low tax rate of 27.6% primarily related to the reversal of the tax valuation allowance that had been established in periods prior to 2004, large diameter pipe revenue recognition, and favorable flow-through timing of scrap consumption and surcharge receipts. The Company has previously noted that its scrap and surcharge is profit neutral, but the flow of revenue and cost varies as scrap prices fluctuate within periods.
The Company’s performance continued to set new earnings records, even without contributions from the above factors.
In October the Company doubled its quarterly cash dividend on common shares from Cdn $0.05 to $0.10 per share. Additionally, IPSCO redeemed the $100 million subordinated notes in November.
"We enter 2005 well positioned to capitalize on the continued steady demand that exists for our products,” continued Sutherland. “The fundamentals of our business, pricing and demand all remain strong. We remain on track with our performance expectations.”
Outlook
Demand for IPSCO’s key product groups of plate and energy tubular products, with the exception of large diameter pipe, continue to exhibit steady demand and pricing levels. IPSCO is exiting 2004 with prices at a stable level and this momentum bodes well going into 2005. The Company expects first quarter earnings to meet or exceed $2.75 per share.
The fourth quarter of 2004 included several favorable factors as compared to our expectations for the first quarter of 2005, the most significant of which was the tax rate. Our estimate for the first quarter of 2005 includes several factors, which will impact earnings, the primary factor being a higher estimated effective tax rate of 37%. In addition, the timing of surcharge realization of the fourth quarter will be reversed if steady scrap price reductions continue as expected. The table below reconciles reported fourth quarter 2004 diluted earnings per share to adjusted diluted earnings per share by excluding the favorable 2004 factors. In addition the table reconciles our estimate of first quarter 2005 diluted earnings per share to put it on a comparable basis to the adjusted fourth quarter 2004 diluted earnings per share amount. We are providing this reconciliation to help our shareholders understand operating and associated income trends for the Company.
| 4th Qtr 2004 As Reported |
|
| Reported Diluted EPS | $3.71 |
| Adjust to 37% Tax Rate | ($0.48) |
| Scrap/Surcharge/Other Factors | ($0.14) |
| Adjusted Reported EPS |
$3.09 |
| 1st Qtr 2005 Estimate |
|
| Estimated Diluted EPS | $2.75 |
| Scrap/Surcharge/Other Factors | $0.39 |
| Adjusted EPS Estimate |
$3.14 |
Besides the scrap and surcharge flow though, other factors in the reconciliations
above include differences in product mix related to large diameter shipments in the fourth quarter and increased expenses for the completed Mobile outage in the first quarter estimate.
“While these factors will cause the estimated first quarter’s performance to be less than our fourth quarter results, the fundamentals of our business remain steady. With the January steel price increases fully implemented and continued strength in first quarter bookings, IPSCO is off to a good start in 2005,” concluded Sutherland.
The Company continues to expect it will generate substantial cash flow during 2005. In addition to making necessary capital investments to grow and improve the business and evaluating potential acquisitions, the Company is committed to delivering additional value to shareholders through its quarterly dividend. In this respect, the Company’s Board of Directors has authorized an increase in the quarterly dividend from Cdn $0.10 to $0.12. This increase is on top of a doubling of the dividend from $0.05 announced in October of 2004.
IPSCO has scheduled the live webcast of its fourth quarter 2004 results conference call at 10:00 AM EDT on Monday, February 14, 2005. During the call IPSCO President and CEO, David Sutherland and Senior Vice President and CFO, Vicki Avril will discuss IPSCO Inc.’s fourth quarter results.
Persons wishing to listen to the webcast may access it in the Investor
Information, Presentations
section. 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 2003, its MD&A, particularly as discussed under the heading "Business Risks and Uncertainties", and its Form 40-F.
Company Contact:
Vicki Avril
Senior Vice President and Chief Financial Officer
Tel. 630-810-4769
Release 05-08
2004 Fourth Quarter Financial Statements
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Tons Shipped by Quarter
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Sales Information
By Product Group
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