Mr. Richard Lord reports

RICHELIEU ACHIEVES GOOD FINANCIAL PERFORMANCE IN THE SECOND QUARTER

"Richelieu [Hardware Ltd.] performed well in the second quarter, as reflected by sales, EBITDA and net earnings, although below results for the 2022 second quarter, which benefited from exceptional market conditions resulting from the pandemic. We continued to rely on our strong drivers, namely our innovation and value-added service strategies with a one-stop shop approach, and the efficiency of richelieu.com, as well as on our acquisition strategy that enabled us to diversify and expand our network, our customer segments and our product offering. Six acquisitions have been completed since the beginning of 2023, including two in the United States in the second quarter. We will remain focused on market penetration, the integration of recent acquisitions, strict monitoring of operating costs, and our innovation and acquisition strategies," mentioned M. Richard Lord, president and chief executive officer.

Two new acquisitions in the United States and opening of a new distribution centre in Minnesota

After the four acquisitions concluded in Canada in the first quarter, Richelieu completed the acquisition of Maverick Hardware, in Oregon, at the beginning of the second quarter, followed on April 30 by the acquisition of the net assets of Westlund Distributing, a specialty hardware distributor operating a distribution centre in Monticello, in Minnesota. These six recent transactions will generate annual sales of approximately $26-million. In addition, during the quarter, the corporation opened a new distribution centre in Minneapolis, and pursued expansion and modernization projects at its Atlanta, Nashville, Seattle and Pompano centres that will be completed soon. Expansion projects finalized in 2023 will add approximately 500,000 square feet to its U.S. network.

Operating results for the second quarter and first six months ended May 31, 2023

The attached table provides an overview of Richelieu's sales in its two main markets for the quarters ended May 31, 2023, and 2022.

For the second quarter ended May 31, 2023, consolidated sales were $472.1-million, compared with $487.9-million for the second quarter of 2022, a decrease of $15.8-million, or 3.2 per cent, resulting from an internal decrease of 4.7 per cent, while the acquisitions made a positive contribution of 1.5 per cent. It should be noted that in the second quarter of 2022, the corporation had achieved exceptional internal growth of 16.1 per cent, including a 22.7-per-cent increase in the United States.

Earnings before income taxes, interest and amortization (EBITDA) were $61.5-million, down $16.3-million or 21 per cent from the corresponding quarter of 2022, mainly due to the return of operating expenses closer to prepandemic levels as well as costs related to external storage, due to temporary inventory increase. Gross margin remained stable. As a result, the EBITDA margin was 13 per cent, compared with 16 per cent for the corresponding quarter of 2022.

Net earnings were $31.2-million, down 33.9 per cent from the prior year mainly due to the increase in the amortization of rights-of-use assets related to business acquisitions and expansion projects, mainly in the United States, as well as interest on the line of credit. Including non-controlling interests, net earnings attributable to shareholders of the corporation were $30.7-million, down 34.7 per cent from Q2 2022. Net earnings per share were 55 cents basic and diluted, compared with 84 cents basic and 83 cents diluted for Q2 2022, down 34.5 per cent and 33.7 per cent, respectively.

Cash flow from operating activities, before net change in non-cash working capital balances, was $48.4-million or 86 cents per diluted share compared with $60.7-million or $1.08 per diluted share for the second quarter of 2022. This 20.4-per-cent decrease primarily reflects the decrease in net earnings. The net change in non-cash working capital items represented a cash inflow of $23.6-million, mainly reflecting the decrease in inventories of $49.2-million, while accounts receivable and other items used cash of $25.6-million. As a result, operating activities represented a cash inflow of $72-million, compared with a cash outflow of $3-million in Q2 2022.

In the first six months of 2023, consolidated sales reached $875.1-million, up $2.7-million or 0.3 per cent over the first six months of 2022, of which 2.1 per cent was from acquisitions and 1.8 per cent was from internal decrease.

EBITDA was $110.6-million, down $21-million or 16 per cent from the corresponding period of 2022. Net earnings attributable to shareholders of the corporation for the first six months were $53.1-million, down 31.1 per cent from the prior year. Net earnings per share were 95 cents basic and diluted, compared with $1.38 basic and $1.37 diluted for the first half of 2022.

Cash flow from operating activities, before net change in non-cash working capital balances, was $86.7-million or $1.54 per diluted share compared with $103.2-million or $1.83 per diluted share for the first six months of 2022, a decrease of 15.8 per cent. After net change in non-cash working capital balance the cash flow from operating activities represented a cash inflow of $88.4-million, compared with a cash outflow of $40.5-million for the first half of 2022.

Financial position

Total assets were $1.33-billion as at May 31, 2023, compared with $1.28-billion as at Nov. 30, 2022, an increase of 3.2 per cent. Current assets were down 1.5 per cent or $13.8-million from Nov. 30, 2022. Non-current assets increased by 14.9 per cent mainly due to the addition of right-of-use assets, intangible assets and goodwill related to business acquisitions and expansion projects. As at May 31, 2023, the corporation had a working capital of $586.2-million, for a ratio of 2.9:1, compared with $562.5-million (ratio of 2.6:1) as at Nov. 30, 2022, and an average return on shareholders' equity of 18.2 per cent.

Share capital

As at May 31, 2023, the corporation's share capital consisted of 55,879,385 common shares (55,784,790 shares as at Nov. 30, 2022). For the three- and six-month periods ended May 31, 2023, the weighted average number of diluted shares outstanding was 56,227,220 and 56,176,050 (56,445,300 and 56,457,660 in 2022).

Dividends

On July 6, 2023, the board of directors approved the payment of a quarterly dividend of 15 cents per share to shareholders of record as at July 20, 2023, payable on Aug. 3, 2023. The declared dividend is designated as an eligible dividend within the meaning of the Income Tax Act (Canada).

About Richelieu Hardware Ltd.

Richelieu is a leading North American importer, manufacturer and distributor of specialty hardware and complementary products. Its products are targeted to an extensive customer base of kitchen and bathroom cabinet, storage and closet, home furnishing and office furniture manufacturers, residential and commercial woodworkers, door and window, and hardware retailers, including renovation superstores. Richelieu offers customers a broad mix of high-end products sourced from manufacturers worldwide. Its product selection consists of over 130,000 different items targeted to a base of more than 110,000 customers who are served by 115 centres in North America -- 50 distribution centres in Canada, 62 in the United States and three manufacturing plants in Canada, specifically, Les Industries Cedan Inc., Menuiserie des Pins Ltee and Usimm/Unigrav, which manufacture a variety of veneer sheets and edge banding products, a broad selection of decorative mouldings and components for the window and door industry, as well as custom products, including a 3-D scanning centre.

July 6, 2023, conference call at 2:30 p.m. (Eastern Time)

Financial analysts and investors interested in participating in the conference call on Richelieu's results to be held at 2:30 p.m. on July 6, 2023, may dial 1-888-390-0620 a few minutes before the start of the call. For those unable to participate, a taped rebroadcast will be available as of 5:45 p.m. on July 6, 2023, until midnight on July 13, 2023, by dialling 1-888-259-6562, access code 825802 followed by the pound key. Members of the media are invited to listen in.

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