Mr. Richard Lord reports

GOOD THIRD-QUARTER PERFORMANCE FOR RICHELIEU

"Richelieu [Hardware Ltd.] delivered a solid performance in the third quarter. The efficiency of our business model in our diversified markets enabled us to achieve a good level of sales, slightly lower than the corresponding quarter of 2022, which was favourably impacted by the market context resulting from the pandemic. In both Canada and the United States, our main market segments contributed to this performance, bringing sales for the first nine months to $1.3-billion. In addition, our operating activities generated significant cash flow of $103.5-million in the third quarter, for a year-to-date total of $192-million. We expect to close the financial year on Nov. 30 with good results and a healthy and solid financial position. Our strategies of innovation and service, market penetration, and business acquisition remain our key drivers for future growth," mentioned Richard Lord, president and chief executive officer.

North American network expansion and consolidation projects

While integrating the six acquisitions closed since the beginning of the year, including four in Canada and two in the United States, the corporation completed the expansion and modernization of its Seattle centre, which is now fully operational, and continued the expansion project at its Pompano centre during the quarter. Centres in the Atlanta and Nashville area are now consolidated, and those in the Calgary area are scheduled for completion in early 2024. Richelieu's North American network currently has 113 interconnected centres.

Operating results for the third quarter and first nine months ended Aug. 31, 2023

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

For the third quarter ended Aug. 31, 2023, consolidated sales were $459-million, compared with $472.9-million for the third quarter of 2022, a decrease of $13.9-million, or 2.9 per cent, resulting from an internal decrease of 4.6 per cent, while the acquisitions made a positive contribution of 1.7 per cent. It should be noted that in the third quarter of 2022, the corporation had achieved a strong internal growth of 16 per cent.

Operating expenses, excluding amortization, totalled $398-million, or 86.7 per cent of sales, compared with $393.7-million, or 83.3 per cent of sales, for the corresponding period in fiscal 2022. In monetary terms, the level of operating expenses increased slightly. This is explained by the increase of operating costs, including costs related to external warehousing resulting from the temporary inventory increase, as well as the effect of the rise in the value of the U.S. currency in relation to the Canadian currency on the conversion of the operating expenses of the subsidiary located in the United States, offset by a slight decrease in inventories expensed as a result of lower sales. In addition, the results for the third quarter of 2022 included a foreign exchange gain of $2.5-million on the translation of monetary assets and liabilities, compared with a gain of $51,000 for the quarter ended Aug. 31, 2023.

Earnings before income taxes, interest and amortization (EBITDA) were $61-million, down $18.2-million or 23 per cent from the corresponding quarter of 2022, mainly as a result of lower sales and higher operating expenses. Gross margin reduced slightly. As a result, the EBITDA margin was 13.3 per cent, compared with 16.7 per cent for the corresponding quarter of 2022.

Amortization expense for the third quarter of 2023 amounted to $15.7-million, up $3.1-million over the corresponding period of 2022, as a result of the increase in property, plant and equipment, and right-of-use assets stemming mainly from recent business acquisitions and expansion and modernization projects. Net financial costs and other were $3.1-million for the quarter, compared with $2.1-million in 2022, a variation of $1.1-million due to higher lease obligations resulting from acquisitions, expansion projects and lease renewals.

Net earnings were $30.7-million, down 34.4 per cent from the prior year. Including non-controlling interests, net earnings attributable to shareholders of the corporation were $29.8-million, down 35.7 per cent from Q3 2022. Net earnings per share were 53 cents basic and diluted, compared with 83 cents basic and 82 cents diluted for Q3 2022, down 36.1 per cent and 35.4 per cent, respectively.

Cash flow from operating activities, before net change in non-cash working capital balances, was $48.5-million or 86 cents per diluted share compared with $60.9-million or $1.08 per diluted share for the third quarter of 2022. This 20.4-per-cent decrease mainly reflects the decrease in net earnings. The net change in non-cash working capital items represented a cash inflow of $55.1-million, mainly reflecting decrease in inventories of $24.5-million, while accounts receivable, payables and other items represented cash inflows of $30.6-million. As a result, operating activities represented a cash inflow of $103.5-million, compared with a cash inflow of $2.7-million in Q3 2022.

In the first nine months of 2023, consolidated sales reached $1.3-billion, down $11.2-million or 0.8 per cent over the first nine months of 2022, of which 2 per cent is from acquisitions and 2.8 per cent from internal decrease.

Operating expenses, excluding amortization, totalled $1.2-billion, or 87.1 per cent of sales, compared with $1.1-billion, or 84.3 per cent of sales, for the corresponding period in fiscal 2022. The variation is explained by operating expenses now approaching prepandemic levels, in addition to the elements mentioned above.

EBITDA was $171.6-million, down $39.2-million or 18.6 per cent from the corresponding period of 2022, and net earnings attributable to shareholders of the corporation were $82.9-million, down 32.8 per cent from the prior year. Net earnings per share were $1.49 basic and $1.47 diluted, compared with $2.21 basic and $2.19 diluted for the same period of 2022, down 32.6 per cent and 32.9 per cent, respectively.

Cash flow from operating activities, before net change in non-cash working capital balances, was $135.1-million or $2.40 per diluted share compared with $164.1-million or $2.91 per diluted share for the first nine months of 2022. The net change in non-cash working capital items represented a cash inflow of $56.8-million, mainly reflecting the decrease in inventories which generated a cash inflow of $74.4-million, while accounts payable, income tax payable and other items used cash of $17.6-million. As a result, operating activities represented a cash inflow of $192-million, compared with a cash outflow of $37.9-million in the first nine months of 2022.

Financial position

Total assets were $1.30-billion as at Aug. 31, 2023, compared with $1.28-billion as at Nov. 30, 2022, an increase of 1.5 per cent. Current assets were down 5.7 per cent or $52.1-million from Nov. 30, 2022, resulting mainly from the inventory reduction. Non-current assets increased by 19 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 Aug. 31, 2023, the corporation had a working capital of $606.1-million, for a ratio of 3.4:1, compared with $562.5-million (ratio of 2.6:1) as at Nov. 30, 2022, and an average return on shareholders' equity of 15.5 per cent.

Share capital

As at Aug. 31, 2023, the corporation's share capital consisted of 55,925,490 common shares (55,784,790 shares as at Nov. 30, 2022). For the three- and nine-month periods ended Aug. 31, 2023, the weighted average number of diluted shares outstanding was 56,346,260 and 56,225,410 (56,240,120 and 56,386,990 in 2022).

Dividends

On Oct. 5, 2023, the board of directors approved the payment of a quarterly dividend of 15 cents per share to shareholders of record as at Oct. 19, 2023, payable on Nov. 2, 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 its 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 113 centres in North America -- 50 distribution centres in Canada, 60 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.

Oct. 5, 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 Oct. 5, 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 Oct. 5, 2023, until midnight on Oct. 12, 2023, by dialling 1-888-259-6562, access code 357265 followed by the pound key. Members of the media are invited to listen in.

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