Mr. Richard Lord reports

RICHELIEU RECORDED SOLID RESULTS FOR THE FOURTH QUARTER OF 2023

"Richelieu [Hardware Ltd.] posted solid results in the fourth quarter with sales of $453.6-million, down slightly by 0.8 per cent, substantially comparable to those of the corresponding quarter of 2022, which posted a 15-per-cent increase in a market favourably impacted by the pandemic. Our performance attests to the strength and expertise of our team, our ability to differentiate ourselves through outstanding customer service, and to make growth-enhancing acquisitions while pursuing innovation for our customers. For the 12 months of 2023, we are satisfied with our sales of $1.8-billion, in line with those of 2022. Despite the return to prepandemic levels of certain operating expenses and charges related to major expansion projects in our network, we achieved good net earnings and our financial position remains solid. The six acquisitions closed in 2023 added to the four completed in 2022 represent additional annual sales of $152-million. Richelieu is solidly positioned to pursue its strategies and create further value by building on its solid financial position," mentioned Richard Lord, president and chief executive officer.

Acquisitions

Richelieu is currently integrating the acquisitions closed in 2023, namely Unigrav, Usimm, Quincaillerie Rabel (Quebec), Trans-World Distributing (Nova Scotia), Maverick Hardware (Oregon) and Westlund Distributing (Minnesota). Subsequent to Nov. 30, 2023, two new acquisitions were completed: Olympic Forest, a distributor of specialized lumber and panel products operating a distribution centre in Erin, Ont., and Rapid Start, a specialty hardware distributor with a distribution centre in Rittman, Ohio. These two recent transactions will add approximately $18-million in annual sales.

Expansion and consolidation projects

In order to continue to seize market growth opportunities and optimize our operations and customer service, Richelieu has undertaken several expansion projects over the past two years. Expansion and modernization projects for centres in the Atlanta, Nashville, Fort Myers, Pompano and Seattle regions have been completed. The brand-new Chicago centre serving the retail market is fully operational, as are the two new centres in the Minneapolis and Carlstadt regions. In December, 2023, the Calgary expansion project was implemented with the refitting of two centres into a single 250,000-square-foot building.

Analysis of operating results for the year ended Nov. 30, 2023, compared with the year ended Nov. 30, 2022

Sales

Consolidated sales reached $1.8-billion, a decrease of $15-million or 0.8 per cent over last year, of which 1.8 per cent from acquisitions and 2.6 per cent from internal decrease. In comparable currency to the corresponding period of 2022, the decrease in consolidated sales for the year ended Nov. 30, 2023, would have been 2.6 per cent.

Earnings before interest, income taxes and amortization (EBITDA) totalled $230.4-million, down by $57-million or 19.8 per cent over 2022. This can be explained by the increase in operating costs, including external warehousing resulting from the temporary increase in inventories, in expenses specific to major expansion projects undertaken during the 2023 financial year and by the effect of the increase in the U.S. foreign exchange rate compared with the Canadian currency on the translation of the operating expenses in U.S. currency. The gross margin is also slightly down, therefore EBITDA margin stood at 12.9 per cent, compared with 15.9 per cent for 2022.

Amortization expenses amounted to $60.9-million compared with $48.6-million for 2022, an increase of $12.3-million, 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 were $13.3-million compared with $7.1-million, an increase of $6.1-million resulting mainly from the use of lines of credit and the increase in lease obligations. Income taxes amounted to $42.4-million, a decrease of $19.3-million over 2022.

Net earnings were down 33 per cent. Considering non-controlling interests, net earnings attributable to shareholders of the corporation totalled $111.5-million, a decrease of 33.8 per cent compared with 2022. Net earnings per share amounted to $2 basic and $1.98 diluted, compared with $3.01 basic and $2.99 diluted for 2022, a decrease of 33.6 per cent and 33.8 per cent respectively.

Fourth quarter ended Nov. 30, 2023

Sales

Fourth quarter consolidated sales amounted to $453.6-million, compared with $457.5-million for the corresponding quarter of 2022, a decrease of $3.8-million or 0.8 per cent, of which 2.2 per cent resulting from internal decrease and partially offset by 1.4 per cent growth from acquisitions. At comparable exchange rates to the fourth quarter of 2022, the consolidated sales decrease would have been 1.3 per cent for the quarter ended Nov. 30, 2023.

Earnings before interest, income taxes and amortization (EBITDA) amounted to $58.8-million compared with $76.7-million in the fourth quarter of 2022, down 23.3 per cent. The gross margin reduced compared with the previous year and EBITDA margin stood at 13 per cent, compared with 16.8 per cent for the fourth quarter of 2022, influenced by the return to prepandemic levels of certain operating expenses as well as to expenses specific to major expansion projects undertaken during the quarter.

Amortization expenses amounted to $16.4-million compared with $13.1-million for the corresponding quarter of 2022, an increase of $3.3-million. Net financial costs are down $600,000 mainly due to the significant reduction in line of credit balances. Income taxes amounted to $10.8-million compared with $15-million for the fourth quarter of 2022.

Net earnings were $29.4-million, down by 35.7 per cent over the corresponding quarter of 2022. Considering non-controlling interests, net earnings attributable to shareholders of the corporation amounted to $28.5-million, down by 36.5 per cent over the fourth quarter of 2022. Net earnings per share were 51 cents basic and diluted, compared with 80 cents basic and diluted for the fourth quarter of 2022.

Cash flows from operating activities (before net change in non-cash working capital balances) amounted to $49.3-million or 88 cents per share, compared with $62.2-million or $1.11 per share for the fourth quarter of 2022, a decrease of 20.7 per cent resulting primarily from net earnings decrease. Net change in non-cash working capital balances represented a cash inflow of $23.3-million, reflecting the change in inventory and accounts receivable of $25.3-million, whereas the change in accounts payable and other items used cash flows of $1.9-million. Consequently, operating activities provided cash flows of $72.7-million, compared with $3.6-million for the fourth quarter of 2022.

Financing activities used cash flows of $14.3-million, compared with $21.6-million for the fourth quarter of 2022. This change primarily resulted from $4.7-million of issued shares in the fourth quarter compared with $200,000 in the corresponding quarter, and common shares repurchases of $4.4-million for the fourth quarter of 2022 while no share repurchases were made in the fourth quarter of 2023.

Investing activities used cash flows of $19.2-million in the fourth quarter mainly for the purchase of a building housing Usimm/Unigrav operations in addition to adding storage space, as well as for the acquisition of various tangible assets related to expansion and construction projects as well as for the purchase of equipment to maintain and improve operational efficiency.

Financial position

Operating activities

Cash flows from operating activities (before net change in non-cash working capital balances) reached $190.5-million or $3.39 diluted per share, compared with $227.8-million or $4.04 diluted per share for 2022, a decrease of 16.4 per cent mainly reflecting the net earnings decrease. Net change in non-cash working capital balances represented a cash inflow of $80.2-million, mainly representing changes in inventory of $97.1-million, whereas accounts receivable, payable and other items used cash flows of $16.9-million. Consequently, operating activities generated a cash inflow of $270.7-million compared with a cash outflow of $32.9-million for 2022.

Financing activities

Financing activities used cash flows of $72.4-million, compared with $70-million for 2022. During the year, Richelieu repaid long-term debt of $5.3-million, paid lease obligations of $34.1-million and issued shares for $8.6-million, compared with a long-term debt repayment of $5.2-million, lease obligations payments of $25.9-million and a $6.3-million share issue in 2022. Dividends paid to shareholders of the corporation amounted to $33.5-million compared with $29.1-million, up 15.3 per cent over 2022. The corporation also repurchased common shares for an amount of $800,000 compared with $12.3-million in 2022.

Investing activities

Investing activities used cash flows of $61.8-million, of which $19.7-million for the six business acquisitions completed in fiscal 2023 and $42.1-million, mainly for equipment to maintain and improve operational efficiency, including additions resulting from expansion projects and for the purchase of a building in Drummondville.

Assets

Total assets amounted to $1.3-billion as at Nov. 30, 2023, an increase of 2.4 per cent. Current assets were down by 5.6 per cent or $51.3-million from Nov. 30, 2022, mainly resulting from the decrease in inventories. Non-current assets increased by 22.1 per cent mainly due to the addition of right-of-use assets and property, plant and equipment related to lease renewals and expansion projects.

Shareholders' equity and share capital

Equity attributable to shareholders of the corporation totalled $904.9-million as at Nov. 30, 2023, compared with $817.2-million as at Nov. 30, 2022, an increase of $87.7-million. This increase is mainly due to a rise of $75.8-million in retained earnings, which amounted to $795-million, and of $11.1-million in share capital and contributed surplus, while accumulated other comprehensive income increased by $900,000. As at Nov. 30, 2023, the book value per share was $16.13, up by 10.1 per cent over Nov. 30, 2022, and the return on average shareholders' equity was 12.9 per cent.

As at Nov. 30, 2023, the corporation's share capital consisted of 56,088,365 common shares (55,784,790 shares as at Nov. 30, 2022). In 2023, upon the exercise of stock options under the stock option plan, Richelieu issued 323,575 common shares at an average price of $26.43 (271,000 in 2022 at an average price of $23.19). The corporation granted 306,500 stock options in fiscal 2023 (276,000 in 2022) and cancelled 41,000 (17,125 in 2022). Consequently, as at Nov. 30, 2023, 1,620,925 stock options were outstanding (1,679,000 as at Nov. 30, 2022).

Dividends

On Jan. 18, 2024, the Board of directors approved the payment of a quarterly dividend of 15 cents per share to shareholders of record as at Feb. 1, 2024, payable on Feb. 15, 2024. 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 112 centres in North America -- 50 distribution centres in Canada, 59 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.

Jan. 18, 2024, 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 Jan. 18, 2024, 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 Jan. 18, 2024, until midnight on Jan. 25, 2024, by dialling 1-888-259-6562, access code 153396 followed by the pound key. Members of the media are invited to listen in.

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