Richelieu Reports Ongoing Growth and Expansion as Third Quarter Sales Are Up
“Richelieu delivered a solid performance in the third quarter, in line with previous periods. Our steady growth and impeccable financial position attest to the efficiency of our business model, tailored to the specific needs of our diversified customer base, to our ability to react quickly and adapt to changing market conditions, as well as our resolute focus on customer service. Our results reflect the substantial impact of our acquisition, innovation and diversification strategies in specialized segments that are complementary to our operations. We continue to integrate our acquisitions in accordance with our criteria for optimizing performance while pursuing our strategies of expansion, innovation and market development in North America with a quality of service that sets us apart in our markets”, indicated Richard Lord, President and Chief Executive Officer.
New Developments in North America
Richelieu completed its fourth acquisition since the beginning of the fiscal year – the 80th since 1988 – Quincaillerie Deno is a distributor of specialty hardware products operating in Quebec. In addition, the Corporation signed indications of interest for three new acquisitions, two in Canada and one in the United States. Together, this recent acquisition and the three transactions in progress would represent sales of approximately $23 million on an annual basis. In order to further seize and create growth opportunities in the short and long term, Richelieu is pursuing several expansion projects in the United States where it currently operates 57 strategically located distribution centers. In addition to the expansion of its Fort Myers, Atlanta and Chicago centers, Richelieu has begun the expansion of its Pompano and Nashville centers, and is also planning to open new centers in Carlstadt and Minneapolis.
3rd Quarter Results
Third-quarter consolidated sales reached $472.9 million, compared to $373.3 million for the corresponding quarter of 2021, an increase of $99.6 million or 26.7%, of which 15.8% from internal growth and 10.9% from acquisitions. At comparable exchange rates to the third quarter of 2021, the consolidated sales increase would have been 24.9% for the quarter ended August 31, 2022.
Richelieu achieved sales of $409.6 million in the manufacturers market, compared to $313.5 million for the third quarter of 2021, an increase of $96.1 million or 30.7%, of which 17.7% from internal growth and 13.0% from acquisitions. Sales to hardware retailers and renovation superstores stood at $63.3 million, up $3.5 million or 5.9% over the third quarter of 2021, entirely from internal growth.
In Canada, Richelieu recorded sales of $279.6 million, an increase of $36.2 million or 14.8% over the third quarter of 2021, of which 13.8% from internal growth and 1.0% from acquisitions. Sales to manufacturers amounted to $228.0 million, compared to $197.0 million in the third quarter of 2021, an increase of 15.7%, of which 14.5% from internal growth and 1.2% from acquisitions. Sales to hardware retailers and renovation superstores reached $51.6 million, up $5.2 million or 11.2% over the corresponding quarter of 2021, entirely from internal growth.
In the United States, sales totalled US$150.0 million, compared to US $104.3 million for the third quarter of 2021, up US$45.7 million or 43.7%, of which 15.3% from internal growth and 28.4% from acquisitions. Sales to manufacturers amounted to US$140.9 million, compared to US$93.5 million, an increase of 50.7% over the third quarter of 2021, of which 18.7% from internal growth and 32.0% from acquisitions. Sales in US$ to hardware retailers and renovation superstores reached $9.1 million. Total U.S. sales in Canadian dollars stood at $193.3 million, compared to $129.9 million in the third quarter of 2021, an increase of 48.9%. These sales accounted for 40.9% of consolidated sales for the third quarter of 2022, compared to 34.8% of consolidated sales for the third quarter of 2021.
Third quarter earnings before income taxes, interest and amortization (“EBITDA”) reached $79.2 million and were up $15.2 million or 23.8% over the third quarter of 2021, resulting mainly from increased sales. Gross margin decreased slightly from the third quarter of 2021 and EBITDA margin stood at 16.7%, compared to 17.1% for the corresponding quarter of 2021. Net earnings grew 20.1%. Considering non-controlling interests, net earnings attributable to shareholders of the Corporation amounted to $46.4 million, up 19.6% over the third quarter of 2021. Net earnings per share rose to $0.83 basic and $0.82 diluted, compared to $0.69 basic and diluted for the third quarter of 2021, increases of 20.3% and 18.8%, respectively.
Third quarter cash flows from operating activities (before net change in non-cash working capital balances) amounted to $60.9 million or $1.08 diluted per share, an increase of 23.5%, compared to $49.3 million, or $0.87 diluted per share for the corresponding quarter of 2021, stemming primarily from the net earnings growth. Net change in non-cash working capital balances used cash flows of $58.2 million, reflecting the increase in inventories of $92.6 million, whereas change in accounts receivable and other items represented cash inflows of $34.4 million. Consequently, operating activities represented a cash inflow of $2.7 million, compared to a cash inflow of $34.5 million in the third quarter of 2021.
For the first nine months, consolidated sales reached $1.3 billion, an increase of $303.0 million or 29.1% over the first nine months of 2021, of which 16.2% from internal growth and 12.9% from acquisitions. At comparable exchange rates to the first nine months of 2021, the consolidated sales increase would have been 28.0%.
EBITDA totalled $210.8 million, up $47.7 million or 29.3% over the first nine months of 2021. Gross margin declined slightly over the corresponding nine-month period of 2021. As for EBITDA margin, it stood at 15.7%, compared to 15.6% for the first nine months of 2021. Net earnings increased 27.4%. Considering non-controlling interests, net earnings attributable to shareholders of the Corporation totalled $123.4 million, up 27.1% over the corresponding nine months of 2021. Net earnings per share amounted to $2.21 basic and $2.19 diluted, compared to $1.74 basic and $1.72 diluted for the first nine months of 2021, up 27.0% and 27.3%, respectively.
Total assets amounted to $1.2 billion as at August 31, 2022, compared with $964.2 million as at November 30, 2021, an increase of 23.0%. Current assets grew by 25.2% or $166.3 million over November 30, 2021. This increase stems from the addition of current assets following the business acquisitions made during the first quarter and from the rise in inventories resulting from the increase in demand and in supply costs. Non-current assets increased 18.2% mainly due to the addition of intangible assets and goodwill related to the business acquisitions.
The Corporation continues to benefit from a healthy and solid financial position. As at August 31, 2022, total debt was $5.4 million, mainly representing balances payable on acquisitions.
On October 6, 2022, the Board of Directors approved the payment of a quarterly dividend of 0.13$ per share to shareholders of record as at October 20, 2022, payable on November 3, 2022. The declared dividend is designated as an eligible dividend within the meaning of the Income Tax Act (Canada).
For the full third quarter results, click here.
Richelieu is a leading North American distributor, manufacturer and importer 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 100,000 customers who are served by 106 centers in North America – 47 distribution centers in Canada, 57 in the United States and two manufacturing plants in Canada, specifically Cedan Industries Inc. which specializes in the manufacturing of a wide variety of veneer sheets and edgebanding products and Menuiserie des Pins Ltée which manufactures components for the window and door industry and a broad selection of decorative mouldings.
Antoine Auclair – Vice-President and Chief Financial Officer – (514) 336-4144
Source: Richelieu Hardware Ltd.