Richelieu Hardware Ltd.

Good afternoon, ladies and gentlemen, and welcome to Reshow Your Hardware Fourth Quarter Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session, which will be restricted to analysts only. And if at any time during this call you require needed assistance, please press star zero for the operator. Also note that this call is being recorded on January 19, 2023. Bonjour, Mesdames et Messieurs, et bienvenue au résultat du quatrième trimestre quinquennat qui se lie. Présentement, vos lignes sont en mode d'écoute seulement. Suite à la présentation, nous allons procéder à une période de questions et réponses qui sera restreinte aux analystes seulement. Si vous avez besoin d'assistance au cours de l'appel, veuillez s'il vous plaît appuyer sur l'étoile et les zéros. Veuillez prendre note que cet appel est enregistré aujourd'hui le 19 janvier 2023. J'aimerais maintenant céder la parole à Monsieur Richard Lord, Thank you.

Good afternoon, ladies and gentlemen, and welcome to the Richard Hughes Conference call for the fourth quarter and 12th month, period ended November 30, 2022. With me is Antoine Auclair, CFO. As usual, note that some of today's issues include forward-looking information, which is provided with the usual disclaimer as reported in our financial findings. First, let's look at our fourth quarter, where our sales benefited from both acquisition and internal growth. The sales increase was driven by a strong performance in the manufacturer's market in the U.S., where the two acquisitions closed in the first quarter made a major contribution, namely Compute Distributor, HGH Hardware, and National Builders Hardware jointly They operate nine distribution centers in six different states. As for the retailers and innovation superstore market, sales remain stable over the last year. We closed our fourth acquisition of the year in September, KKRIDONO, a specialty hardware distributor operating one distribution center in Montreal. The four acquisitions closed in 2022 represent additional sales of approximately $125 million on an annual basis. As for 2022, it was another year of sound growth fueled by both internal growth and acquisitions. We are very pleased with the performance achieved in all our markets, especially in the U.S., where the growth was 42.2%, now representing 40% of our total sales. Our innovation and acquisition strategies, our focus on customer service, the diversification of our market segments, and our successful website, richelieu.com, all these trends contributed to bear fruit and be our best growth levers. I'm also pleased to announce that the Board of Directors approved this morning a rise of 15.4% in our quarterly dividend to 15 cents per share. Antoine will now review the financial highlights, and then we'll conclude with the latest development and outlook. Thanks, Richard.

Our fourth quarter sales reached $458 million, up 14.9%. Sales to manufacturers stood at $398 million, up 17.4%, of which 78% from internal growth and 9.6% from acquisitions. In the hardware retailers and renovation superstores markets, We achieved sales of $60 million in line with 2021. In Canada, sales amounted to $274 million, an increase of $13.4 million, or 5.2%. Our sales to manufacturers reached $226 million, up 5%. As for retailers markets, sales stood at $47.5 million, up 5.8%. In the U.S., sales totaled $136 million in U.S. dollars, up 24.1%, of which 2.8% resulting from internal growth and 21.3% from acquisitions. Sales to manufacturers reached $127.5 million in U.S. dollars, up 29.4%. In the retailers market, sales were down by $2.5 million in U.S. dollars. Total sales in the US reached $184 million in Canadian dollars, an increase of 33.2%, representing 40.2% of our total sales. Total sales in 2022 reached $1.8 billion, up 25.2%, of which 13.4% from internal growth and 11.8% from acquisition. Sales to manufacturers reached $1.6 billion, up 28.9%, of which 15.9% from internal growth and 13% from acquisition. These increases are the result of sustained demand in the renovation market in 2022, as well as higher selling price. Sales to hardware retailers grew by 6.3%, or $14.9 million, to $251.5 million, mostly from acquisitions. In Canada, sales total $1.1 billion, up 13.7%, of which 10.3% from internal growth and 3.4% from acquisitions. Our sales to manufacturers amounted to $877 million, up by 14.2%, of which 11.7% from internal growth and 2.5% from acquisitions. Sales to hardware retailers and renovation super stores were $177 million, up 11.7%. In the U.S., sales amounted to $562.5 million in U.S. dollars, up 42.2%, of which 15.4% from internal growth and 26.8% from acquisitions. They reached $728 million in Canadian dollars, up 46.9%, accounting for 40% of total sales. Sales to manufacturers reached $521 million in U.S. dollars, an increase of 49.7%, and sales to hardware retailers were down by 12.9%. Fourth quarter EBITDA stood at $76.7 million compared with $71.3 million last year, up 7.5%. EBITDA margins stood at 16.8%. For the year, EBITDA was $287.4 million, up 22.6%, and EBITDA margins stood at 15.9%. Fourth quarter net earnings attributable to shareholders totaled 44.9 million compared with 44.6 million last year. By use of net earnings per share reached 80 cents compared with 79 cents in 2021. For the year, net earnings reached 168 million, an increase of 18.8% and $2.99 per share compared with $2.51 per share last year. Fourth quarter cash flow from operating activities before net change and non-cash working capital balances were up 8.3% to $60.4 million or $1.07 per share. Net change and non-cash working capital balances used cash flow of $58.6 million. For the year, they were up 22.7%, totaling $224 million or $3.98 per share. Net change in non-cash working capital balances used cash flow of $260.7 million, mainly from spike in inventory, which resulted from the higher product costs and the easing of the supply chain challenges, including the acceleration of delivery times, especially from Asia. During the year, we paid dividends of $29 million, up 50% over 2021, of which $7.3 million were in the fourth quarter, and repurchased common share for $12.3 million. We have thus distributed to a total of $41.4 million to our shareholders this year. We also invested $67 million during the year, of which $44 million was for business acquisitions and $23 million for equipment to maintain and improve operational efficiency, including investment in ongoing extension projects. As of November 30, 2022, bank overdraft net of cash amounted to $212 million. Our working capital was $563 million for a current ratio of 2.6 to 1, and the return on average shareholder's equity stood at 22.7%.