Richelieu Hardware Ltd.

Good afternoon, ladies and gentlemen, and welcome to this year's conference call for the second quarter and first half ended May 31st, 2024. With me is Antoine Auclair, CFO. As usual, know that some of today's issues include forward-looking information, which is provided with the usual disclaimer, as reported in our financial findings. We continue to make good advances in the second quarter, thanks notably to the valuable contribution of our acquisitions the strong support of our market development strategy and our value-added service. As a result, we achieved an increase in sales over the competitive quarter of 2023, which is appreciable in the current market condition. This rise reflects the good performance in our manufacturer's market, especially in the U.S., with a growth of 8.7% in the quarter. Our sales to retailers and renovation super stores were down in Canada and U.S., resulting from a softer market and the impact of some price reduction. Nevertheless, we are currently working on many interesting projects with retail customers that will generate additional sales in the coming periods. In addition, the centralization projects in Western and Eastern Canada will continue to support our growth in this market. We also focus on the ramp-up and development of our centers that we were expanding and modernizing in 2023. We are happy with these investments that were implemented to better service our customers, support our growth, and access new territories. We already see significant increase in sales versus last year in all of these projects. I now hand it over to Antoine for the financial review of the quarter and first half.

Thanks, Richard. Second quarter sales reached $407 million, up 2%, resulting from a positive contribution from the acquisition of 2.7% and an internal decrease of 0.7%. In Canada, sales amounted to $276 million, down 1.1%, of which 2.8% from internal decrease, partially offset by a 1.7% positive contribution from acquisitions. Sales to manufacturers reached $232 million, up 0.9%. And for the hardware retailers, sales stood at $44 million, down 10.6%. In the U.S., sales grew to $150 million in U.S. dollar, up 6.1%. Sales to manufacturers reached $143 million in U.S. dollar, up 8.7%. In hardware retailers and renovation superstores market, sales reached $7.4 million, down 2.9 million. In Canadian dollars, total sales in the U.S. reached 205 million, an increase of 6.5%. For the first half, sales reached 888 million, up 1.5%, of which 0.5% from internal decrease, offset by 2% from acquisition. In Canada, sales reached 508 million, slightly down by 2.1 million, or 0.4%, of which 2.2% from internal decrease and 1.8% from acquisition. Sales to manufacturers reached $420 million, up $4.3 million or 1%. Sales to hardware retailers and renovation superstores reached $88.2 million, compared to $94.6 million, down 6.8%. In the U.S., sales amounted to $280 million in U.S. dollars, up 4%, of which 1.7% from internal growth and 2.3% from acquisitions. They reached $380 million in Canadian dollars, up 4.2%, accounting for 43% of total sales. Sales to manufacturers totaled $264 million U.S., an increase of $13.5 million, or 5.4%, of which 2.9% from internal growth and 2.5% from acquisitions. Sales to hardware retailers and renovation superstores were down 14% compared to last year. Second quarter EBITDA reached 53.8 million, down 7.7 million, or 12.6% over last year. Growth in EBITDA margins continued to be under pressure due to temporary factors, including inventories at higher than current purchasing costs, lower selling price for certain products originating mainly from Asia, plus the temporary impact resulting from the expansion projects. Consequently, EBITDA margins stood at 11.2% compared to 13% last year. First half EBITDA reached 94.2 million, down 14.8%. As for the EBITDA margin, it stood at 10.6% compared to 12.6 last year. Second quarter net earnings attributable to shareholders totaled 23.4 million, down 23.7%, mainly due to amortization resulting from new business acquisitions and expansion projects. Net earnings per share were 42 cents compared to 55 cents last year, a decrease of 23.6%. First-half net earnings attributable to shareholders reached $38.7 million, down 27.2%. Diluted net earnings per share stood at $0.69 compared to $0.95 last year. Cash flows from operating activities before net change in non-cash working capital balances was $45.1 million compared to $50.8 last year. Net change in non-cash working capital items generated a cash inflow of $10.7 million. Inventories continued to reduce as planned, with a positive effect of $22 million this quarter. As a result, operating activities provided a cash inflow of $55.7 million in the quarter compared to a cash inflow of $74.4 million in 2023. For the first half, cash flows from operating activities represented a cash inflow of $56.2 million compared to a cash inflow of $93.2 million last year. For the second quarter, financing activities used cash flow of $38.6 million compared to $17.8 million last year. During the quarter, the corporation paid lease obligation of $10 million, distributed dividends of $8.4 million, and paid interest on bank overdraft of $700,000. During the quarter, we also repurchased $481,000 common share for $18.6 million. First half financing activities used cash flow of $57.6 million compared to $39.8 in 2023. During the first half, we invested $36.2 million, $17 million for the three-business acquisition, and $19.2 million primarily for investments related to the consolidation of our new Calgary warehouse and the purchase of equipment to maintain and improve operational efficiency. We continue to benefit from a healthy and solid financial position with a working capital of $616 million for a current ratio of 3.3 to 1 and almost no debt. I now turn it over to Richard.

Thank you, Antoine. First, I'd like to say something about the situation in our Montreal warehouse. Well, last month, some 125 employees whose collective agreement expired last December went on strike. We have taken appropriate measures to ensure that all our local customers continue to be served thanks to the contingency plan we have put in place. It has to be noted that the strike affected just one of our 114 distribution centers and a small portion of our 3,000 employees. We are confident that a mutually beneficial agreement will be reached very soon. To conclude, we continue to focus on the development of our expanded and modernized distribution centers in the U.S., as well as our new Calgary location, which enables us to effectively support growth of our manufacturer's market, in addition to centralizing the distribution of all products for retailers in Western Canada. We will pursue our projects undertaken in the second quarter regarding the consolidation of our distribution activities for retailers in Ontario and eastern Canada. We are well positioned to seize new opportunities in the renovation market and to benefit from the expected increase in demand in the context of the housing shortage in Canada and in the U.S. Our focus is on profitable growth. This means keeping tight control over our costs and pursuing our winning strategies of innovation, service, and acquisition. Thanks, everyone. We'll now be happy to answer your questions.