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Good afternoon, ladies and gentlemen, and welcome to Richelieu Hardware Fourth Quarter Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session, which will be restricted to analysts only. [Operator Instructions] Also note that the call is being recorded on January 19, 2023.
[Foreign Language]
Merci. Thank you. Good afternoon, ladies and gentlemen, and welcome to the Richelieu's conference call for the fourth quarter and 12-months 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 filings.
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 manufacturers market in the U.S., where the three acquisitions closed in the first quarter made the major contribution. Namely, Compi distributor; HGH Hardware; and National Builders Hardware jointly they operate nine distribution centers in six different states.
As for the retailers and renovation superstores market, sales remained stable over the last year. We closed our fourth acquisition of the year in September Quincaillerie Deno, a specialty hardware distributor operating one distribution center in Montreal. Together, 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 strong growth fueled by both internal growth and acquisitions. We are very pleased with the performance achieved in all our markets especially in 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 levels. I’m also pleased to announce that the Board of Directors approved this morning a rise of 15.4% in our quarterly dividend to $0.15 per share.
Antoine will now review the financial highlights and I will 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 7.8% from internal growth and 9.6% from acquisitions. In the hardware retailers and renovation superstores market, 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 market, sales stood at $47.5 million, up 5.8%. In the U.S. sales totaled US$136 million, up 24.1% of which 2.8% resulting from internal growth and 21.3% from acquisitions.
Sales to manufacturers reached US$127.5 million, up 29.4%. In the retailers market, sales were down by US$2.5 million. Total sales in the U.S. reached CAD184 million, 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 acquisitions.
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 totaled $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 superstores were $177 million, up 11.7%.
In the U.S. sales amounted to US$562.5 million, up 42.2% of which 15.4% from internal growth and 26.8% from acquisitions. We reached CAD728 million, up 46.9% accounting for 40% of total sales. Sales to manufacturers reached US$521 million, 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. Diluted net earnings per share reached $0.80, compared with $0.79 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 in non-cash working capital balances were up 8.3% to $60.4 million or $1.07 per share. Net change in 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 of $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 expansion projects.
As at November 30, 2022 Bank overdraft net of cash amounted to $112 million. Our working capital was $563 million for a current ratio of 2.6:1 and the return on average shareholders' equities stood at 22.7%.
I now turn it over to Richard.
Thanks, Antoine. We are constantly looking to acquire new businesses in line with our [indiscernible] and integrate them by trading our value and developing synergies. Just recently, in January, we concluded four new acquisitions that will contribute to diversify our offering and our customer base, namely Quincaillerie Rabel, a distributor or specialty hardware with one distribution center in Terrebonne, Quebec. Trans-World Distributing, a distributor of industrial fasteners, with one distribution center in Dartmouth, Nova Scotia. Unigrav and Usimm, two companies offering custom products, including 3D scanning centres, for the architectural and industrial market, they are located respectively in Drummondville and Montreal.
These four new acquisitions will add approximately $18 million in sales on an annual basis. Our expansion projects are progressing well, mainly in Atlanta, Fort Myers, Nashville and Pompano. Also, we just opened our new Carlstadt location close to New York City, and we will be up and running in Minneapolis for February. As for Chicago, our new location servicing retailers will be fully operational in the coming weeks. Other expansion projects are currently under review and U.S. sales will continue to be a strong driver of our growth.
To conclude, Richelieu has a strong financial conditions, skills and expertise to service customers with a distinctive service approach, as well, we have a solid track record in product innovation and business acquisitions, which remain our two main growth driver.
In 2023, we've continued to build on this momentum and our strength in order to achieve good results with the involvement of our great team. We will pursue our market development, innovation and acquisition strategies, while giving priority to service productivity, synergies and sound financial management.
Thanks, everyone. Now we’ll be happy to answer your questions.
Thank you, Mr. Lord. [Operator Instructions] And your first question will be from Zachary Evershed at National Bank Financial. Please go ahead.
Good afternoon, everyone. Congrats on the quarter.
Hello?
So I was hoping you could give us a little bit more color on the inventory breakdown. Maybe paint a picture for us of where you want to get that number down to what's higher due to pricing? And then what's attributed to new distribution centers and acquisitions in your inventory?
Yes, Zach, I will answer, it’s Antoine. The -- basically -- just product cost increase amounts to approximately $45 million to $50 million just from a cost increase and $30 million from acquisition and new extension. So basically close to $75 million on those elements. But they were pretty much at the highest point. In January, we were pretty much at the highest point, so you looked at the -- you have the November levels is going to increase in the December, slightly increase in January as well. We're going to be at the top of the mountain in January stabilize in February and it will go down substantially during 2023.
And how much do you think you can pare away to get to a stabilized inventory level?
Between, I would say between $60 million to $80 million.
That's helpful. Thanks. And then Richard, maybe you could give us some commentary on pockets of weakness and strength that you're seeing in your end markets and product categories?
What do we see so far the market is still quite good even though the first quarter is always our lowest quarter as you can remember. But and also what we have seen this year more than ever than our small customers until January 15, they were still on vacation. But in spite of that, our sales is doing quite well, it's going to be hard. I don't think we can beat the performance that we had last year though. But the market is still good. We see the retail market being flat -- slightly down in the U.S., but it's only for timing, purchasing -- purchasing of timing for customers and speaking with our sales management and our salespeople, they see that our customer would be busy for at least the next six months to a very decent level.
So basically all the product lines are doing pretty well, so far as well as most of our customer segment. And also I think our new acquisition was to contribute to a nice growth, because now they had access to more products, they have access to the distribution system and the distribution marketing trends. So basically, that should generate more sales and we have various program in order to increase our sales as usual in U.S., as in Canada in order to get more sales per customers and gain more new customers as well. So basically, whatever the circumstances might be or will be Richelieu is still doing everything in terms of many strategies in parallel in order to keep increasing our sales.
Great color, thanks. And so I'm hearing you on gaining new customers and growing your sales per customer. And I noted that you flagged that gross margins were stable in the quarter. What are your thoughts on the extent of price deflation in your product categories in the year ahead?
There will be a price depletion for certain products for a while. There is no doubt, because of the excess inventory, the higher cost that we have namely for some product for the retailers that should temporarily affect our gross margin, but especially for example, for the fastener and fitting business, because we had excess inventory and instead of it, we have direct import for certain of our customers from Asia directly to our customer this year we're going to use our inventory instead of selling product at reduced margin that coming directly from Asia.
So we have to carry the cost of having this product of inventory, but we're going to use the product with is already into our inventory to shift our customers at a lower margin. That will affect temporarily our margin. We don't expect any disaster, but we're going to have certain decrease for certain product line that we don't see the effect as being dramatic in a [indiscernible] result, if we look at the next couple of quarters.
Got you. Thank you. And previously you've given range of maybe 14% to 15% EBITDA margins in a post-pandemic world. Do you think that's still the case with what you're seeing in terms of inventory discounts and that kind of thing for 2023?
Yes, it is.
Short and sweet. And then just one last one if I can on customers that you won during the disrupted supply chains, because RCH was able to keep inventory better then competitors. What do you think your retention rate is on that new business? The market share gains you made there?
I think the retention is something higher than 80%, because this customer, they have discovered us, they see the larger value to product that we have. So and they will continue to buy from us, because they have experienced a good service and they see the large variety of products. The reason is of using our website and to reach for people just picking up the sales rep of the customer service people. So basically that keeps improving the whole thing and basically we're quite optimistic with this.
We also have to [welcome] (ph) that regarding the sales that we have to keep in mind that before last year, our customers also bought more products from us they should have bought, because they were scared. They wanted to make sure that they have the right and the more inventory than they would really need in order not to lose anything of their projects. So our customers are in excess of inventory and they also know that we are in excess of inventory. So if they need something just as we speak now, is just by the quantity they need now, because they know that Richelieu has lot of inventory, so they are not scared as Richelieu could miss something in the near future.
So basically, that does not help to create more sales. But as I said earlier though, whatever the -- those circumstances, we still do well compare even though we will not be close to the performance that we had last year. But sales are still holding, I would say, healthy.
Fantastic. Thank you. That's all I had. I'll turn it over.
Thank you.
Thank you. [Operator Instructions] And at this time, Mr. Lord, we have no other questions. Please proceed.
It was a pleasure to talk to you. Thanks again, and whatever you need to talk to us, we are here. Thank you very much.
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.