Q4 2020 Richelieu Hardware Ltd Earnings Call

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Good afternoon, ladies and gentlemen, luxury should 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 should only.

If at any time during this call would be quite a bit of the sisters.

Please press star zero for the operator.

This call is being recorded on January 21st 2021.

Most of them at the same is true at revenue as you did.

Your kitchen free Mr. Ken Kenny Richelieu.

Please a lot more volume from a decreased thermal stream.

That's true.

Losing them QC they tell you.

So all of these problems and that is to sell more.

She was a busy one this is also called it up did that show it will easily be put on that is it that that is the largest player to Los Angeles.

Yeah.

Jim I met most of the day that bill of material and shuttle cars don't issue that I'd like LIBOR index.

Okay. Thank you.

Afternoon, ladies and gentlemen, and welcome to the Sugar conference call for the fourth quarter and 12 month period.

November 30th.

With me is Antoine Auclair CFO.

As usual note that some of today's issue into forward looking information, which is provided with the usual disclaimer as reported financials sidings.

The fourth quarter.

Hi.

And a strong increase in sales, resulting both from internal growth and acquisitions and total growth in equities.

Let's take a quick look at the Q4 financial highlights.

Total sales increased by $20 four per cent.

Including 12% from organic growth and 4.8.

$8 four from acquisitions sales for manufacturers.

$15, 7%.

Sales rose by 65, 4% and the retailer.

Retailers and renovation superstores market.

I also went out to 33, 5% increase in EBITDA for the year totaling $150 million.

All 13, 7%.

But the one 2% increase in net.

These per share, reaching $1 60, compared to 116 next year.

These results.

As an essential service provider were achieved thanks to our business model and strategies, which continue to prove the efficiency mainly.

Well one step approach for the service.

The strategy.

Our market risk diversification.

A question on strategy.

You made a good contribution to the results for the quarter and whole year.

Five acquisition, we completed in fiscal 'twenty, one day, adding over $17 billion in annual sales.

Rick will discuss control and finally, the support and dedication of all day.

Under the circumstances, we are very satisfied with our results for fiscal 2020.

Which roche we have spared no effort to contribute to provide maximum support to our customers we care.

Got it.

Antoine will now review, the fourth quarter and fiscal year results.

Net sales position from a bit to 32.

Thanks Richard.

Fourth quarter sales reached $319 million up by 24%.

Sales to manufacturers stood at $270 2 million up by 15, 7% nine 8% from internal growth and five 9% from acquisitions.

And the hardware, where your theaters and renovation superstores market, we achieved sales of $48 8 million up by.

By 55, 4% of which 28, 5%, resulting from internal growth and 26, 9% from acquisition.

In Canada sales amounted to $250 million.

An increase of $35 9 million, our sales to manufacturers reached $174 5 million.

By 15, 8%.

As for the hardware retailers and renovation superstores market sales stood at $40 5 million up by 42, 6%.

In the U S sales totaled $78 9 million in U S dollars up 21, 6% of which six 9%, resulting from internal growth and 14, 7% from acquisitions.

Sales to manufacturers reached $72 6 million in U S dollar.

By 15, 8%.

In the hardware retailers and renovation superstores market sales were up $4 1 million U S dollar or 186% for the quarter, resulting mainly from acquisitions.

Total sales in the U S reached $104 million and Canadian dollars, an increase of 21, 1% representing 32, 6% of total sales.

Total sales in 2020 reached $1 billion $128 million up by eight 3%.

<unk>, 7% from internal growth and seven 6% from acquisition.

Sales to manufacturers reached $938 million up by $4 four 5% five 4% from acquisition and <unk>, 9% from it'll hold decrease resulting from the slowdown in the second quarter due to the pandemic.

Sales to hardware retailers and renovation superstores stood at $189 7 million up by 32, 2% 10, 2% from internal growth and 22% from acquisitions.

In Canada sales total $730 million million up by six 4% of which 5% from acquisition and one 4% from internal growth.

Our sales to manufacturers amounted to $581 million or by two 1% of which four 1%, resulting from acquisition and 2% from internal decrease.

Sales to hardware retailers and renovation superstores.

<unk> hundred 17 million up by 27%.

In the U S sales amounted to $296 3 million in U S dollars.

By 10, 8% 12, 6% from acquisition and one 9% from internal decrease.

They reached $397 $9 million and Canadian dollars up by 11, 9% accounting for 35% of total sales.

Sales to manufacturers reached $265 9 million in U S dollars, an increase of seven 3% entirely from acquisition.

Sales in the hardware retailers and renovation superstores market were up by 53, 5% in U S volume.

Yes.

Fourth quarter EBITDA stood at $46 7 million compared with $35 million last year up 33 five per cent.

The EBITDA margin stood at 14, 6% compared with 13, 2% for the fourth quarter of 2019, resulting from increased sales together with cost reduction measures implemented.

For the year EBITDA was 155, $154 5 million up by 24, 4%.

Gross margin remained stable with 2019 EBITDA margin stood at 13, 7% compared with 11, 9%, resulting from increased sales as well as cost reduction measures and government grants.

Fourth quarter net earnings attributable to shareholders totaled $27 1 million compared with $19 1 million last year.

Net earnings per share reached 48 basic and diluted compared with 34 for the same quarter last year, an increase of 41, 2%.

For the year net earnings attributable attributable to shareholders reached $85 2 million net earnings per share were $1 50 diluted up by 29, 3%.

Fourth quarter cash flow from operating activities before net change in noncash working capital balances were up by 29, 5% to $36 2 million or <unk> 64 per share.

Net change in non cash working capital balances used cash flow of $2 7 million.

For the year, there were up 23, 5% totaling $121 million or $2 14 per share.

Net change in non cash working capital balances represented a cash inflow of $24 6 million.

During the year, we paid dividends of $11 3 million of which $3 8 million and were in the fourth quarter and repurchase common share for $25 million.

We have distributed a total of $36 3 million to our shareholders. This year.

We also invested $45 5 million during the year of which $33 1 million was for business acquisition.

$12 4 million for equipment to maintain and improve operational efficiency and for it equipment.

As at November 32020, cash totaled $73 9 million and our working capital was $377 million for a current ratio of three six to one.

I'll now turn it over to Richard.

Thank you everyone.

In the current situation, we continue to strictly respect all prevention measures issued by the value of the government.

Well take our employees customers.

And business Butler as much as possible.

We will continue to reported that as the business efficiently while meeting very watchful.

Evolving business environment.

We continue to have like a strategy that that's paid off so far.

Really our strategies of innovation.

This acquisition.

They have service E commerce, with Richard <unk> Dot com and market development.

Cost trends.

US provide a solid foundation on which we continue to build the company.

Business model, whether that sales to our customers.

Our value added service.

Quality and efficiency of our network of data for strategic centers.

Number.

Diversity of our customers our commitment and dedicated team at the soundness of our financial position.

In conclusion.

I would like to mention that this morning, the board of directors.

What percentage increase in the quarterly dividend to <unk> <unk>.

As well as the payment of a special dividend of $6 67.

As a compensation for that.

Dividend that was declared in the first quarter of 'twenty one.

I think this channel.

Thank all of our team and business partners for their support in this challenging period. Thanks.

Thanks, everyone with that we'd be happy to answer your question.

Yes.

Thank you ladies and gentlemen, we will now begin the question answer session for analysts only.

Should you have a question. Please press the star followed by day, one on your Touchtone phone.

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I'm only please before your first question.

And your first question is from EMEA Patel CIBC. Please go ahead.

Hey, good afternoon, congrats on another strong quarter.

Richard.

Could you could you comment on how sales has fared since the end of November.

I think we I think the trend that we have.

The last quarter continued to be strong with sales inquiries.

What about double digit so we expect that to continue for sales force.

While we don't know how long, but that will still benefit from the fact that the hardware stores or buying more because we want our suppliers from our central services and we should also see an increase.

With the manufacturers, which is.

Which is stronger than it was in a couple of quarters just to give you an idea that overhaul North America without acquisition.

The cabinet market increase.

Increased by 12% of which 15% in Canada and <unk>.

7% in the U S.

That you all would walking increased globally by two 2%.

So it's just that it's.

The U S. But we have an increase in Canada from 7%, which is positive that this market is currently.

Also we have there isn't until it's really true.

866%.

Oliver North America, just wanted to share.

17%.

Why this market is down because of the offices.

People are working from at home.

We need to necessarily certainly the offices.

One interesting aspect of it.

Sales in the other is what we call. It is the other especially online market.

This topic we have.

Two maybe two way towards.

The various market segments.

And this topic, but just to give you an idea.

But the other specialized market our sales increased by 20%.

And.

This is due to the.

The closet.

Non-GAAP, all new market Joseph market, though and we do market, that's hardware market and E. Tailers bucket that means that the investment that we have made the steel market.

We are really paying off and we see that day increase.

The increase is being very strong in those market segment.

Thanks Richard.

It's very helpful. I'm just curious.

Mario in Quebec, where maybe there is.

Late more restrictions on construction.

What impact.

Do you expect to net debt.

In fact with the construction, but what we expect though is that we see that for the hardware retailers because we have access to the U S.

Point of sales sales figures and we see that because of the restriction that the book.

The content will go back to the market, we see sales going down.

That thing should last I think at least from our out of those two or three weeks, if I remember well so that means that we fight back.

A slowdown in the sales total hardware historically these next month, because so far though they continue to buy as usual.

We see that because of those new effects from the.

The market is affected as far as our construction.

We don't see.

Customers like the cabinets.

Manufacture it without any slowdown so far things are the ones.

Yes.

Okay. Thanks, that's helpful and then Richard.

Last conference call you talked about potential for price hikes on some of the products in 2021 is that playing out.

The magnitude magnitude off of any increases and how much of the portfolio is as affected.

We are working on that actually we don't know yet what will be the magic numbers book, because we have not received.

All the price increases from our various suppliers from around the world, but we expect that cash I would say that.

Price will increase value between four and 5% the course of the next few months.

And those increases will take place on certain day.

Takes about 90 days for the hardware retailers from the manufacturers.

Most of it 80% of the market. It doesn't fly 24 hours. After we've made a decision and a few other customers that amount is not true.

We work with contract with you take some of those 60 days. So basically yes, we have said that they.

We expect that as far as we see right now.

Okay great.

Helpful.

That's all I had for now I'll I'll get back in the queue. Thanks.

Okay.

Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by day one.

Your neck with net.

Your next question is from Edward Friedman with CWT.

Mr. Franklin you May proceed.

Oh, sorry, I was on mute.

Okay.

The most the most famous sentence in 2020 I was on mute.

Sorry.

Again, congratulations for a very good strong quarter.

I have two question one is from the U S market.

Yes.

You can give some sort of an update on how the U S market behavior.

Because when I look at your results in the U S. Europe helps a little bit weaker than compared to kind of look we were just wondering if you can give an update on how the Reno market behavior in the U S, Canada and second about capital allocation. So you did an SCB of $25 million. This year and also announced another one in December given I had mentioned that you have many opportunities.

Acquisitions, which you did also in 2020 I was wondering if not better to spend the money on acquisition not to do buybacks given that your flow does not.

Enormous.

Thank you.

Regarding the U S market.

Moving on to one would've answered the second part of the question. The U S market, Yes, we don't have the growth.

In Canada the demand we go since the beginning of the Covid.

What we see the see improving in the U S.

It's hard to precisely you mentioned Watson.

What is the big difference between GAAP and U S market.

Sure.

As you will we talked as well.

It could be similar.

But the volume we go with them.

Hello.

It's increasing so basically hopefully that will continue to improve.

For the next quarter.

Good day have a different explanation.

For our next call but.

We on the right track from the U S.

That's about what I can say about that.

Yes, and if I may for the second portion of the question. So.

For sure that the priority for capital allocation is.

<unk> acquisition. So the pipeline is still healthy we have nice opportunities.

In the states and in Canada as well. So this is the priority.

We have a buyback program in place when we have opportunities to buy back <unk>.

Locks were were there and we have it.

Clearly dividend policy. So that's it's been it's been the recipe for the last demand for them in many years past many years and it's still it's still the recipe but.

For sure the priority is.

Acquisition.

Okay. Thank you.

The next question is from a K ever share National Bank. Please proceed.

Good afternoon, its actually Thomas calling in for Zachary My two main questions have been answered.

Maybe hi, if I may ask you you mentioned.

Cost saving initiatives could you give us more color on that and what you may or may not be able to retain actor.

After the pandemic.

Yes.

Our cost saving initiatives is basically yes.

In terms of our resources and also will drive a travel the travel expenses. So.

Certainly some of these expenses will come it will come back to normal, but we're still have.

Measures in place to make sure that we.

<unk> from our first of all we follow the rules, we we implement ban on travel. So those are still in place and we're going to be monitoring the.

Whats.

The different laws.

Different from various governments to make sure that we have.

We monitor this very carefully but those those.

Those cost reduction are still in place.

Okay, and Sir you mentioned that you still have to travel ban in place.

Does this make it harder for you to conduct due diligence and your AR.

In your M&A pipeline.

Good day.

Okay, we have local people almost everywhere. So people we will have our people decision is in the U S.

Go and visit the places and the rest is done by phone and teams.

Absolutely.

We've been able to close many acquisition this year so.

We have done things differently, we view as our teams that are.

That's our onsite so we've done things differently. So.

It does not stop us for.

We're making acquisition.

Plastic maybe two last from me.

Okay.

The stress and.

The higher pace of activity due to COVID-19, do you think.

Older owner operators have you seen them come forward and maybe start discussions or is it.

Unchanged and people.

Head down and keep working.

No not yet.

Basically there are like I said the pipeline is still there is still healthy.

Just describe might happen, but not necessarily right away because it's not necessarily that time to to sell your business.

Youll want to rebuild did but.

We think that probably some some owners will have enough and we'll decide to.

That they don't want to live that again and to start the discussion with us.

Like we've seen in 2910 11. After this period, we've seen a lot of of acquisition in the mainly in the U S. So.

This could this could happen again, but as as we speak this did not happen yet.

Okay, and maybe my last one we've seen some some activity with bigger deals in the industry.

As you.

You received any inbound interest tier two to be acquired.

[laughter].

No no.

Not really no.

I think I'd look at it another quick follow looking at retail.

Of interest, but I didn't get it because of you that it contributes very well evaluate the markets.

And and the future remains great share you would continue to be on this one as we all know I think thats the best way to go.

One of them is going to happen in the quarter from 'twenty to 'twenty one than assets.

You've seen in <unk>.

The first price that we have today.

We've always been successful.

Moving on after the crisis I think all the questions from the unforeseen contribute we.

We really have the feeling that we did we're gaining market share because we have.

Continue the best our best effort to maintain very high service for our customers all our warehouse sales are quite good together.

If a customer needs a product where the problem is we made sure that the.

Question over to receive the product as quick as possible.

Not all but many suppliers that could achieve some.

Im good deliveries like where do we attribute to the market. We don't we don't we don't.

Don't try to save any effort to satisfy our customer our warehouses.

All connected together so the customer might be in day in Boston. The circuits that are available in Boston that is going to come for from Detroit could come from Trump all from Montreal as well if necessary. So that does result in increased sales and increase of loyalty from our customers and we keep gaining customers so and that should continue on the months.

Okay.

And I think that's all I had thank you very much.

Thanks.

Ladies and gentlemen, as a reminder, should you have a question. Please press the star followed by day one.

There are no further questions at this time you May proceed.

There's no more question, we'd like to thank you very much for your support your good questions and hopefully we're going to you're going to have to.

Another chance to talk to you soon maybe to meet you. Soon eventually so thanks, a lot and have a nicely.

Ladies and gentlemen, this concludes your conference call for today.

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Yes.

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