Q2 2024 Richelieu Hardware Ltd Earnings Call
Good afternoon ladies and gentlemen and welcome to Richelieu Hardware's second quarter results conference call. At this time, all lines are now disconnected.
Operator: Second Quarter Results, Conference Call.
Operator: second quarter results conference call. At this time, all lines are on a silent mode. Following the presentation, we'll conduct a question and answer session which will be restricted to analysts only.
Operator: At this time, all lines on other Somal news.
Operator: Following the presentation, we'll conduct a question-and-answer session, which will be restricted to analysts only. At any time during this call, you require immediate assistance, please press the star zero for the operator.
Following the presentation, we'll conduct a question and answer session, which will be restricted to analysts only. If at any time during this call you require immediate assistance, please press star zero for the operator.
Operator: If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on July 11, 2024. If you need assistance during the call, press star and zero. Please note that this call was recorded on July 11, 2024. I would now like to give the floor to Mr. Richard Lord, President and Chief Executive Officer. The floor is yours.
Operator: This call is being recorded on July 11, 2020-24. If you need assistance, please press the star zero for the operator. Please take note that this call will be recorded on July 11, 2020-24.
This call is being recorded on July 11th, 2024.
Antoine Auclair: Good morning, ladies and gentlemen, and welcome to the second quarter results of fiscal year 2024 for Richelieu Hardware. Currently, your lines are in listen-only mode. Following the presentation, we will proceed to a question and answer period which will be restricted to analysts only.
Speaker Change: If you need assistance during the call, press star and zero. Please note that this call is being recorded on July 11, 2024. I would now like to turn the call over to Mr. Richard Lord, President and CEO . The floor is yours.
Operator: I would like to now proceed with the question and answer session.
Richard Lord: Merci. Thank you.
Operator: Thank you.
Richard Lord: Good afternoon, ladies and gentlemen. And welcome to the issue use conference call for the second quarter and first half ended May 31, 2020-24.
Speaker Change: Merci, thank you. Good afternoon, ladies and gentlemen, and welcome to Richelieu's conference call for the second quarter and first half ended May 31st, 2024.
Richard Lord: Good afternoon, ladies and gentlemen, and welcome to Richelieu's conference call for the second quarter and first half ended May 31st, 2024. 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 filing. We continue to make good progress 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.
Richard Lord: With me, is Antoine Auclair, CFO? As usual, know that some of these 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 not only to the valuable contribution of our acquisitions, the strong support of our market development strategy, and our value adult service. As a result, we achieve an increase in sales over the competitive quarter of 2020-23, which is appreciable in the current market condition. This rise reflects the good performance in our manufacturer's market, especially in the U.S.
Speaker Change: With me is Antoine Auclair, CFO .
Speaker Change: 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.
Speaker Change: We continue to make good advances in the second quarter, thanks not only to the valuable contribution of our acquisitions, the strong support of our market development strategy and our value-added service.
Richard Lord: As a result, we achieved an increase in sales over the competitive quarter of 2023, which is appreciable in the current market conditions. This rise reflects the good performance of our manufacturer's market, especially in the U.S., with a growth of 8.7% in the quarter. Our sales to retailers and renovations of our stores were done in Canada and the U.S., resulting from a softer market and the impact of some price reductions. Nevertheless, we are currently working on many interesting projects with retail customers that will generate additional sales in the coming period.
Speaker Change: 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 US, with a growth of 8.7% in the quarter.
Richard Lord: with a growth of 8.7 percent in the quarter. Our sales retailers, annual renovations per source, were done in Canada and U.S. resulting from a soft-term 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 standardization 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 this investment that we are implemented to better service customers, support our growth, and access new territories.
Speaker Change: Our safe-to-retailers and renovation superstores were done in Canada and US, resulting from a softer market and the impact of some price reduction.
Speaker Change: Nevertheless, we are currently working on many interesting projects with retail customers that will generate additional sales in the coming periods.
Richard Lord: In addition, the centralization projects in Western and Eastern Canada will continue to support our growth in this market. We will also focus on the ramp-up and development of our centers, which we are expanding and modernizing in 2023. We are happy with these investments that were implemented to better serve our customers, support our growth, and access new territories. We already see a significant increase in sales versus last year in all of these projects. And now I hand it over to Antoine for the financial review of the quarter and first half.
Speaker Change: In addition, the centralization projects in Western and Eastern Canada will continue to support our growth in this market.
Speaker Change: We also focus on the ramp-up and development of our centers that we were expanding and modernizing in 2023.
Speaker Change: We are happy with these investments that were implemented to better service our customers, support our growth and access new territories.
Richard Lord: We already see a significant increase in sales versus last year in all of these projects.
Speaker Change: We already see significant increase in sales versus last year in all of these projects.
Antoine Auclair: I now end it over to Antoine for the financial review of the quarter and first F.
Speaker Change: I now hand it over to Antoine for the financial review of the quarter and first half.
Antoine Auclair: 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% was an 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. dollars, up 6.1%.
Antoine Auclair: Thanks, Richard. Second quarter sales reached 407 million, up 2 percent, resulting from a positive contribution from the acquisition of 2.7 percent and an internal decrease of 0.7 percent. In Canada, sales amounted to 276 million, down 1.1 percent, of which 2.8 from internal decrease, partially offset by a 1.7 percent positive contribution from acquisitions. Sales to manufacturer reached 132 million, up 0.9 percent, and for the hardware retailers, sales to put at 44 million, down 10.6 percent. In the U.S., sales grew to $150 million in U.S. dollars, up to 6.1%. Sales to manufacturers reached $143 million in U.S.
Antoine Auclair: 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%.
Antoine Auclair: 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.
Antoine Auclair: Sales to manufacturers reached $232 million, up 0.9%, and for the hardware retailers, sales stood at $44 million, down 10.6%.
Antoine Auclair: In the U.S., sales grew to $150 million in U.S. dollars, up 6.1%.
Antoine Auclair: Sales to manufacturers reached $143 million in U.S. dollars, up 8.7%. In the 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%.
Antoine Auclair: dollars, up to 8.7%. In hardware retailers and renovations super stores market, sales reached $7.4 million, down to $2.9 million. In Canadian dollars, total sales in the U.S. reached $205 million in increase of 6.5%. For the first half, sales reached $888 million, up 1.5%, of which 0.5% from internal decrease of set 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 renovations super stores reached $88.2 million compared to $94.6 million, down 6.8%.
Antoine Auclair: Sales to manufacturers reached $143 million in U.S. dollars, up 8.7%. In hardware retailers and renovation superstores market, sales reached $7.4 million, down $2.9 million.
Antoine Auclair: In Canadian dollars, total sales in the U.S. reached $205 million, an increase of 6.5%.
Antoine Auclair: For the first half, sales reached $888 million, up 1.5%, of which 0.5% was from an 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% was from an 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% came from internal growth and 2.3% from acquisition.
Antoine Auclair: For the first half, sales reached $888 million, up 1.5%, of which 0.5% from internal decrease, offset by 2% from acquisition.
Antoine Auclair: 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 acquisitions.
Antoine Auclair: Sales to manufacturers reached $420 million, up $4.3 million or 1%.
Antoine Auclair: Sale to hardware retailers and renovation superstores reached 88.2 million compared to 94.6 million down 6.8%.
Antoine Auclair: In the U.S., sales amounted to $280 million in U.S. dollars, up 4%, of which 1.7% from internal growth and 3.3% from acquisition. The 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 renovations super stores were down 14% compared to last year.
Antoine Auclair: 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 acquisition.
Antoine Auclair: They reached $380 million in Canadian dollars, up 4.2%, accounting for 43% of total sales. Sales to manufacturers totaled US$264 million, an increase of US$13.5 million, or 5.4%, of which 2.9% from internal growth and 2.5% from acquisition. Sales to hardware retailers and renovation superstores were down 14% compared to last year.
Antoine Auclair: They reached $380 million in Canadian dollars, up 4.2%, accounting for 43% of total sales.
Antoine Auclair: Sales to manufacturers totaled US$264 million, an increase of US$13.5 million or 5.4%, of which 2.9% from internal growth and 2.5% from acquisitions.
Antoine Auclair: Sales to hardware retailers and renovation superstores were down 14% compared to last year.
Antoine Auclair: Second quarter a bit that reached $53.8 million, down 7.7 million or 12.6% over last year.
Antoine Auclair: Second quarter EBITDA reached $53.8M, down $7.7M or 12.6% over last year. Growth and EBITDA margins continue to be under pressure due to temporary factors, including inventories at higher than current purchasing costs, lower selling prices for certain products originating mainly from Asia, plus the temporary impact resulting from the expansion project. Consequently, EBITDA margins stood at 11.2% compared to 13% last year. First half EBITDA reached $94.2M, down 14.8%. As for the EBITDA margin, it stood at 10.6% compared to 12.6% last year.
Antoine Auclair: Second quarter EBITDA reached $53.8M down $7.7M or 12.6% over last year.
Antoine Auclair: Growth and a bit of margins continued to be under pressure due to temporary factors, including inventories that hired and current purchasing costs, lower selling price for certain product 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.
Antoine Auclair: Growth and EBITDA margins continue 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.
Antoine Auclair: Consequently, EBITDA margins stood at 11.2% compared to 13% last year.
Antoine Auclair: First half a bit that reached $94.2 million, down 14.8%. As for 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 our marketization resulting from new business acquisitions and expansion projects. Net earnings per share were 42 cents compared to 55 cents last year; the increase of 23.6%. First half net earnings attributable to shareholders reached $38.7 million, down 27.2%. By the two net earnings per shares stood at 69 cents compared to 95 cents last year. Cash flows from operating activities before net change in non-cash working capital balances was $45.1 million compared to $50.8 million last year.
Antoine Auclair: 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.
Antoine Auclair: Second quarter net earnings attributable to shareholders totaled $23.4M, down 23.7% mainly due to amortization resulting from new business acquisitions and expansion projects. Net earnings per share were $0.42 compared to $0.55 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 were $45.1 million compared to $50.8 million last year. Net change in non-cash working capital items generated a cash inflow of $10.7 million. Inventories continue to reduce as planned, with a positive effect of $22M this quarter.
Antoine Auclair: 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.
Antoine Auclair: Net earnings per share were $0.42 compared to $0.55 last year, a decrease of 23.6%.
Antoine Auclair: First half net earnings attributable to shareholders reached $38.7 million, down 27.2%.
Antoine Auclair: diluted net earnings per share stood at 69 cents compared to 95 cents last year
Antoine Auclair: Cash flows from operating activities before net change in non-cash working capital balances was $45.1 million compared to $50.8 million last year.
Antoine Auclair: Net change in non-cash working capital items generated a cash flow of $10.7 million. In inventories continued to reduce as planned. 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.
Antoine Auclair: Net change in non-cash working capital items generated a cash inflow of $10.7 million.
Antoine Auclair: Inventories continue to reduce as planned with a positive effect of $22 million this quarter.
Antoine Auclair: 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 2020. 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 a lease obligation of $10 million, distributed dividends of $8.4 million, and paid interest on a bank overdraft of $700,000.
Antoine Auclair: 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.
Antoine Auclair: 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.
Antoine Auclair: For the second quarter, financing activities use 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 in common shares for $18.6 million.
Antoine Auclair: 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.
Antoine Auclair: During the quarter, we also repurchased $481,000 of common stock for $18.6 million. First half financing activities use cash flow of $57.6M compared to $39.8M in 2020. During the first half, we invested $36.2 million, $17 million for the three business acquisitions, 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.
Speaker Change: During the quarter, we also repurchased $481,000 common share for $18.6 million.
Antoine Auclair: First half financing activities use cash flow of $57.6 million compared to $39.8 million in 2023.
Speaker Change: First half financing activities use cash flow of $57.6M compared to $39.8M in 2023.
Antoine Auclair: During the first half, we invested $36.2 million, $17 million for the three business acquisitions, and $19.2 million primarily for investment related to the consolidation of our new Calgary warehouse and the purchase of equipment to maintain and improve operational efficiency.
Speaker Change: During the first half, we invested $36.2 million, $17 million for the three business acquisitions, 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.
Antoine Auclair: 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 $1,000, and almost know that.
Speaker Change: 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.
Richard Lord: I now turn it over to Richard.
Richard Lord: Thank you, one.
Richard Lord: Thank you, Antoine. First, I'd like to say something about the situation in our Montreal warehouse, where 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. However, it has to be noted that the strike affects just one of our 114 distribution centers and a small portion of our 3,000 employees.
Richard Lord: First, I'd like to see 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 local customers continue to be served thanks to the contingency plan we have put in place. It has to be noted that the strike effects just one of our 114 dissolution centers and a small portion of our 3,000 employees. We are confident that a mutually beneficial agreement will be reached very soon.
Speaker Change: I now turn it over to Richard.
Richard Lord: 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.
Richard Lord: 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.
Richard Lord: It has to be noted that the strike affects 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.
Richard Lord: 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 the growth of our manufacturer's market, in addition to centralizing the distribution of all products for retailers in Western Canada. As well, we will pursue our projects undertaken in the second quarter regarding the consideration of our distribution activities for retailers in Ontario and Eastern Canada.
Richard Lord: To conclude, we will continue to focus on the development of our expanded and modernized dissolution centers in the US, as well as our new Calgary location, which enables us to effectively support word of our manufacturer's market in addition to centralizing the dissolution of all products for retailers in Western Canada. As well, we will pursue our projects undertaken in the second quarter regarding the consideration of our dissolution 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 US.
Richard Lord: To conclude, we will 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.
Richard Lord: of our manufacturer's market, in addition to centralizing the distribution of all products for retailers in Western Canada.
Richard Lord: As well, we will pursue our projects undertaken in the second quarter regarding the consideration of our distribution activities for retailers in Ontario and Eastern Canada.
Richard Lord: 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.
Richard Lord: 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.
Richard Lord: Our focus is on profitable growth. This means keeping tight control over our costs and pursuing our winning strategies of innovation, service, and acquisition.
Speaker Change: 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 and I'll be happy to answer your questions.
Operator: Thanks, everyone, but now we're happy to answer your question. Thank you, ladies and gentlemen. Should you have a question? Please press star one on your telephone keypad. If you'd like to have a question, please press star two. One moment, please, for your first question.
Operator: Ladies and gentlemen, should you have a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. One moment please for your first question. Your first question comes from Amir Patel from CIBC Capital Markets. Please go ahead.
Speaker Change: Thank you. Ladies and gentlemen, should you have a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. One moment please for your first question.
Zachary Evershed: Your first question comes from Amar Patel from CBC Capital Markets. Please go ahead.
Speaker Change: Your first question comes from Amir Patel from CIBC Capital Markets. Please go ahead. Hi, good afternoon.
Hamir Patel: Hi, good afternoon. Richard, are you able to share how your year-over-year sales are tracking in Q3 so far for both manufacturers and retailers?
Richard Lord: Hi, good afternoon. Are you able to share how your sales are tracking? in Q3 to date for both manufacturers and retailers? Yes, let me get my report. I have that not very far from me. Regarding the kitchen cabinet market, we have flat compared to last year, which is a positive sign. The kitchen cabinet manufacturers represent our 30% of our sales. Interesting to mention that the commercial renovation, which consists of mid-work and commercial projects, is increasing by in total by 4.3%. Including 6% in the U.S., that's very positive. Although a specialized market that is including the what we call the market here, we are up by 5% all over North America.
Hamir Patel: Richard, are you able to share how your year-over-year sales are tracking in Q3 to date for both manufacturers and retailers?
Richard Lord: Yes, let me get my report. Regarding the kitchen cabinet market, we are flat compared to last year, which is a positive sign. Kitchen cabinet manufacturers represent about 40% of our sales. It's interesting to mention that commercial innovation, which consists of mid-work and commercial projects, is increasing in total by 4.3%, including 6% in the U.S. That's very positive. In our specialized market, which includes the closet market here, we are up by 5% all over North America.
Hamir Patel: Yes, let me get my report.
Speaker Change: I have that, it's not very far from me.
Speaker Change: Regarding the kitchen cabinet market, we are flat compared to last year, which is a positive sign. Kitchen cabinet manufacturers represent about 40% of our sales.
Richard Lord: Interesting to mention that the commercial innovation which consists of the millwork and commercial projects is increasing by in total by 4.3% including 6% in the US. That's very positive.
Richard Lord: other specialized market that is including
Richard Lord: So it's pretty positive. And we see the downside on the door, and we do manufacturers, which is typically related to the new construction. And the residential and office furniture that are down from many years on that we know about the office furniture maybe because of the people working from home. So basically, these are a positive sign that our manufacturer's market is behaving quite well.
Richard Lord: So it's pretty positive, and we see the downside, though, on the door and window manufacturers, which is typically related to new construction, and the residential and office furniture, which is down for many reasons that we know about. Office furniture may be because of people working from home.
Richard Lord: And we see the downside though on the door and window manufacturers, which is typically related to the new construction.
Speaker Change: and the residential and office furniture that are down for many reasons that we know about. The office furniture may be because of the people working from home. So basically, these are positive signs that our manufacturer's market is behaving quite well. The retailers, as a matter of fact, remains down, but we expect this market to improve. Because of the many projects that we have undertaken with many of our retail customers, we have new products that came out in the Home Depot stores in Canada three months ago. We have new projects with Home Depot that will...
Richard Lord: So basically, these are positive signs that our manufacturer's market is behaving quite well. The retailer's, as a matter of fact, remains down, but we expect this market to improve because of the many projects that we have undertaken with many of our retail customers. We have new products that came out in the Home Depot stores in Canada three months ago. We have new projects with Home Depot that will be delivered next fall, October, and November. We have many new projects with Rona.
Richard Lord: The retailers, as a matter of fact, remain down, but we expect this market to improve because of the many projects that we have undertaken with many of our retail customers. We have new products that came out in the Home Depot stores in Canada three months ago. We have a new project with Home Depot that will be delivered next fall, I mean November. Many new projects with the Rona. Now that Rona, you know that they have a new executive that has taken place and a new president, new vice president. So basically their mandate is to revive that company that has been, I would say, sleeping for a few years because of what you knew that those were wanted to sell its operation in Canada.
Speaker Change: will be delivered, you know, next fall, I mean, October, November. Many new projects with RONA. Now that RONA, you know, they have a new executive that has taken place, a new president, new vice president. So basically, their mandate is to revive that company that has been...
Richard Lord: Now Rona, you know that they have a new executive that has taken place, a new president, and a new vice president. So basically, their mandate is to revive that company that has been, I would say, sleeping for a few years because of what you know that Rona wanted to sell its operation in Canada. So basically, we have many positive signs that give us a clear demonstration that the future looks great for retailers in Canada.
Richard Lord: So basically we have many positive signs that give us a clear demonstration that the future looks great with the retailers in Canada. In the US, unfortunately, our sales are down because we have lost one customer, but we are in the process of compensating those sales, those lost sales with new customers. What happened with the customers I'm talking about is because they have decided to buy their own products overseas. That's their choice. We don't think it's a good choice, but this is what they have decided. But we think before the end of the year, we should have recaptured that business with other customers.
Speaker Change: Give us a clear demonstration that the future looks great with the retailers in Canada. In the U.S., unfortunately, our sales are down because we have lost one customer.
Richard Lord: In the U.S., unfortunately, our sales are down because we have lost one customer, but we are in the process of compensating for those lost sales with new customers. What happened with the customers I'm talking about is that they decided to buy their own products overseas. That's their choice. We don't think it's a good choice, but this is what they have decided. But we think before the end of the year, we should have recaptured that business with other customers.
Speaker Change: What happened with the customers I'm talking about is because they have decided to buy their own products overseas. That's their choice. We don't think it's a good choice, but this is what they have decided. But we think before the end of the year we should have recaptured that business with other customers.
Antoine Auclair: And Amir, that's pretty much what we've been seeing since the beginning of Q3 as well, so the trend is pretty similar so far.
Richard Lord: And I made that pretty much what we're seeing since the beginning of Q3 as well. So the trend is pretty similar so far.
Speaker Change: And Amir, that's pretty much what we're seeing since the beginning of Q3 as well, so the trend is pretty similar so far.
Hamir Patel: Thanks, Antoine. Richard, that customer you mentioned that you lost in the U.S., was that a retail customer?
Richard Lord: Okay, thanks.
Richard Lord: So thank you.
Zachary Evershed: And Richard, that customer you mentioned that you lost in the US, is that that was a retailer customer? Yeah, you're sharing that customer. Yes, yes.
Speaker Change: Thanks Antoine. Richard, that customer you mentioned that you lost in the US, was that a retailer customer? Yes, it was a retailer customer. I was talking about the retail market.
Richard Lord: Yes, yes, I was talking about the retail market. Yes.
Richard Lord: Now what's talking about the retail market? Yes.
Zachary Evershed: Perfect.
Zachary Evershed: And all the figures that you ran to appreciate all that was that organic or is that benefiting organic only, organic only, nothing including any acquisition. Okay, now that's three helpful.
Speaker Change: perfect and all the figures that you you ran through appreciate all that was that organic or is that kind of organic only organic only no and not including any acquisitions
Hamir Patel: perfect, and all the figures that you ran through appreciate all that was that organic, or is that kind of organic only organic, only, and not including any acquisitions? Okay, that's very helpful. And then Richard, just turning to, you know, in Q2, you had a 0.7% organic decline. How much of that was weaker volumes? And how much was, maybe, some price deflation? Because I know you highlighted pricing on products from Asia, where we're down a bit. I will let Antoine...
Zachary Evershed: And then Richard, just turning to, you know, in Q2, you had a 0.7% organic decline. How much of that was weaker volumes? And how much was maybe some price deflation? Because I know you highlighted pricing on products from Asia, where we're down.
Speaker Change: Okay, now that's very helpful. And then Richard, just turning to, you know, in Q2 you had a 0.7%...
Richard Lord: organic decline how much of that was weaker volumes and how much was maybe some price deflation because I know you highlighted pricing on products from Asia where we're down a bit
Richard Lord: I will let him try. If you go a bit more in detail, if you look at the reduction in the retail business in Canada, it's pretty much coming all of it from price reduction. The rest, we have some price reduction in the industrial business but not necessarily material, but the one big ticket item regarding price reduction hits the retail business in Canada and it's pretty much all coming from there. Mainly for the product that we are importing from Asia. Okay, so the volumes were pretty stable, year-rear? Yeah, in quantity of the product sold is stable.
Antoine Auclair: If you go a bit more in detail, if you look at the reduction in... in the retail business in Canada, it's pretty much coming, all of it, from price reductions. The rest, we have some price reductions in the industrial business, but not necessarily material, but the one big ticket item regarding price reductions hits the retail business in Canada, and it's pretty much all coming from there, mainly for the products that we are importing from Asia.
Speaker Change: If you go a bit more in detail, if you look at the reduction in the
Richard Lord: In the retail business in Canada, it's pretty much coming, all of it, from price reduction. The rest, we have some price reduction in the industrial business, but not necessarily material.
Richard Lord: The one big ticket item regarding price reduction hits the retail business in Canada and it's pretty much all coming from there. Mainly for the products that we are importing from Asia.
Antoine Auclair: Okay, so the volumes are...
Antoine Auclair: Yeah, in the quantity of products...
Richard Lord: Okay, so the volumes are pretty stable year-over-year? Yeah, in quantity of products sold, it's stable.
Richard Lord: Okay, and Richard, as you look out over the next 18 months, I know Asia is a small piece of your product mix, but are you seeing any signs of perhaps upward price momentum? Because I think for most of your products, there hasn't been any price increases for some time. You're absolutely right.
Richard Lord: Richard, as you look out over the next 18 months, I know Asia is a small piece of your product mix, but are you seeing any signs of perhaps upward price momentum? I think for most of your products, there haven't been any price increases for some time.
Richard Lord: Richard, as you look out over the next 18 months, I know Asia is a small piece of your product mix, but are you seeing any signs of perhaps upward price momentum, because I think for most of your products there hasn't been any price increases for some time.
Richard Lord: You're absolutely right, and the operating costs continue to increase, the salary continues to increase, as well as the price of the rents, and the leases that we have to pay. I feel that the market will start to increase its prices, mainly the products from Europe and from America should start to increase. We've seen that with the finishing products, the lacquers, and what we call the paint for the wood products that we sell. So we had our first price increase last month, and I expect that North American products and European products will start to increase early next year. That's not only a hope.
Richard Lord: I'll put it in question to increase the salary. We continue to increase as well as the price of the rents and the leases that we have to pay. We feel that the market will start to increase. It's pricing; mainly, the product from Europe and from America should start to increase. We've seen that with the finishing product, the lacquers and what we call the paint for the wood product that we sell. So we had our first price increase last month. And I expect that the North American products and the European products will start to increase early next year.
Richard Lord: You're absolutely right, and the operating costs continue to increase, the salary continues to increase as well.
Richard Lord: that we have to pay. I feel that the market will start to increase its pricing, mainly the product from Europe and from America should start to increase. We've seen that with the finishing products, the lacquers and what we call the paint for the wood product that we sell.
Richard Lord: So we had our first price increase last month and expect that the North American products and European products will start to increase.
Richard Lord: That's not only a whole thing; I think. These guys also have the operating cost increasing, and they're going to have to do something. Asia is still slow. The only problem with Asia is that they are not much to do as we speak. So they don't increase their price, but that could change very quickly. And return if you see price increases on the Europe and Asia products. Are you getting a sign from your suppliers as to the scale of those increases that they might be looking to realize? Not yet. I wasn't breathing with an important customer a couple of days ago, which is blue, which is a huge supplier.
Richard Lord: I think these guys also have their operating costs increasing, and they're going to have to do something. Asia is still slow. The only problem with Asia is that they haven't got much to do as we speak, so they don't increase their prices.
Richard Lord: early next year. That's not only a hope, I think these guys also have their operating costs increasing and they're going to have to do something. Asia is still slow. The only problem with Asia is that they have not much to do as we speak, so they don't increase their price, but that could change very quickly.
Richard Lord: And Richard, if you see price increases on European and Asian products, are you getting a sign from your suppliers as to the scale of those increases that they might be looking to achieve? Not yet.
Richard Lord: Richard, if you see price increases on the Europe and Asia products, are you getting a sign from your suppliers as to the scale of those increases that they might be looking to realize? Not yet. I was meeting with an important customer.
Richard Lord: I was meeting with an important customer a couple of days ago, which is Bloom, which is a huge supplier. They have a price increase in mind, but they would not put any number on the table as we speak. So basically, I cannot answer that question clearly. Okay, fair enough. That's all I have for now.
Richard Lord: a couple of days ago, which is Bloom, which is a huge supplier. They have a price increase in mind, but they would not put any number on the table as we speak. So basically, I cannot answer clearly that question.
Richard Lord: They have a price increase in mind, but they would not say I put that in number on the table as we speak. So basically, I kind of answer if you need that question. Okay.
Zachary Evershed: Fair enough. But that's all I had for now.
Speaker Change: Okay, fair enough. That's all I had for now. I'll get back in the queue. Thanks.
Zachary Evershed: I'll get back in the queue. Thanks.
Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star 1. Your next question comes from Zachary Evershed from National Bank Financial.
Operator: Ladies and gentlemen, as a reminder, should you have a question? Please press star one.
Speaker Change: Ladies and gentlemen, as a reminder, should you have a question, please press star 1.
Zachary Evershed: The next question comes from Zachary Evershed from National Bank Financial. Please go ahead.
Zachary Evershed: Please go ahead. Thank you. Congratulations.
Speaker Change: Your next question comes from Zachary Evershed from National Bank Financial. Please go ahead.
Zachary Evershed: Thank you, congratulations on the quarter everyone. Thank you, thank you. In terms of the rationalization of the cost base that you guys are entertaining in Eastern Canada and Ontario, can you give us a breakdown of the cost savings that you're expecting, perhaps by bucket?
Zachary Evershed: Thank you. Congrats on the quarter, everyone.
Zachary Evershed: Thank you. In terms of the rationalization of the cost base that you guys are entertaining in Eastern Canada and Ontario, can you give us a break down on the cost savings that you're expecting, perhaps by bucket? What's saving is important.
Zachary Evershed: Thank you. Congrats on the quarter, everyone.
Zachary Evershed: Thank you. Thank you.
Zachary Evershed: In terms of the rationalization of the cost base that you guys are entertaining in Eastern Canada and Ontario, can you give us a breakdown of the cost savings that you're expecting, perhaps by bucket?
Richard Lord: Cost saving is important; I will let Antoine answer that question, but I would like to make a few comments regarding the effect on our customers. Because what we are doing, we're centralizing some distribution centers that are mainly servicing the hardware retailers. In the retail market, Richelieu's got something like six different product lines, which, as we speak, are distributed through six different warehouses because they are the result of many acquisitions that we've made in the past.
Richard Lord: I would let Antoine answer that question, but I would say I would like to make a few comments regarding the effect on our customers. Because what we are doing with centralizing some some dissolution center that are mainly servicing to have way retailers in the retail market. You should use got something like six different public line, which as we speak, have distributed to six different warehouses because we have these. These are the results of many acquisitions that we made in the past. So, when we centralize that, what we do for the customer, for the small customers, because at the retail business, we sell to our owner, for example, to Home Depot and Home Hardware and those customers.
Zachary Evershed: Cost saving is important, I would let Antoine answer that question, but I would like to make a few comments regarding the effect on our customers.
Antoine Auclair: Because what we are doing, we are centralizing some distribution centers that are mainly servicing the hardware retailers.
Speaker Change: In the retail market, Richelieu's got something like six different product lines, which as we speak, are distributed through six different warehouses, because these are the result of many acquisitions that we've made in the past.
Richard Lord: So when we centralize that, what we do for the customers, for the small customers, because in the retail business, we sell to Rona, for example, to Home Depot, and to Home Hardware, and those customers buy through their distribution centers, which is easy, and can be shipped from any warehouse. But for the small customers that want to place a purchase order at Richelieu, we have six different products coming from six different warehouses. That means that we have six different prepaid plans.
Speaker Change: So, when we centralize that, what we do for the small customers, because at the retail business we sell to Rona, for example, to Home Depot and Home Hardware and those customers.
Richard Lord: They buy through their dissolution centers, which is easy. It can be shipped from anywhere else, but for the small customers that want to make a place a purchase order at Richelieu, we have six different products coming from six different warehouses that mean that we have six different prepaid in order to have their freight for free. They have to buy five hundred dollar each of the border client. So, which is a burden for the small customers? So, now since we combine everything at the same place, the same prepaid order, you know, five hundred dollar applies for all the products.
Speaker Change: They buy through their distribution centers, which is easy, can be shipped from any warehouse. But for the small customers that want to place a purchase order at Richelieu, we have six different products coming from six different warehouses. That means that we have six different prepaid in order to have their...
Richard Lord: In order to have their freight for free, they have to buy $500 worth of each of the product lines, which is a burden for the small customers. So now, since we combine everything at the same place, the same prepaid order, $500, applies to all the products. So that will create more sales because customers don't have that benefit from others or from our competitors, and it will make their life easier in order to manage their stores.
Speaker Change: They're afraid for free, they have to buy $500 each for the product line. So which is a burden, you know, for the small customers. So now, since we combine everything at the same place...
Richard Lord: So, that will create more sales because the customers, they don't have that benefit from other from our competitors. And it will make their life easier for in order to manage their stores. And it will save money, as we will, because while combining those dissolution centers, we save on operating costs, and we save on the product ending and everything else. Because we still use the same source, the difference would be in the labor force in the warehouse, not one. Regarding cost reduction, that we're talking about close to 1.5 million in terms of a reduction in cost.
Speaker Change: The same prepaid order, you know, $500 applies for all the products, so that will create more sales because the customers, they don't have that benefit from others, from our competitors.
Speaker Change: And they will make their life easier in order to manage their stores, and they will save money as we will, because by combining those distribution centers, we save on operating costs and we save on product handling and everything else, because we still use the same sales force. The difference would be in the labor force in the warehouse.
Richard Lord: We will save money, as we will because, by combining those distribution centers, we save on operating costs, and we save on product handling and everything else because we still use the same sales force. The difference would be in the labor force in the warehouse.
Antoine Auclair: Regarding cost reduction, Zach, we're talking about close to 1.5 million in terms of a reduction in costs and another 1.5 when we'll be able to exit the location that we're in, so that should be happening before now and the end of the year, so close to 3 million next year.
Speaker Change: Regarding cost reduction, Zach, we're talking about close to 1.5 million in terms of
Richard Lord: And another 1.5, when we'll be able to exit the location that we're in, so that should be happening before now on the end of the year. So, close to 3 million. Next year, and those are annual numbers, now quarterly, right? Yeah, annual numbers.
Speaker Change: reduction in costs and another 1.5 when we'll be able to exit the location that we're in so that should be happening before now and the end of the year so close to 3 million.
Antoine Auclair: Next year. And those are annual numbers, not quarterly numbers, right? Yeah, annual numbers. Perfect. And then would you be able to quantify the dollar impact of the strike in Montreal, or would it not be material?
Speaker Change: next year. Those are annual numbers, not quarterly, right? Annual numbers.
Zachary Evershed: Perfect.
Richard Lord: And then would you be able to quantify the dollar impact of the strike in Montreal, or would it not be material? We don't think it would be material. We don't have any; first of all, that said, it would be fixed very shortly. And we don't see a; that should be very detrimental to our sale because we, the contingency plan is very effective. And we have used, you know, our Mississauga or Ottawa or Quebec or Monkton and Nova Scotia warehouse in order to continue to serve a customer effectively. The known, you know, nice people here were working in the warehouse in Montreal.
Speaker Change: Perfect.
Zach: Would you be able to quantify the dollar impact of the strike in Montreal, or would it not be material?
Richard Lord: We don't think it will be material. We don't have any... First of all, I said that it would be fixed very shortly, to see the auto store and the conveyors running and getting the boxes out of that warehouse. So we don't expect any huge benefits, but it's still early to evaluate all the impacts. Antoine, what do you think? No, no, you're correct. We were monitoring the lines shipped all across our network versus what we were shipping before, so we haven't seen a major impact. There will be a small impact, of course, that's for sure, but nothing material from our point of view.
Antoine Auclair: That's helpful, thanks. And then my line did cut out for a moment, so apologies if this has already been asked, but have your expectations for margin levels for 2024 changed at this point in time?
Zach: We don't think it will be material, we don't have any, first of all I said that it will be fixed very shortly.
Speaker Change: and we don't see a that should be very detrimental to our sale because we
Speaker Change: The contingency plan is very effective and we have used Mississauga, Ottawa, Quebec, Moncton and Nova Scotia warehouses in order to continue to serve our customers effectively. The non-unionized people here who are working in the warehouse in Montreal, they did a fantastic job.
Richard Lord: They did a fantastic job. These guys are efficient. They have learned very fast how to do the job. And it was amazing to see the author saw and the conveyors running and getting the boxes out of that warehouse.
Speaker Change: These guys are efficient. They have learned very fast how to do the job. It was amazing to see the auto store and the conveyors running and getting the boxes out of that warehouse.
Antoine Auclair: So we don't expect any use benefit, but it's still early to evaluate the audience packs.
Speaker Change: So, we don't expect any huge benefit, but it's still early to evaluate all the impacts, Antoine, what do you think? No, no, you're correct. We were...
Antoine Auclair: Antoine, what do you think? No, you're correct. We were, we were monitoring the lines, shipped all across our network. So versus what we were shipping before. So, we haven't seen major impact. That will be a small impact. Of course, that's for sure, but nothing material for, from our point of view as we speak.
Speaker Change: We were monitoring the lines shipped all across our network versus what we were shipping before. So we haven't seen major impact. There will be a small impact, of course, that's for sure, but nothing material from our point of view as we speak.
Zachary Evershed: That's a full thanks.
Zachary Evershed: And then my line did cut out for a moment. So apologies if this has already been asked.
Speaker Change: That's helpful, thanks. And then my line did cut out for a moment, so apologies if this has already been asked, but have your expectations for margin levels for 2024 changed at this point in time?
Antoine Auclair: But have your expectations for margin levels for 2024 changed at this point in time? So as you can see, second quarter is pretty aligned with the, with the first quarter. The gap between them, the, the, the margin last year reduced in the second quarter. So what's going to reduce as well in the third and the fourth quarter? It's going to; it's going to improve. The second half should be better than the, than the first half. That's for sure.
Antoine Auclair: So, as you can see, the second quarter is pretty aligned with the first quarter. The gap between the EBITDA margin last year and this year has reduced in the second quarter, so it's going to reduce as well in the third and the fourth quarter. It's going to improve. The second half should be better.
Speaker Change: And there are no further questions at this time. I will turn the call back over to Hicham Lal for closing remarks.
Hicham Lal: No more questions? Thanks again. It's always a pleasure to talk to you. Do not hesitate to contact us for more information. Thank you very much. Have a good afternoon.
Antoine Auclair: And next year if, when we're going to see the market coming, coming back, we should also see an improvement in margin if the market is improving.
Zachary Evershed: Thank you, with color. That's it for me.
Zachary Evershed: I'll turn it over.
Operator: And there are no further questions at this time.
Richard Lord: I will turn the call back over to Richard Hallow for closing remarks. There's no more questions. Thanks again. It's always a pleasure to talk to you. Do not hesitate to contact us for more information. Thank you very much. Have a good afternoon.
Operator: Ladies and gentlemen, this concludes this conference call. I'm going to disconnect. Thank you.