Q1 2025 Richelieu Hardware Ltd Earnings Call

Speaker Change: Good afternoon, ladies and gentlemen, and welcome to Richelieu Hardware, first quarter 2025 Results Conference call. At this time, all lines are in a listen only mode.

Speaker Change: Following the presentation, we will conduct a question and answer session, which will be restricted to analysts only And if at any time during this call you require immediate assistance, these press star zero for the operator. Also note that this call is being recorded on April 10th, 2025.

Speaker Change: Bonjour Mesdames et Messieurs et bienvenue au résultat du premier trimestre 2025 de Quinquairie-Richelieu. Présentement, vos lignes sont en mode d'écoute seulement.

Speaker Change: Following the presentation, we will proceed to a question and answer period that will be restricted to analysts only. If you need assistance during the call, press star E0.

Speaker Change: Please also note that this call was recorded on April 10, 2025.

Speaker Change: I would now like to give the floor to Mr. Richard Lord, President and CEO . The floor is yours.

Speaker Change: Merci. Thank you. Good afternoon, ladies and gentlemen, and welcome to Richelieu's conference call for the first quarter ended February 28, 2025.

With me is Antoine Auclair, CFO and CO [inaudible]

As usual, know that some of this issue

Richelieu made a strong start in 2025.

Speaker Change: While the first quarter is generally the weakest period of the year.

Speaker Change: or two of those sales climbed by 8.6 percent, driven equally by Antoine's growth and acquisition.

This increase reflects the good performance of the manufacturer's market.

Speaker Change: Where sales were up 10%, thanks to our strategy of innovation, acquisition, market and value-adult service.

Speaker Change: In the retailers and innovation super stores market, overall sales were stable compared with the first quarter of 2024.

In order.

to maintain our strategic advantage as market leader.

Speaker Change: We are investing substantially in this market to update our programs and product lines in the digital stores as well as introducing new products.

Speaker Change: We see these initiatives are already starting to bear fruit, with sales vote in Canada.

Speaker Change: We are also very pleased with our five acquisitions completed, including four in the first quarter and one following the end of the quarter

On December 1st, we acquire Mill Supply [inaudible]

Operating in that mode, Nova Scotia, Nova Scotia, and Jonathan, Prince Edward I.

Speaker Change: This acquisition, which was targeted since a long time, expands our presence in the

Speaker Change: In January , we acquired Darren Distributing, a specialized hardware anti-corretial surface distributors in Denver, Colorado.

Marking our entry in this strategic market for Richard, Richelieu.

Then we close the accusation of Midwest specialty products.

Speaker Change: In February , we acquired module X partition, located in ill-side, New Jersey.

Speaker Change: This distributor of division 10 products for the construction market enables us to expand our presence in the greater New York area.

Speaker Change: Our most recent acquisition, completed on April 1st, is Roads Anuara Architectural Products.

Speaker Change: A distributor of exclusive accretural panels and related products, working closely with architects and designers, and I am commercial woodwalkers with one distribution centers in Vineland, New

Speaker Change: This strategic acquisition now, I light our commitment to expand our reach and increase our product offering at first North America.

In addition, the contributing $15 million in sales.

Speaker Change: These five acquisition strengthen our opposition in certain markets, open up new ones, add new products to our range, and then add also talented team and create opportunities for new

Speaker Change: Together, with the four acquisitions completed in 2024, they add approximately 120 million

The last three years...

Speaker Change: We also started two greenfield locations in Minneapolis and Karr Stab, Louis Josie.

Speaker Change: In Canada, we competed last year the opening of our brand new 250,000 square feet building

Speaker Change: While concentrating two centers giving us the opportunity to be a one-stop shop for all Western retail customers, we also undertook the same projects out of Kitchener, Ontario, for Eastern retail customers.

Holy this year

Speaker Change: We concluded the consolidation of two centers into one one hundred and forty thousand square feet building in Vancouver, serving the raw market.

Speaker Change: We are pleased with this investment that will require you to continue to gain market shares and to offer a first-class service to our customers.

Speaker Change: At one, we now review the financial highlights of the first quarter.

Antoine: Thanks Richard, first quarter sales reached 442 million, up 8.6% driven equally by internal growth and acquisitions.

In Canada, sales amounted to $242 million, up 4.1%.

Antoine: Our sales to manufacturers reach 195 million, and Hardware retailers and renovations superstar market sales stood at 46.3 million up 5%.

Antoine: In the US, sales grew to 140 million in US dollar, up 7.6% reflecting a 10% increase in the manufacturer's market, mostly resulting from acquisition while sales to retailers and innovation super stores market were done.

Antoine: And Kennedy and Dollar sales in the US reach 200 million and increase of 14.5% representing 45% of total sales.

Antoine: The lower margin from our recent acquisition, the increased marketing costs for new product lines at our retail customers affected the margin slightly downward to 9.6% compared to 9.9 last year.

Antoine: First-quarter net earnings attributable to shareholders total 13.9 million, a decrease of 8.6% from the first quarter of 2024.

Antoine: Mainly due to an increase in amortization expense, resulting from the CapEx investment and Lisa set additions from the expansion projects and business acquisition made during the previous fiscal year and the first quarter of 2025.

Antoine: Consequently, diluted net earnings per share was 25 cents compared with 27 cents last year.

Antoine: First quarter cash rule from operating activities before net change in non-cash working capital balances was $2,7 million or $0.67 per dialy to trade, dialy to the chairs.

Antoine: The net change in non-cash working capital used cash flow of 34 million.

Antoine: As a result, operating activities provided a cash and flow of $3.7 million compared to a cash and flow of $0.5 million in the first quarter of 2024.

Antoine: At the end of the quarter, financial situation was healthy and solid with working capital of $613.2 million and I'll most know that.

I now turn it over to Richard.

Richard Lord: Thank you everyone. In conclusion, we will integrate our recent acquisition and continue to monitor the market for new opportunities in line with our short and long-term growth objectives. We currently operate in an ever-changing and volatile market.

Richard Lord: would remain a trial adaptable and connected to our market in order to continue to offer first-last service of customers.

Richard Lord: The tariff measures implemented by the U.S. administration might have an impact on the global economy and we are on the lookout to take the necessary action to mitigate the effect on Richelieu.

Richard Lord: Or highly diversified, any innovative product offering may cause an essential destination for customers.

We continue to build on our core strength.

Our business model and our innovation and acquisition strategies.

Richard Lord: Our comprehensive market coverage and the strength of our network in our team.

Richard Lord: The penetration and effecting the effectiveness of our triangle website, Richelieu.com, as well as the distinctive other value of our service and our service balance sheet.

Thanks everyone, we now will be happy to answer your questions.

Speaker Change: Thank you, sir. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touch-tone phone. You will hear or prompt that your hand has been raised. As stated, questions will be taken from analysts.

Speaker Change: And should you wish to withdraw from the question cue? Simply press star followed by two. And if using your speaker phone, you will need to lift the handset first before pressing any keys.

Speaker Change: Please go ahead and press star one now if you do have any questions.

Speaker Change: And your first question will be from Zachary Evershed at National Bank. Please go ahead.

Good afternoon. Thanks for taking my questions.

You know, who was I?

Speaker Change: Could you give us a little bit of color on what you saw throughout the quarter in terms of pricing versus volume to get to where you were for the full quarter?

Gotcha, thanks.

Speaker Change: And then I was hoping you could dive down into the investment in retail channels How much of a drag was that on margins and what do you hope to get in terms of return on that?

But we're implementing, we're adding new product lines and uh...

Speaker Change: These are one-time fees, so this will disappear and will benefit from the additional sales in the future.

Speaker Change: which is something which becomes a, that's going to be part of the regulation of the Carribean Market and US eventually.

Speaker Change: Those products have owned the pool, as we speak, we have a major investment with Rona, 100% of the Rona stores, the big box, the big ones, have to be revamped in terms of refreshing our displays, refreshing our product line, and adding products.

Speaker Change: and for the other stores older than Renault, that has been slew because the market was slew for all the retailers that they were quite hesitant before making any changes. I think this is behind us now, so we do what we have to do in the stores and we're going to reap the benefit.

Very clear. Thank you.

Speaker Change: and given what you're seeing in the market, how's the pace of your M&A?

Speaker Change: No, no, no, definitely not the shutting down discussion, but we could see a more favorable

Speaker Change: Even without that, the channel is very healthy so we've already closed five this year and we're not done yet so we have other opportunities we're working on so it's very healthy either in Canada and the US but we also have to be put in with...

Speaker Change: with some companies that may be, we don't know, with the tariff, you know, all the, everything is changing every week, we don't know what's going to happen. So if we have, we see companies that are for sale but are really dependent on Chinese products, so we have to be prudent. So sometimes we drag our feet because of that, we wait until we know exactly what's going to happen in the market.

Speaker Change: But basically, as Antoine said, you know, the market for acquisition is very healthy.

Speaker Change: Makes sense. And then while we're touching on tariffs, could you go into more detail on your mitigation strategies because obviously we're seeing some very high tariff holes on China and you do have some exposure there into the U.S.?

Speaker Change: I work for the U.S. regarding our sales. The Chinese product represents less than 20% of our sales.

Speaker Change: We don't know what is going to happen, but we are very well prepared because we have the most diversified product lines in North America, much more than our competitors, and we have many alternative engines, but we have engines that come from US, that come from Italy, that come from Russia, that come from Germany, so the customer has the choice, and the best deal would be the choice of the supplier, as the customer.

Speaker Change: And Zach, as we speak, we have a team on site in China meeting with the suppliers. Yeah, I'm talking to Guigurini every morning for me, every night for him.

Speaker Change: So regarding what's going on in the discussion, I think there is a lot of uncertainty as well with our Chinese supplier. They all, you know, they do all the effort that they can to help to show you, but we don't with over 100% of the service.

Speaker Change: Hopefully that we'll change, but the Chinese product will continue to solve very well in Canada where we don't have any more time that we had before. So basically no change in Canada, but in the US we have to make sure that we're very proud about what we're going to do in the next weeks.

Speaker Change: I understood, thanks. And then just mechanically it's a very long supply chain for orders that you placed ahead of the tariff increases. Will those apply to the shipments when you receive them?

Yes, yep, yep, yep, yep.

Gotcha, thanks. Then just one last one for me.

Speaker Change: You know, it's potentially a good market for M&A, like 2009-2010. We could see some upside to your annual target for acquisitions. What's your leverage comfort? How high would you take the balance sheet given the uncertainty out there in macro?

Speaker Change: The margin that we're the EBITDA that we're acquiring is sustainable so we'll do it for the right opportunity.

Sustaining all of you, the Lord.

Thank you. Gotcha. I'll turn it over.

Speaker Change: Thank you. I remind our ladies and gentlemen if you're an analyst and would like to ask a question, please press star followed by one on your touch on phone.

Moderator: Next question will be from Nikolai Garbage at CIBC Capital Markets. Please go ahead.

Nikolai Gorbachev: Hi there. Could you discuss how organics they all spared in March?

I would say that we told the Cyrus...

Nikolai Gorbachev: I think you should have a good ear because we...

I think we have there yet.

It's improving.

Speaker Change: Okay, I see things. And I guess you mentioned the overall market there. What do you see? What are your expectations this year? Like many key players on the R&R side going to the flat market? Do you have a similar view?

Speaker Change: Well that's what we're in the market and you see what lows and home depot are also talking about so flat or low single digit growth that's what we see as of today.

Speaker Change: Okay, great. Thanks. That's all I had to turn it over. Thank you. Thank you

Speaker Change: And at this time of Shulah, we have no other questions registered, please proceed.

Gillard: If there's no more question, thanks again, it's always a pleasure to talk to you. Have a good day.

Speaker Change: Thank you, sir. Ladies and gentlemen, this doesn't need to conclude your conference call for today. Once again, thank you for attending and at this time we do ask that you please disconnect your alliance.