Richelieu Hardware Ltd. (RCH) Earnings Call Transcript

Good afternoon, ladies and gentlemen, and welcome to Richelieu Hardware Second Quarter Results Conference Call. [Operator Instructions] Also note that this call is being recorded on July 9, 2026. [Foreign Language]

Thank you. Good afternoon, ladies and gentlemen, and welcome to Richelieu's conference call for the second quarter and first half ended May 31, 2026. With me is Antoine Auclair, CFO and COO. As usual, note that some of today's issue include forward-looking information, which is provided with the usual disclaimer as reported in our financial filings. We recorded good growth and positive results during the second quarter. We have remained focused on acquisition strategy, completing new acquisition, followed by 2 quarter 1 after the end of the quarter, 3 promising acquisitions, meeting our criteria and further strengthening our leading position in this high-growth market segment. Thanks to steady growth in our main market segment in Canada and the U.S., our sales increased respectively by 5.5% and 4.4% in U.S. dollar for the U.S. sales for total sales of $532.1 million, up 3.9%, an increase that would have been 5% on a comparable currency to 2025. Our sales to manufacturers accounted for 89% of our total sales, reaching $473.7 million, up 3.8%, driven by internal growth and acquisitions. Our sales to retailers and renovation superstores increased by 4.2% to $58.4 million. EBITDA reached $56.1 million and net income attributable to shareholders was up 3.2% to $23.2 million. Regarding the execution of our acquisition strategy since the beginning of the year, we have completed 4 acquisitions, one in the U.S. during the first quarter, another in Quebec during the second quarter and 2 additional acquisitions after the end of the quarter in Canada. On May 1, we acquired Finium, a distributor and manufacturer based in Frampton, Quebec, specializing in premium covering panels with high decorative and acoustic value. These products stand out for the unique design, quality and installation ease for both residential and commercial application and they fit perfectly with our decorative panel offering. On June 26, we completed the acquisition of Solution Acoustic, which operates in the Greater Montreal and as a specialized distributor in acoustic solution known for their performance and architectural design. Then on July 8, we completed the acquisition of Winnec a dissimilar specialize our operating in the GTA area with 3 distribution centers. This process our position in the key market of Ontario. These two acquisitions considered since the beginning of the year at approximately $55 million in annual sales, with new value expertise, new products new customers and further enhance the value in providing to our customers. In fact, the addition [indiscernible] solution strengthens our leadership in decorative and acoustic solutions to high market segment, while further expanding our presence among [indiscernible] designers. This strategy builds on the recognition we received earlier this year with our Best of KBS awards in 2 different product categories and reflects our commitment to differentiate ourselves and remain a leader in innovation. I will now ask Antoine to review the financial highlights for the quarter and the six months.

Thanks, Richard. In the second quarter, sales reached $532.1 million, up 3.9% or $19.9 million, driven by 1.8% internal book and 2.1% from acquisitions. At comparable exchange rates, sales growth would have been 5%. In Canada, sales totaled $291 million, up 5.5% despite flat sales in Ontario, where the market conditions remain more challenging. Sales to manufacturers amounted to $246 million, up 4.5%, while -- the hardware retailers totaled $45 million, up 11.6%. In the U.S., sales grew $175 million in U.S. dollar, up 4.4%. Sales to manufacturers reached USD 166 million of 5.6% with 3.1% coming from internal growth. In the hardware retailers and renovation superstores market, sales reached $9.6 million, down 12.7%. In Canadian dollars, total sales in the U.S. reached $241 million, up 1.9% over last year and accounting for 45% of total sales. Sales to our U.S. manufacturers market now represent 48% of total sales to manufacturers, further reflecting the growing importance of our U.S. operations. For the first half, total sales reached nearly 1 billion, up 4.4%, of which 1.9% resulted from internal growth and 2.5% from acquisition. In comparable exchange rate, sales growth would have been 5.9%. In Canada, sales reached $541 million, up 4.5%, including 2.9% from internal growth and 1.6% from acquisition. Sales to manufacturers totaled $452 million, up $21.6 million or 5%. Sales to hardware retailers and renovation superstores were [indiscernible] million compared to $86.8 million, up 2.2%. In the U.S., CF amounted to $331 million, up 7.5%, with 3.7% from internal growth and 3.8% from acquisitions. We reached CAD 455 million up 4.2%, accounting for 46% of total sales. In U.S. dollars, sales to manufacturers totaled $313 million, an increase of $23.2 million or 8%, driven by 4.5% in total growth and 3.5% from acquisitions. Sales to hardware retailers and renovation superstores stayed the same credit to last year. Second quarter EBITDA reached $56.1 million, up $1 million or 1.7% from last year. EBITDA margin was 10.6% compared to 10.8% last year. slight decrease in percentage reflects the impact of tariffs, which proportionately increased both sales and cost of sales. First half EBITDA totaled $9.4 million, up 1.8% with the EBITDA margin at 10%. Second quarter net earnings attributable to shareholders amounted to $23.2 million, up 3.2%, while diluted net earnings per share increased 2.4% to $0.42 from $0.41 last year. First half net earnings attributable to shareholders reached $37.6 million, up 3.4%. Diluted net earnings per share stood at $0.68 compared to $0.66 last year. Second quarter cash flow from operating activities before net change in noncash flow capital reached $47.9 million, up 2.4% from $46.8 million last year. Change in noncash working capital used cash flow of $28.5 million, primarily driven by a $14.8 million increase in accounts receivable and a $9.4 million increase in inventories. As a result, operating activities generated a cash inflow of $19.4 million for the quarter. For the first half, cash flows from operating activities represented a cash inflow of $36.6 million compared to a cash inflow of $51 million last year. For the second quarter, financing activities used $23.5 million in cash compared to $23.3 million last year primarily reflecting higher cash return to shareholders, $7.6 million of common share repurchase in addition to quarterly dividend of $8.6 million. First half financing activities used cash flow of $58.6 million compared to $44.7 million in 2025. In the first half, we invested $26 million, including $15.3 million for 2 business acquisitions and $10.7 million primarily for equipment required to maintain and improve operational efficiency, including IT equipment. We continue to maintain an outstanding balance sheet with working capital of $629.5 million. I'll now turn it over to Richard.

Thank you, Antoine. In conclusion, we are integrating our acquisitions while the current economic environment is creating attractive acquisition opportunities in our target markets. are evaluating several opportunities and remain well positioned to pursue those that meet our strategic criteria and support our long-term growth. We continue to differentiate ourselves by constantly expanding our product offering and being innovative solutions and emerging overall design churn to the American market. While introducing products that are first to the market and maintain of them exclusive with our own brand names. And many of them we used to do with our own brand name. We have become a churn partner for architects, designers, wood working professional and retailers. This relentless focus on innovation, product leadership and value-added service, combined with the strongest team and the strategically located distribution network is what defines Richelieu reinforcing our competitive advantage and help our customers being more successful in their own business. Thanks, everyone. We now be happy to answer your question.

[Operator Instructions] First, we will hear from Hamir Patel at CIBC.

Richard, can you share how sales fared in the month of June and any differences there across categories or geographies. And I know I think last time, you kind of highlighted Ontario as being particularly weak. So any signs of turnaround there? .

I think we -- the sales performance -- following the sales performance that we had until -- in the last quarter. So what we see Canada is doing well as a whole, except Ontario, I think Quebec is doing very well with a sales increase by more than 10%, where [indiscernible] Canada is also very healthy. I think over 5% increase. So basically, except for Ontario, Canada is pretty good. Ontario, I would say, in the U.S., it's about the same everywhere, but we have different market segments like the specialized market like the closet market, for example, we continue to experience sales between 15% and 20% increase. For the rest, we have easier performance of 2% to 3% per market saving. So basically, we we're satisfied with that. But we -- I think we have to -- what we have decided in this company that maybe to invest a little bit lower in salespeople, mainly in the U.S. mobile to gain more customers and to move the market. I think the market is in the kind of lethargy. So I think we have to be more aggressive in visiting more customers and acquiring new customers, and as a result, you say that well. So basically, we don't give the months to come in the near future, we have to help ourselves by making them moving the sites.

Fair enough. And Richard, how much is Ontario as a percent of your Canadian business? Is that 40%, 50%? .

44%.

Hamir, it is 17% of total sales. .

Total sales including U.S. everything.

Right. Okay. And then I know -- I think, Richard, in the past, you highlighted some U.S. box business that was going to resume. I think it was supposed to start in Q2. Does that one playing out here in Q3.

Yes. It has started. So we're in the process of delivering our first order. So basically, that's going to create more sales really for a couple of quarters, it is going to be flat for a couple of -- for the next quarters because once we fill up the stores, it takes a while before the other, but I think it's going to be -- you can imagine $10 million to $12 million sales, yearly sales.

Hamir, it started in June.