RICHELIEU CONTINUES ITS GROWTH SOLID INCREASE IN U.S. SALES

HIGHLIGHTS FOR Q2 ENDED MAY 31, 2024

• Sales of $481.4M, up 2%, including $276.3M in Canada and US$150.5M in the United States, up 6% (US$).
• EBITDA of $53.8M - EBITDA margin of 11.2%.
• Net earningsattributable to shareholders of $23.4M, or $0.42 per diluted share.
• Cash flows from operating activities of $55.7M.
• Expansion: acquisition in the U.S.
• Buyback of 480,820 common shares for $18.6M.

FIRST HALF-YEAR

• Sales of $888.3M, including $508.3M in Canada and US$280.4M in the United States.
• EBITDA of $94.2M - EBITDA margin of 10.6%.
• Net earnings attributable to shareholders of $38.7M, or $0.69 per diluted share.
• Cash flows from operating activities of $56.2M.
• Sound financial position as of May 31, 2024, with a working capital of $616.0M (current ratio of 3.3:1).

Quarterly dividend of $0.15 per share payable on August 8, 2024, to shareholders of record as at July 25, 2024.

MONTREAL, July 11, 2024 /CNW/ - (TSX: RCH) "Richelieu continued its growth in the second quarter with sales up by 2% compared to the corresponding quarter of 2023. This increase resulted from our recent acquisitions, our market penetration and value-added service strategies, which is appreciable in the current market conditions. Our sales grew by 4.5% in the manufacturers' market, with increases of 0.9% in Canada and 8.7% (US$) in the U.S., while in all our geographic markets, sales to retailers and renovation superstores decreased by 14.6%. Richelieu is well positioned to seize opportunities in the renovation market and to meet the expected increase in demand for specialized products in the context of the housing shortages in Canada and the United States. We will remain focused on our winning strategies and our strengths, namely innovation, market diversification, value-added service, the robustness of our network and our ability to make strategic acquisitions" said Mr. Richard Lord, President and CEO.

DEVELOPMENT OF THE NORTH AMERICAN NETWORK: THREE NEW ACQUISITIONS IN THE FIRST HALF OF FISCAL 2024 AND CONSOLIDATION OF DISTRIBUTION ACTIVITIES FOR RETAILERS IN WESTERN CANADA, ONTARIO AND EASTERN CANADA

On March 27, 2024, Richelieu closed the acquisition of the main net assets of Allegheny Plywood, a distributor specializing in panels and decorative surfaces, operating distribution centres in Pittsburgh and Allentown, Pennsylvania, as well as in Cleveland, Ohio. This acquisition is in addition to those concluded in the first quarter, namely Olympic Forest Products, a distributor of wood products and specialty panels based in Erin, Ontario, and Rapid Start, a distributor of specialty hardware serving manufacturers from its centre in Rittman, Ohio. Together, these transactions represent sales of approximately $60M, on an annual basis, and strengthen the Corporation's presence in these markets.

Completed in December 2023, the Calgary expansion project allows the Corporation to continue supporting the growth of its manufacturer customers by consolidating two centres into a single 250,000-square-foot warehouse and centralizing the distribution of all products intended for retail customers in Western Canada. In the second quarter, the Corporation began optimizing distribution activities for the retailers market in Ontario and Eastern Canada. These projects are ongoing and have already involved the transfer of operations from two distribution centres.

OPERATING RESULTS FOR THE SECOND QUARTER AND FIRST SIX MONTHS ENDED MAY 31, 2024

The following table provides an overview of Richelieu's sales in its two main markets for the quarters ended May 31, 2024 and 2023 :

For the second quarter ended May 31, 2024, consolidated sales were $481.4M, compared to $472.1M for the second quarter of 2023, an increase of $9.3M, or 2.0%, resulting from a positive contribution from the acquisitions of 2.7% and an internal decrease of 0.7%. In comparable currency to the second quarter of 2023, consolidated sales increase would have been 1.8% for the quarter ended May 31, 2024.

Operating expenses excluding amortization totalled $427.6M, representing 88.8% of sales, compared to $410.6M, or 87.0% of sales, for the same period in 2023. The increase in monetary terms reflects higher costs of goods sold in certain product categories, as well as operational expenses associated with expansion projects completed over the past year and early this year, which are currently in the start-up phase.

Earnings before income taxes, interest and amortization (EBITDA) was $53.8M, down $7.7M or 12.6% from the corresponding quarter of 2023, mainly as a result of lower gross margin caused by inventories at costs higher than current purchasing costs and the drop in selling prices of certain products, plus the temporary increase in some operating expenses resulting from expansion projects. As a result, the EBITDA margin was 11.2%, compared with 13.0% for the corresponding quarter of 2023.

Amortization expense for the second quarter of 2024 amounted to $17.2M, up $2.4M over the corresponding period of 2023, as a result of the increase in property, plant and equipment and right-of-use assets stemming from expansion and modernization projects completed in 2023 and early this year. Net financial costs were $3.1M for this quarter in 2024, compared to $4.0M in 2023, a decrease of $0.9M mainly due to reduced lines of credit used primarily to finance acquisitions, expansion projects, and the temporary increase in inventories in the previous fiscal year.

Net earnings were $24.6M, down 21.1% from the prior year. Including non-controlling interests, net earnings attributable to shareholders of the Corporation were $23.4M, down 23.7% from Q2 2023. Net earnings per share were $0.42 basic and diluted, compared to $0.55 basic and diluted for Q2 2023, down 23.6%.

Cash flow from operating activities, before net change in non-cash working capital balances, was $45.1M or $0.80 per diluted share compared to $50.8M or $0.90 per diluted share for the second quarter of 2023. This 11.1% decrease mainly reflects the decrease in net earnings. The net change in non-cash working capital items generated a cash inflow of $10.6M, mainly reflecting decreases in inventories and accounts payable of $31.1M, while accounts receivable and other items used cash flows of $20.5M. As a result, operating activities provided a cash inflow of $55.7M, compared to a cash inflow of $74.4M in Q2 2023.

In the first six months of 2024, consolidated sales reached $888.3M, up $13.2M or 1.5% over the first half of 2023, of which 2.0% from acquisitions and 0.5% from an internal decrease. In comparable currency to the corresponding period of 2023, the increase in consolidated sales would have been 1.4%.

Operating expenses excluding amortization totalled $794.1M, representing 89.4% of sales, compared to $764.5M, or 87.4% of sales, for the same period in 2023. This variation is also explained by higher costs of goods expensed as well as costs specific to projects during the start-up phase.

EBITDA was $94.2M, down $16.4M or 14.8% from the corresponding period of 2023 and net earnings attributable to shareholders of the Corporation were $38.7M, down 27.2% from the prior year. Net earnings per share were $0.69, basic and diluted, compared to $0.95, basic and diluted, for the same period of 2023, down 27.4%.

Cash flow from operating activities, before net change in non-cash working capital balances, was $80.0M or $1.42 per diluted share compared to $91.4M or $1.63 per diluted share for the first six months of 2023. The net change in non-cash working capital items used cash flows of $23.8M, mainly reflecting the decrease in inventories which generated a cash inflow of $10.6M, while accounts receivable, accounts payable, including income tax payable, and other items used cash of $34.4M. As a result, operating activities generated a cash inflow of $56.2M, compared to a cash inflow of $93.2M in the first six months of 2023.

FINANCIAL POSITION

Total assets were $1.38B as at May 31, 2024, compared to $1.31B as at November 30, 2023, an increase of 5.1%. Current assets increased by 3.3% or $28.2M from November 30, 2023. As at May 31, 2024, the Corporation had a working capital of $616.0M, for a ratio of 3.3:1, compared to $621.8M (ratio of 3.6:1) as at November 30, 2023 and an average return on shareholders' equity of 11.0%.

SHARE CAPITAL

As at May 31, 2024, the Corporation's share capital consisted of 55,677,620 common shares [56,088,365 common shares as at November 30, 2023]. For the three and six-month periods ended May 31, 2024, the weighted average number of diluted shares outstanding was 56,328,850 and 56,421,090 [56,227,220 and 56,176,050 in 2023].

DIVIDENDS

On July 11, 2024, the Board of Directors approved the payment of a quarterly dividend of 0.15$ per share to shareholders of record as at July 25, 2024, payable on August 8, 2024. The declared dividend is designated as an eligible dividend within the meaning of the Income Tax Act (Canada).

MAIN TRADEMARKS

PROFILE AS AT MAY 31, 2024

Richelieu is a leading North American importer, manufacturer and distributor of specialty hardware and complementary products. Its products are targeted to an extensive customer base of kitchen and bathroom cabinet, storage and closet, home furnishing and office furniture manufacturers, residential and commercial woodworkers, doors and windows, and hardware retailers including renovation superstores. Richelieu offers customers a broad mix of high-end products sourced from manufacturers worldwide. Its product selection consists of over 145,000 different items targeted to a base of more than 120,000 customers who are served by 114 centres in North America – 48 distribution centres in Canada, 63 in the United States and three manufacturing plants in Canada, specifically, Les Industries Cedan Inc., Menuiserie des Pins Ltée and USIMM UNIGRAV Inc., which manufacture a variety of veneer sheets and edge banding products, a broad selection of decorative mouldings and components for the window and door industry as well as custom products, including a 3D scanning centre.

Notes to readers — Richelieu uses earnings before interest, income taxes and amortization ("EBITDA") because this measure enables management to assess the Corporation's operational performance. This measure is a financial indicator of a corporation's ability to service its debt. However, EBITDA should not be considered by an investor as an alternative to operating income, net earnings, cash flows or as a measure of liquidity. Because EBITDA is not a standardized measurement as prescribed by IFRS, it may not be comparable to the EBITDA of other companies. Richelieu also uses adjusted cash flows from operating activities, which are based on net earnings plus the amortization of property, plant and equipment, intangible assets and right-of-use assets, deferred tax expense (or recovery), share-based compensation expense and financial costs. These additional measures do not account for net change in non-cash working capital items to exclude seasonality effects and are used by management in its assessments of cash flows from long-term operations. Therefore, adjusted cash flows from operating activities may not be comparable to those of other companies. Certain statements set forth in this report (generally identified by terms such as "may", "could", "might", "intend", "expect", "believe", "estimate" or comparable variants) constitute forward-looking statements which, by their very nature, remain subject to other risks and uncertainties as set forth in the Corporation's annual and quarterly reports. Although management considers these assumptions and expectations reasonable based on the information available at the time they are provided, such assumptions and expectations could prove inaccurate and actual results could differ materially. Richelieu is under no obligation to update or revise any forward-looking statements made herein to account for future events or circumstances, except as required by applicable legislation. The unaudited interim consolidated financial statements, accompanying notes and interim MD&A for the second quarter and first six months of 2024 will be available on SEDAR+ at www.sedarplus.com and on the Corporation's website at www.richelieu.com.

SOURCE Richelieu Hardware Ltd.

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