Richelieu Hardware Ltd. (TSX: RCH) Q3 2025 Earnings Call | 10/10/2025

Overview:

• Speakers: Richard Lord (President & CEO), Antoine Auclair (CFO & COO), Operator, and analysts from CIBC Capital Markets, National Bank Capital Markets.
• Focus: Solid Q3 results with 6.7% sales growth, 11.4% EBITDA margin, and strong cash flow. Highlighted acquisition strategy (8 deals in 2025 adding ~$75M annual sales), robust balance sheet, and resilience amid Ontario market challenges. Positive on U.S. growth and future cash generation.

Key Points from Richard Lord (CEO):

1. Q3 Performance:
   • Sales: $499.2M (+6.7% YoY, +4.1% internal, +2.6% acquisitions).
   • Canada: $272M (+2.9% YoY; manufacturers $226M +1.9%; hardware retailers $46M +8.5% due to timing).
   • U.S.: $227M CAD (+11.7% YoY, 45% of total; $165M USD +11.4%; manufacturers $158M USD +11.6% with 7.3% internal; retailers $7.7M USD +6.9%).
   • Market segments: Manufacturers +6.5%; retailers/renovation superstores +8.6%.
   • All regions positive except Ontario; U.S. and Canada sustained growth.
2. 9M 2025 Performance:
   • Sales: ~$1.5B (+7.2% YoY; +4% internal, +3.2% acquisitions).
   • Canada: $790M (+2.2%); manufacturers $657M +2.2%; retailers $132.9M +2%.
   • U.S.: $663M CAD (+13.8%, 46% of total; $473M USD +10.4%, half internal/acquisitions).
   • U.S. manufacturers: $447M USD +10.5% (+5% internal, +5.5% acquisitions); retailers +7.9%.
3. Acquisitions & Expansion:
   • 8 deals in 2025 (6 in H1, 2 post-Q3: Ideal Security (Montreal, doors/windows hardware for retailers) and Finmac Lumber (Winnipeg, specialized wood for woodworkers/retailers); add $75M annual sales.
   • Focus: Diversify offerings, create synergies; target $100M annual sales from acquisitions.
   • Recent emphasis on panel/hardwood (e.g., Finmac); high-margin, low-competition markets like Manitoba.
4. Outlook:
   • Positive cash position ($12M), working capital ($632.7M); expect solid FY25 end.
   • Robust model for uncertainty; one-stop-shop network, market leadership, cash flow protection.
   • October sales: In line with Q3 (~4% YoY), gaining market share despite stable market.

Key Points from Antoine Auclair (CFO & COO):

1. Financials:
   • EBITDA: $57M (+7.7% YoU, 11.4% margin); 9M: $154.7M (+5.1%, 10.6% margin).
   • Net earnings: $23.9M (+5.2%, $0.43/share +4.9%); 9M: $60.3M (-1.8%, $1.08/share vs. $1.09).
   • Cash flow: Q3 $82.7M (operating activities, +$16.2M inventory reduction); 9M $133.6M (+25.6%).
   • Financing: Q3 -$25.4M (share repurchases $3.7M); 9M -$70.1M.
   • CapEx: $11M in 9M (~$15-16M FY25, maintenance level ~1% of sales; no major projects).
   • Balance sheet: Positive cash, healthy working capital; low debt.
2. Inventory & Efficiency:
   • Q3 inventory reduction $16.2M; expect further ~$10M reductions.
   • Obsolescence step-up due to excess inventory reduction efforts.

Q&A Highlights:

• October Sales (CIBC): In line with Q3 (~4% YoY); better than market via share gains/internal growth.
• Ontario Share (CIBC): ~18% of total sales; challenging environment but not material impact.
• U.S. Retailer Loss (CIBC): Ongoing efforts to regain; positive progress; diversifying with other U.S. projects.
• U.S. Internal Growth (National Bank): ~7.3% (mostly pricing/inflation, offsetting tariffs without gross margin impact).
• Customer Backlogs (National Bank): Reasonable (2-3 months); no negative impact; renovation market strong.
• Q4 Margins (National Bank): Similar to Q3 (11.4%); historical Q4 strength expected.
• Section 232 Tariffs (National Bank): Minimal impact (~2.8% of sales in residential furniture; 12% of kitchen cabinets exported to U.S.); U.S. imports dominated by non-Canada sources ($1.6B vs. $400M Canadian). Customers mitigating costs; Richelieu positioned for synergies (one-stop-shop, JIT inventory).
• M&A Pipeline (CIBC): Strong; target ~$100M annual sales; focus on high-margin (15% EBITDA), synergistic deals (e.g., retailers, wood products).
• Retailers in Canada (CIBC): Gaining share via broad offerings; Rona/Home Depot key partners; focus on pro/consumer products, space management, decorative items.