Achieved record growth in U.S. sales

Richelieu Hardware Ltd. (TSX—RCH), a Montreal-based specialty hardware distribution and manufacturing company, achieved a record 54.8 per cent year-over-year increase in sales in its quarter ended May 31.


Montreal hardware distributor achieves record growth sales in U.S.

Richelieu is a leading North American distributor, importer and manufacturer 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, door and window, and hardware retailers including renovation superstores.

Richelieu has performed well so far this fiscal year. The company attributes its performance to, among other things, the positive impact of acquisitions and investments in recent years in new market segments.

In the U.S., it achieved a record 54.8-per-cent year-over-year increase in sales in its latest quarter. The increase resulted from strong internal growth of 22.7 per cent and the contributions of its most recent acquisitions. In Canada, sales were up 17.3 per cent in the manufacturers’ markets, and 9.3 per cent in the retailers and renovation superstores market.

For the six months ended May 31, 2021, Richelieu made $77.5 million, or $1.37 a diluted share, compared with $58.6 million, or $1.03 a share, in the same period of 2020. Sales rose 30.4 per cent to $872.4 million, of which 16.2 per cent came from internal growth and 14.2 per cent from acquisitions. At comparable foreign exchange rates, sales would have increased 29.8 per cent.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, rose 32.8 per cent to $131.6 million. The EBITDA margin improved to 15.1 per cent from 14.8 per cent, the result of increased sales and cost control. Cash flow was $103.2 million, up 32.3 per cent. After dividend payments to shareholders and capital expenditures, the company was left with free cash flow of $78.7 million.

Free to use its cash flow to pay dividends

Free cash flow gives a company the flexibility to pay dividends, buy back shares, make acquisitions and reinvest in its business. Earlier in the first half, Richelieu elected to use its free cash flow to increase its quarterly dividend 86 per cent to $0.13 a share.

Richelieu also continues to reinvest in its business. Management says the expansion of several of its distribution centres in strategic U.S. markets is going according to schedule. And even though it’s currently integrating its most recent acquisitions, it’s on the lookout for further business acquisitions.

In the meantime, it continues to pursue its growth strategy based on innovation and its value-added multi-access service with the view to seizing opportunities in the short and long term.

Richelieu Hardware is a buy for growth and some income.

This is an edited version of an article that was originally published for subscribers in the July 22, 2022 issue of The Investment Reporter. You can profit from the award-winning advice subscribers receive regularly in The Investment Reporter.

The Investment Reporter, MPL Communications Inc.
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