Good afternoon, ladies and gentlemen, and welcome to Richelieu Hardware Fourth Quarter Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session which will be restricted to analysts only. If at any time during this call you require needed assistance, please press star zero for the operator. Also note that this call is being recorded on January 19th, 2023.
(Foreign Language)
Thank you. Good afternoon, ladies and gentlemen, and welcome to the Richelieu's conference call for the fourth quarter and twelfth month period ended November 30th, 2022. With me is Antoine Auclair, CFO. As usual, note that some of today's issue include forward-looking informations, which is provided with the usual disclaimer as posted in our financial filings. First, let's look at our fourth quarter, where our sales benefited from both acquisition and internal growth. The sales increase was driven by a strong performance in the manufacturer's market in the U.S., where the two acquisitions closed in the first quarter made a major contribution, namely Compi Distributors, HGH Hardware, and National Builders Hardware. Jointly, they operate nine distribution centers in six different states. As for the retailers and renovation superstore market, sales remained stable over the last year.
We closed our 4th acquisition of the year in September, Quincaillerie Deno, a specialty hardware distributor operating one distribution center in Montreal. Together, the four acquisitions closed in 2022 represent additional sales of approximately CAD 125 million on an annual basis. As for 2022, it was another year of sound growth, fueled by both internal growth and acquisitions. We are very pleased with the performance achieved in all our markets, especially in U.S. where the growth was 42.2%, now representing 40% of our total sales. Our innovation and acquisition strategies, our focus on customer service, the diversification of our market segments, and our successful website, richelieu.com, all these trends contributed to bear fruit and be our best growth levers.
I'm also pleased to announce that the board of directors approved this morning a rise of 15.4% in our quarterly dividend to CAD 0.15 per share. Antoine will now review the financial highlights. I will conclude with the latest development and outlook.
Thanks, Richard. Our fourth quarter sales reached CAD 458 million, up 14.9%. Sales to manufacturers stood at CAD 398 million, up 17.4%, of which 78% from internal growth and 9.6% from acquisitions. In the hardware retailers and renovation superstores market, we achieved sales of CAD 60 million in line with 2021. In Canada, sales amounted to CAD 274 million, an increase of CAD 13.4 million or 5.2%. Our sales to manufacturers reached CAD 226 million, up 5%. As for retailers market, sales stood at CAD 47.5 million, up 5.8%.
In the US, sales total $136 million, up 24.1%, of which 2.8% resulting from internal growth and 21.3% from acquisitions. Sales to manufacturers reached $127.5 million, up 29.4%. In the retailers market, sales were down by $2.5 million. Total sales in the US reached CAD 184 million, an increase of 33.2%, representing 40.2% of our total sales. Total sales in 2022 reached CAD 1.8 billion, up 25.2%, of which 13.4% from internal growth and 11.8% from acquisitions.
Sales to manufacturers reached CAD 1.6 billion, up 28.9%, of which 15.9% from internal growth and 13% from acquisitions. These increases are the result of sustained demand in the renovation market in 2022, as well as higher selling price. Sales to hardware retailers grew by 6.3% or CAD 14.9 million to CAD 251.5 million, mostly from acquisitions. In Canada, sales total CAD 1.1 billion, up 13.7%, of which 10.3% from internal growth and 3.4% from acquisitions. Our sales to manufacturers amounted to CAD 877 million, up by 14.2%, of which 11.7% from internal growth and 2.5% from acquisitions.
Sales to hardware retailers and renovation superstores were CAD 177 million, up 11.7%. In the U.S., sales amounted to $562.5 million, up 42.2%, of which 15.4% from internal growth and 26.8% from acquisitions. We reached CAD 728 million, up 46.9%, accounting for 40% of total sales. Sales to manufacturers reached $521 million, an increase of 49.7%. Sales to hardware retailers were down by 12.9%. Fourth quarter EBITDA stood at CAD 76.7 million, compared with CAD 71.3 million last year, up 7.5%. The EBITDA margin stood at 16.8%.
For the year, EBITDA was CAD 287.4 million, up 22.6%, and EBITDA margin stood at 15.9%. Fourth quarter net earnings attributable to shareholders totaled CAD 44.9 million, compared with CAD 44.6 million last year. Diluted net earnings per share reached CAD 0.80 compared with CAD 0.79 in 2021. For the year, net earnings reached CAD 168 million, an increase of 18.8% and CAD 2.99 per share compared with CAD 2.51 per share last year. Fourth quarter cash flow from operating activities before net change in non-cash working capital balances were up 8.3% to CAD 60.4 million or CAD 1.07 per share. Net change in non-cash working capital balances used cash flow of CAD 58.6 million.
For the year, they were up 22.7%, totaling CAD 224 million or CAD 3.08 per share. Net change in non-cash working capital balances used cash flow of CAD 260.7 million, mainly from spike in inventory, which resulted from the higher product costs and the easing of the supply chain challenges, including the acceleration of delivery times, especially from Asia. During the year, we paid dividends of CAD 29 million, up 50% over 2021, of which CAD 7.3 million were in the fourth quarter, and repurchased common share for CAD 12.3 million. We have thus distributed to a total of CAD 41.4 million to our shareholders this year.
We also invested CAD 67 million during the year, of which CAD 44 million was for business acquisitions and CAD 23 million for equipment to maintain and improve operational efficiency, including investment in ongoing expansion projects. As of November 30th, 2022, bank overdraft net of cash amounted to CAD 212 million. Our working capital was CAD 563 million for a current ratio of 2.6 to one, and the return on average shareholders' equity stood at 22.7%. I now turn it over to Richard.
Thanks, everyone. We are constantly looking to acquire new businesses in line with our criteria and integrate them by sharing our value and developing synergies. Just recently, in January, we concluded four new acquisitions that will contribute to diversify our offering and our customer base, namely, Quincaillerie Rabel, a distributor of specialty hardware with one distribution center in Terrebonne, Quebec. Trans-World Distributing, a distributor of industrial fastener with one distribution center in Dartmouth, Nova Scotia. Unigrav and Usimm, two companies offering custom products, including three scanning centers for the architectural and industrial market. They are located respectively in Drummondville and Montreal. These four new acquisitions will add approximately CAD 80 million in sales on an annual basis. Our expansion projects are progressing well, mainly in Atlanta, Fort Myers, Nashville, and Pompano Beach.
We just opened our new Carlstadt location close to New York City, and we will be up and running in Minneapolis for February. Our new location servicing retailers will be fully operational in the coming weeks. Other expansion projects are currently under review, USA will continue to be a strong driver of our growth. Richelieu has a strong financial foundations, skills and expertise to serve its customers with a distinctive service approach. We have a solid track record in product innovation and business acquisitions, which remain our two main growth drivers. In 2023, we will continue to build on this momentum and our strength in order to achieve good results with the involvement of our great team. We will pursue our market development, innovation and acquisition strategies, while giving priority to service, productivity, synergies, and sound financial management.
Thank you, everyone. Be happy to answer your questions.
Thank you, Richard Lord. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. If you would like to withdraw your question, please press star followed by two. If you are using a speakerphone, we do ask that you please lift the handset before pressing any keys. Please go ahead and press star one now if you have a question. Your first question will be from Zachary Evershed at National Bank Financial. Please go ahead.
Good afternoon, everyone. Congrats on the quarter.
Hello.
I was hoping you could give us a little bit more color on the inventory breakdown. Maybe paint a picture for us of where you wanna get that number down to, at what's higher due to pricing, and then what's attributed to new distribution centers and acquisitions in your inventory.
Yeah, Zach, I will answer that one. The basically just product cost increase amounts to approximately CAD 45 million-CAD 50 million just from a cost increase and CAD 30 million from acquisition and new extension. Basically, close to CAD 75 million on those elements. We're pretty much at the highest point. In January, we're pretty much at the highest point, you looked at the, you have the November levels. It's gonna increase in December, slightly increase in January as well. We're gonna be at the top of the mountain in January, stabilize in February, and it will go down substantially during 2023.
How much do you think you can pare away to get to a stabilized inventory level?
I would say between CAD 60 million-CAD 80 million.
That's helpful. Thanks. Richard, maybe you could give us some commentary on pockets of weakness and strength that you're seeing in your end markets and product categories.
What we see so far, the market is still quite good even though the first quarter is always our lowest quarter as you can remember. Yeah, and also what we have seen this year more than ever than our small customers until January 15, they were still on vacation. In spite of that, our sales, you know, do quite well. It's gonna be hard. I don't think we can beat the performance that we had last year, though. The market is still good. We see the retail market being flat. Slightly down in the U.S., but it's only for timing, purchasing of timing for our customers.
Speaking with our sales management and our sales people, they see that our customer will be busy for at least the next 6 months to a very decent level. Basically, all the product line are doing pretty well so far as well as most of our customer segment. Also, I think our new acquisition will also contribute to a nice growth because now they have access to more products, they have to access to distribution system and introduce marketing strengths. Basically, that should generate more sales. We have various program in order to increase our sales as usual in U.S. as in Canada, in order to get more sales per customers and gain more new customers as well.
Basically, whatever the circumstances might be or will be, Richelieu is still doing everything in terms of a money strategy in parallel in order to keep increasing our sales.
Basically, whatever the circumstances might be or will be, Richelieu is still doing everything in terms of a money strategy in parallel in order to keep increasing our sales.
Great color. Thanks. I'm hearing you on gaining new customers and growing your sales per customer. I noted that you flagged that gross margins were stable in the quarter. What are your thoughts on the extent of price deflation in your product categories in the year ahead?
There will be a price deflation for certain products for a while. There is no doubt, because of the excess inventory, the higher cost that we have, namely for some products for the retailers. That should temporarily affect our growth margin. Let me look especially for example, for the fastener and fitting business, because we have excess inventory and instead of We have direct import for certain of our customers from Asia directly to our customer. This year, we're gonna use our inventory instead of sending a product at reduced margin that coming directly from Asia. We have to carry the cost of using this product or inventory, but we're gonna use the product which is already into our inventory to ship to our customers at a lower margin. That will affect temporarily our margin.
We don't expect any disaster, but we're gonna have certain decrease for certain product line. We don't see the effect as being dramatic in the Richelieu result if we look at the next couple of quarters.
Gotcha. Thank you. Previously, you've given a range of maybe 14%-15% EBITDA margins in a post-pandemic world. Do you think that's still the case with what you're seeing in terms of inventory discounts and that kind of thing for 2023?
Yes, it is.
Short and sweet. Just one last one, if I can. On customers that you won during the disrupted supply chain because RCH was able to keep inventory better than competitors, what do you think your retention rate is on that new business, the market share gains you made there?
I think the retention is something higher than 80% because this customer, they have discovered us. They see the large variety of product that we have. They will continue to buy from us because they have experienced a good service, and they see the large variety of products, the easiness of using our website and to reach for people, just thinking of the sales rep of the customer service people. Basically that keeps, you know, improving the whole thing. Basically, we're quite optimistic with this.
We also have to recognize that regarding the sales that we have to keep in mind that before, you know, last year, our customers also bought more product from us they should have bought because they were scared. They wanted to make sure that they had the right and the more inventory than they would really need in order not to lose anything on their project. Our customers are in excess of inventory, and they also know that we are in excess of inventory. If they need something, they just, as we speak now, they just buy the quantity they need now because they know that Richelieu has a lot of inventory, so they're not scared as to Richelieu could miss something in the near future.
Basically, that does not help to create more sales. As I said earlier, though, whatever those circumstances, we still do well compare even though we will not be close to the performance that we had last year. Sales are still holding, I would say, healthy.
Fantastic. Thank you. That's all I had. I'll turn it over.
Thank you.
Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone. At this time, Monsieur Lal, we have no other questions. Please proceed.
It was a pleasure to talk to you. Thanks again. Whatever you need to talk to us, you know where we are. Thank you very much.
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.