Good afternoon, ladies and gentlemen, and welcome to Richelieu Hardware Second 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. Also note that this call is being recorded on 07/09/2020.
Thank you. Good afternoon, ladies and gentlemen, and welcome to Richelieu conference call for the second quarter and six months period ended 05/31/2020. With me is Antoine Houclair, CFO. 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. The second quarter was marked by a never before experienced business environment.
In such context, Richelieu has nevertheless realized an appreciable financial performance and maintain a solid and healthy financial position. We hold this performance to our one stop shop product approach as well as the diversification of our market segments, our customer service, the contribution of our acquisitions and the measures we rapidly and effectively implemented to mitigate the impact of the situation, such as temporary layoffs, reduced working hours and salaries and suspension of all travel. Up to approximately 60% of our workforce has been impacted by those measures and about 20% are still affected as we speak. In addition, some 600 employees are also working from home, thanks to our IT department that diligently provided the proper infrastructure and support, including compliance with the CBEST security. Aligned with the pre COVID trend, March started very strong, but April was impacted by the pandemic.
Overall, all our distribution centers in Canada and in The U. S, with the exception of two in Quebec that closed temporarily for only a few days, All the others remain operating at essential services with resources adapted to the current business volume. We saw substantial improvement in May, which continued in June in the manufacturers' market, but especially in the retailers and innovation superstores market. Our priority is to serve our customers. We therefore decided to maintain our inventory level, which proves appropriate considering the higher than expected demand we are currently experiencing, namely in the retailers and the innovations of our stores market.
I should also point out that we have not slowed down our acquisition strategy. During the quarter, we continued to identify new acquisition targets that meet our value creation criteria. And on June 29, we completed the acquisition of the asset of Central Wholesale Supply, which is a specialty hardware distributor operating in one location in Richmond, Virginia. We are pleased to set our presence in this strategic market for Michelin. In addition, we recently signed an agreement in principle for a new strategic acquisition in Canada.
Together, they will generate annual sales of approximately $10,000,000 I'll now go to Francois for the financial review.
Thanks, Richard. Second quarter sales reached $248,300,000 down by 11.7%, of which 6.6% growth from acquisition and 18.3% from internal decrease. In Canada, sales amounted to $155,200,000 down by 15.2%, of which 4.1 growth from acquisition and 19.3% from internal decrease. Our sales to manufacturers reached $124,500,000 down by 18.2%. As for the hardware retailers and renovation superstores market, sales stood at $30,800,000 down 0.6%, of which 7.2% growth from acquisition and 7.8% from internal decrease, largely impacted by the month of April with improvement in May.
In The U. S, sales totaled $66,500,000 in U. S. Dollar, down 9 percent. Sales to manufacturers reached US59 million dollars a decrease of 8.2% over the 2019, of which 5.9% growth from acquisition and 14.1% from internal decrease.
Sales in U. S. Dollar to hardware retailers and renovation superstores were down 14.8% compared to last year, including 45% growth from acquisition and 59.8% from internal decrease, resulting from higher cyclical sales last year. Excluding this effect, the internal growth in this market would have been 34%. Total sales in The U.
S. Reached CAD 93,000,000, a decrease of 5% representing 37.5% of the total sales. For the 2020, sales totaled 497,700,000.0, down 1.9% of which 6.6 growth from acquisition and 8.5% from internal decrease. In Canada, sales reached $312,000,000 down by $14,900,000 or 4.6%, of which 5% resulted from acquisition and 9.6% from internal decrease. Sales to manufacturers reached $252,200,000 down by $17,800,000 or 6.6%, of which 4.7% growth from acquisition and 11.2% from internal decrease.
Sales to hardware retailers and renovation superstores reached $59,800,000 compared to $56,900,000 up 5.1%. In The U. S, sales amounted to US136.8 million dollars up by 1.2%, of which 9.6% growth from acquisition and 8.3% from internal decrease. They reached CAD185.7 million, up by 2.9%, accounting for 37.2% of total sales. Sales to manufacturers totaled US121.8 million dollars an increase of $1,600,000 or 1.2% over the same period last year, of which 4.3 growth from acquisition and 2% from internal decrease.
Sales to hardware retailers and renovation superstores were up 1% compared to last year. Second quarter EBITDA reached $33,800,000 down by $600,000 or 1.7% over last year resulting from lower sales, partially offset by cost reduction measures and government grants. Gross margin remained stable and the EBITDA margin stood at 13.6% compared to 12.2% last year. First half EBITDA reached $58,700,000 up 6%. The gross margin remained stable.
As for the EBITDA margin, it stood at 11.8% compared to 10.9% last year, thanks to our cost control measures. Second quarter net earnings attributable to shareholders totaled 17 point $700,000 down 7.2%. Net earnings per share were $0.31 basic and diluted compared to $0.33 basic and diluted last year, a decrease of 6.1%. First half net earnings attributable to shareholders reached $29,500,000 up 1.5%. Diluted net earnings per share stood at $0.52 compared to $0.50 up 4%.
Second quarter cash flow from operating activities before net change in working capital balances amounted to $26,700,000 or $0.47 per share, same level as last year. Including the change in working capital balances, our operating activities generated $49,400,000 during the quarter. For the first half, they were up 7.4%, totaling $47,000,000 or $0.83 per share. For the 2020, financing activities used cash flow of $3,800,000 compared to $10,900,000 last year. This change mainly reflects the shares repurchased of $4,500,000 and dividend paid to shareholders of $3,600,000 in the 2019.
No dividends were declared for the 2020. First half financing activities used cash flow of $10,600,000 compared to 17,500,000.0 in 2019. During the first six months, we invested $29,400,000 including $23,400,000 for the three business acquisitions and $6,000,000 primarily for the purchase of equipment to maintain and improve operational efficiency and software licenses. We continue to benefit from a healthy and solid financial position, cash balance of $42,600,000 almost no debt, our working capital of $358,000,000 for a current ratio of 3.7 to one. I now turn it over to Richard.
Thank you, Antoine. The recovery trend that we have seen in May and June, both in the manufacturers and especially in the retailers and innovations for sold market is encouraging. But we obviously remain very mindful on how the situation evolves in order to take appropriate action and address effectively when and as needed. We will remain focused on keeping our business model well adapted to the need of our customers, both in Canada and The U. S, in order to meet their needs and anticipate their expectations.
We will ensure that we show you value added concept based on our diversified and unique long tail approach for products of distinctive multi access service, our outstanding online service with richardmu.com and the strong experience of our team supports effectively our customers in Canada and The U. S. With a strong financial position, we are pursuing our innovation and acquisition strategies, which are the two key growth and long term value creation drivers for the SureView. We are also happy to announce that this morning, the Board of Directors approved a payment of a quarterly dividend of $0.67 per share payable on August 7. In conclusion, I would like to warmly thank our team and business partners for their support in this challenging period.
Thank you, everyone. Now I'll be happy to answer your questions.
Thank you. And your first question will be from Hamir Patel at CIBC Capital Markets. Please go ahead.
Good afternoon. Richard, can you comment on how the year over year sales comps changed over the course of Q2? And also what was the June sales comps?
The June sales year over year, I think we see the result quarter this quarter compared to last year. But in the month of June, we will see a huge improvement. First of all, year started very strong. Richelieu was on the way it was on a good start to have an excellent year for an excellent performance regarding the percentage of EBITDA, the increase in sales and everything. So unfortunately, the COVID situation took our sales down for the last quarter.
It started with down by 46% in the month of April. And it went back up to down to 20% in May compared to 46% in April, so a big improvement. And we've seen the retailers market basically booming since the month of May, and this is continuing in June. Just to give you an example, for the month of June, if we because we have two more days in June that we had last year, but if we compare for the same number of days, sales in June are higher by 4% overall, with the manufacturers market both in Canada, both market being down by 10 and the retailer market before the what we call the cycle sales in Canada is up by 55%, while the same comparable sales in The U. S.
Are up by 80%. So we see a very, very encouraging trend. What's going to happen in the next few months, we don't know. But I think actually, we're quite happy with the actual situation. We have to keep our eyes open about what will happen in the future.
Richard, that's very helpful. And sorry, what you're saying was so for Q2 of this year, the whole quarter, is the sales day going to be similar to a year ago?
Juan, would it be same thing? The actual quarter would be same number of date for the whole quarter, the The third third quarter, it's one additional day. One additional day.
Okay, great. Thanks. That's helpful. And Richard, could you guys disclose what was the price you're paying for Central Wholesale Supply and the other transaction that you have under agreement?
The other I mean, the other transaction is it's only a letter of intent that should be in a position to close the transaction in the next few weeks. So I'm not in a position to disclose anything on this one. But for Central Wholesale, we've paid $2,000,000
$2,000,000 Okay. And then just the last one I had. On the last conference call, you'd indicated that you'd reduced senior management compensation in Q1 and some other headcount reductions. Have you started to maybe reverse some of those initiatives? Clearly, the business is performing a lot better than you expected.
Like we said a few minutes ago, actually, the 60% of our employees were touched when we made the first move in early April. And now about 20% of our people are still touch. All the people that have reduced service and when we've seen two weeks ago, the type of results that we're going to have for the second quarter. So I think that it's been a wise decision to reestablish the salary at 100% for those that were working five days a week and add reduced salary of about 20%. So that's what we've done in the last couple of weeks.
But we still have as we speak actually, we still have 200 people actually on furloughs and we've got two twenty five employees that still work four days a week instead of five and are being paid accordingly as a result of that.
Okay. That's all I had. I'll turn it over. Thank you.
Thank you.
Thank you. Next question will be from Zachary Evershed at National Bank Financial. Please go ahead.
Thank you. Good afternoon. Congrats on the quarter.
Thank you.
First question for you is on your EBITDA in the quarter, the strong margins. How much of that can you attribute to the government grants? And how much goes to cost saving initiatives?
Yes. It's the government grants is $2,200,000 So if you exclude the $3,200,000 the EBITDA would still be slightly higher than EBITDA percentage would still be slightly higher than last year.
That's helpful. And do you have visibility on how much of that 3,200,000.0 will occur in Q3 and beyond?
Yes. We're currently evaluating the amount relating to the period eligibility period ending June 6. It should be in the same ballpark.
Excellent. Thank you. You also made a reference to some postponed payments, provided a lift to cash from operations. Is that specifically the swing in accounts payable and that's what accounts for it?
Yes, you are correct. Yes, it's close to $15,000,000 So some of these delays were up for payment in June 30. So those are done, but we're benefiting from everything we can. And that's one of the reason why you've seen the payables increase.
Absolutely. So June 30, you've already caught up on that?
Yes.
Perfect.
And then we covered the inflections, Q3. Beautiful. How's your pipeline looking going forward on M and A after the two most recent ones close?
Yes, it's still strong. It's still strong in both Canada and U. S. So we're keeping our eyes open. So this situation might also create some more opportunities.
So but as we speak, we have we still have nice files open and we are not slowing down.
Perfect. And then one last one for me. There's some real infection hotspots developing in The U. S. Are you making any specific preparations for shutting down operations if they have closures there or are you going to take it as it comes?
We are prepared for everything. Now actually to operate in those circumstances. So things get worse in certain area, we certainly will react as rapidly as we did in the past. We've talked to our U. S.
Management people last week. So far, things are rather stable, but we keep our eyes open on that. And if necessary, we take the necessary action very quickly. Hopefully, that will not result in closing some DCs.
Fantastic. That's helpful. I'll leave it there.
Okay. Thank you.
Thank you. Thank you. And at this time, Mr. Lal, we have no other questions. So I would like to turn the call back over to you, sir.
So it's always a pleasure to talk to you guys. Do not hesitate to call us if you have any more questions. Have a beautiful day. Bye bye.
Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.