Good afternoon, ladies and gentlemen, and welcome to the Richelieu Hardware Third Quarter Results Conference Call. At this time, note that all lines are in a listen only mode. Following the presentation, will conduct a question and answer session, which will be restricted to analysts only. Note the call is recorded on Thursday, October 4.
Thank you. Good afternoon, ladies and gentlemen, and welcome to Richelieu's conference call for the third quarter ended August 3138. With me is Antoine Leclerc, 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. During the third quarter, we continued to increase our sales and improve our EBITDA margin.
We ended the period with a healthy and solid financial position. We remain on the lookout for acquisition opportunities. And on September 4, we completed the acquisition of Chair City Supply, a U. S. Distributor, which is our second U.
S. Acquisition this year. Chair City distributes specialty products to furniture manufacturers from its four distribution centers, three in North Carolina and one in Tennessee. Our network now includes 36 centers in The U. S.
And 36 in Canada. This acquisition strengthens our presence, our team, our product offering and our customer base in this significant market segment, while adding $15,000,000 in sales on a yearly basis. In the first nine months, we repurchased common share totaling $14,100,000 including $8,900,000 in the third quarter. Let's look at financial highlights. Third quarter sales reached 260,600,000.0 up by 2.9%, of which 2.2% from internal growth and 0.7% from acquisition.
Sales manufacturers stood at $221,900,000 up by 4.4%, 3.5% from internal growth and 0.9% from acquisition. In the hardware retailers and innovation superstores market, we achieved sales of $38,700,000 down by 4.9%. In the same period of 2017, Illustrated benefited from significant sales resulting from the initial introduction of new products in stores and higher cyclical sales both in Canada and The U. S. In Canada, sales amounted to $178,700,000 up by 3.8% entirely from internal growth.
Our sales manufacturers reached $143,700,000 up by 5.4%. As for the hardware retailers and renovation superstores market, sales stood at $35,000,000 down 2.5 In The U. S, sales totaled $62,400,000 in U. S. Dollar.
Sales to manufacturers reached $60,000,000 up by 0.3%, of which 2.4% from acquisitions and due to the termination of a supply agreement with the major customers, a decrease of 2.1% of internal growth. With comparable sales, internal growth in the manufacturers market would have been 6.6%. Sales in U. S. To other retailers and innovation superstores were down by 21.6% from the corresponding 2017 due to higher cyclical sales in the third quarters of last year, keeping in mind that year to date sales increased by 70%.
Total sales in The U. S. Reached CAD 81,800,000.0, an increase of 1% and represented 31.4 percent of the total sales. For the first, sales totaled $745,900,000 up by 7.7%, 3.9% from internal growth and 3.8% from acquisitions. At comparable exchange rates to the 2017, sales growth would have been 8.6%.
Sales to manufacturers reached 6 and $27,300,000 up by 7.2%, 2.7% from internal growth and 4.5% from acquisitions. Sales to hardware retailers and innovation superstores grew by 10.8% or $11,600,000 to total $100,600,000 mainly due to our market development efforts that resulted in significant sales increase in the 2018 compared to the same period of last year. In Canada, sales reached $503,700,000 up by $41,500,000 or 9%, of which 5% from internal growth and 3.9 Our sales manufacturers amounted to $4.00 $5,000,000 up by 10.3%, of which 5.4% from internal growth and 4.9% from acquisitions. Sales to other retailers and innovation superstores market grew by 3.8%. In The U.
S, sales amounted to $188,600,000 in U. S. Dollar, up by 8%, 4.2% from internal growth and 3.8% from acquisitions. They reached CAD242.2 million, up by 5.2%, accounting for 32.5% of total sales. Sales to manufacturers reached 172,900,000.0, an increase of 4.5%, of which 0.6% from internal growth and 3.9% from acquisitions.
With comparable sales, internal growth in the manufacturer's market would have been 6.9%. Sales in the hardware retailers and innovation superstores market were up by 70.7% in U. S. Dollar. Third quarter EBITDA reached $28,900,000 up by 1,000,000 or 3.6% over the 2017.
Gross margin and EBITDA margin improved slightly from the 2017. The EBITDA margin stood at 11.1% compared to 11% last year. For the first nine months, EBITDA was $76,800,000 up $3,900,000 or 5.3%. And EBITDA margin stood at 10.3% compared to 10.5 for the same period last year. Third quarter net earnings attributable to shareholders totaled $18,400,000 up by 1.4%.
Net earnings per share were $0.32 basic and diluted, an increase of 3.2%. Amortization expenses for the first nine months of twenty eighteen amounted to $9,800,000 compared with $8,500,000 for the period of 2017, up by $1,300,000 resulting mainly from the increase in capital assets acquired last year. For the first nine months, net earnings attributable to shareholders reached $49,300,000 up by 3.2%. Net earnings per share was 80% diluted, up by 3.7%. Third quarter cash flow from operating activities before net change in working capital balances amounted to 22,600,000 or $0.39 per share, an increase of 3.2%.
For the first nine months, they were up 5.9%, totaling $61,100,000 or $1.05 per share. For the 2018, dividends paid to shareholders amounted to $3,500,000 up by $200,000 over the corresponding quarter of 2017. During the first nine months, we paid dividends of $10,400,000 up by 5.2% and repurchased common shares for $14,100,000 We also invested $10,200,000 of which $2,000,000 for business acquisition and $8,100,000 primarily for the purchase of equipment to improve operational efficiency. As of August 3138, net cash totaled $7,400,000 and our working capital was $328,900,000 for a current ratio of five:one. Turning to our outlook.
In the fourth quarter, we will remain focused on product innovation, market penetration and development strategies on the integration of further synergies with our latest acquisitions. We will continue to identify acquisition targets in North America, which are fully compatible with our growth objectives. We are confident we will achieve good results for the year ended November 30. That concludes my overview. Thank you for your interest.
We'll now be happy to answer your questions.
Thank you, Mr. And your first question will be from Zachary Evertz at National Bank Financial. Please go ahead.
Afternoon, everyone. Here Thank for you. I'll kick it off with a question about the termination of the supply agreement with the major manufacturing customer. In Q2 last quarter, we calculated the impact at about $5,000,000 and now we're seeing about the same this quarter. Is that $5,000,000 figure correct?
Yes, it is. Perfect. And so will we see a similar drag in Q4 and Q1? Or is there a seasonality component to it?
Same thing in Q4 and Q1. After that, we'll be free from that.
Perfect. Second question for you is on the drop in the retailers revenue. And I understand that Q3 twenty seventeen was a tough comp as it was up about 20% on new product introductions and higher cyclical sales. Can you give us a little bit of color on those new products?
New products that we have introduced in stores, for example, we have additional business with Lowe's in Canada and some other customers as well. So it's been a big move in the course of last year because we were loading the stores. So it created sales that now are at the closing level instead of loading. Now we're just closing with the normal speed, which is normal when you deal with such customers in that type of business, it's perfectly normal to see what we're seeing now.
Perfect.
And That doesn't mean we don't lose any business. We continue to gain business, but the main impact is the loading of the stores last year plus the cyclical sales with the cyclical customers that typically buy only by cycle. You can have all those for one quarter, like a type of Costco and that type of business. For a quarter, you have zero business. The next quarter, you have millions of dollars of business.
So we have to live with that. But at the end of the year, you're going to see that things are going be very positive.
That's very helpful. Thank you. And so you said at the end of the year, are going be very positive. We do see that Q4 twenty seventeen looks like a fairly easy comp. So you are expecting big things for Q4?
Maybe not big thing, but it should be okay.
Wonderful. So you mentioned that you've reached a cruising speed. Would you say that it's right to think about sales to retailers as about a $40,000,000 a quarter business roughly?
What you're saying makes sense, but our goal here and our job is to continue to improve and to increase our market share in that market. So we have many, many projects on the table that could bring further business at Vishalu in the future. But for the time being, yes, your $40,000,000 makes sense.
Excellent. Thank you so much. Would you be able to give us a geographic breakdown of your revenues? Were there pockets of weakness in Canada, for example?
Yes, yes, exactly. Actually, for the manufacturers market, Eastern Canada, our sales in the last quarter increased without acquisition by 4.4% for the Eastern Canada, which is Quebec and the Maritimes and Atlantic area. Ontario was up by 2.9%. Western Canada was up by 8.4% for a total of 4.5% for the Canadian market regarding the manufacturers. So it's quite positive and we see various markets like the kitchen cabinet manufacturers market still increasing by almost 6%, commercial innovation with the architectural woodworkers by over 6% as well.
Residential furniture is up still by 3.2% in Canada and office furniture by over 5%. So basically, most of the market, we feel that it's still very healthy. There is a lot of activity still.
Beautiful. And you don't see any of your end markets slowing down?
No. No. The end market is slowing down. No.
Wonderful. And then last one for you. Even though revenue growth wasn't as strong as what we were expecting, your margins did come in above our estimates, which is a great sign. Are the initiatives and new technology implementation costs done at this point?
It's almost done. As we said in previous phone calls, the last quarters, we basically said that in the fourth quarter, we should see some of the benefits, but we have started to see some during the present quarters, mainly in the last month for us because we are almost finished not almost, we finished with the improvement that we were making in The U. S. In certain warehouses. And in Canada, main project was in Montreal.
So we almost finished with installing the racking, which will replace the space that was available since we have installed in the total stores. So basically, in the fourth quarter, everything should be up and running smoothly and should bring some benefits.
Thank you very much. That's everything for me.
Thank you. And your next question is from Scott Karskullan at Mackenzie Investments. Please go ahead.
Yes. Hi, gentlemen. Just want to ask a question about the tariffs, in particular tariffs on Chinese imported goods. I think the last quarterly conference call, you said you were importing about 15 from China and we've seen tariffs already implemented on some Chinese goods. But in the event that The US at the end of the year decides to put tariffs on all Chinese goods and takes those tariffs to 25%.
What does that mean for you guys? Are you able to pass that on immediately to customers?
Yes. It does mean that we have to pass it on to the customers. Basically, the way it should work is that we're going to add something on the invoice for the extra duty that we have to pay due to that new regulation. So there's no doubt that Richelieu is not going to pay for that for those new taxes. Taxes.
We will have to charge the customers. And we already have I have in front of me the letter of one of our competitors, which is usually dealing mainly with the retailers in The U. S. That exactly saying that they charge the cost of the duty to their customers as well as we will do as well at Refugio.
So we'll possibly see basically inflation across your
That's the situation for the Americans. That does not apply to Canada. So as far as we are concerned, 203,500 products are going to be touched and we will immediately, as soon as we have touched, charge the customers.
Okay, great. Thank you for that clarity.
Thank you.
Thank you. And at this time, Mr. Lau, we have no other questions. I would like to turn the call back over to you, sir.
Thank you to all of you again, and please, it's always a pleasure for us to talk to you if you decide to give us a call. Have a great day. Bye bye.
Thank you, sir. 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. Enjoy the rest of your day.