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 listen-only mode, but following the presentations, we will conduct a question and answer session which will be restricted to analysts only. If at any time during this call you require immediate assistance, please press star zero for an operator. Note the call is recorded on Thursday, October the 4th. Merci. Thank you. Good afternoon, ladies and gentlemen, and welcome to Richelieu's conference call for the third quarter ended August 31st, 2018. With me is Antoine Auclair, 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 CAD 15 million in sales on a yearly basis. In the first nine months, we repurchased common share totaling CAD 14.1 million, including CAD 8.9 million in the third quarter. Let's look at financial highlights. Third quarter sales reached CAD 260.6 million, up by 2.9%, of which 2.2% from internal growth and 0.7% from acquisition.
Sales to manufacturers stood at CAD 221.9 million, up by 4.4%, 3.5% from internal growth, and 0.9% from acquisition. In the hardware retailers and renovation superstores market, we achieved sales of CAD 38.7 million, down by 4.9%. In the same period of 2017, Richelieu had 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 CAD 178.7 million, up by 3.8% entirely from internal growth. Our sales to manufacturers reached CAD 143.7 million, up by 5.4%. As for the hardware retailers and renovation superstores market, sales stood at CAD 35 million, down 2.5%. In the U.S., sales totaled $62.4 million in U.S. dollars.
Sales to manufacturers reached $60 million in U.S. dollars, up by 0.3%, of which 2.4% from acquisitions, and due to the termination of a supply agreement with their major customers, a decrease of 2.1% of internal growth. With comparable sales, internal growth in the manufacturer's market would have been 6.6%. Sales in U.S. to hardware retailers and renovation superstores were down by 21.6% from the corresponding quarter of 2017 due to higher cyclical sales in the third quarters of last year. Keeping in mind that year-to-date sales increased by 17%. Total sales in the U.S. reached CAD 81.8 million in Canadian dollars, an increase of 1% and represented 31.4% of the total sales. For the first, sales totaled CAD 745.9 million, up by 7.7%, 3.9% from internal growth and 3.8% from acquisitions. At comparable exchange rates to the first nine months of 2017, sales growth would have been 8.6%.
Sales to manufacturers reached CAD 627.3 million, up by 7.2%, 2.7% from internal growth and 4.5% from acquisitions. Sales to hardware retailers and renovation superstores grew by 10.8% or CAD 11.6 million to a total CAD 100.6 million, mainly due to our market development efforts that resulted in significant sales increase in the first and second quarters of 2018 compared to the same period of last year. In Canada, sales reached CAD 503.7 million, up by CAD 41.5 million or 9%, of which 5% from internal growth and 2.9% from acquisitions. Our sales to manufacturers amounted to CAD 405 million, up by 10.3%, of which 5.4% from internal growth and 4.9% from acquisitions. Sales to other retailers and renovation superstores market grew by 3.8%. In the U.S., sales amounted to $188.6 million, up by 8%, 4.2% from internal growth and 3.8% from acquisitions.
They reached CAD 242.2 million in Canadian dollars, up by 5.2%, accounting for 33.5% of total sales. Sales to manufacturers reached $172.9 million in U.S. dollars, 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 renovation superstores market were up by 17.7% in U.S. dollars. Third quarter EBITDA reached CAD 28.9 million, up by CAD 1 million or 3.6% over the third quarter of 2017. Gross margin and EBITDA margin improved slightly from the third quarter of 2017. The EBITDA margin stood at 11.1% compared to 11% last year. For the first nine months, EBITDA was CAD 76.8 million, up CAD 3.9 million or 5.3%. EBITDA margin stood at 10.3% compared to 10.5% for the same period last year.
Third quarter net earnings attributable to shareholders total CAD 18.4 million, up by 1.4%. Net earnings per share were CAD 0.32 basic and diluted, an increase of 3.2%. Amortization expenses for the first nine months of 2018 amounted to CAD 9.8 million, compared with CAD 8.5 million for the same period of 2017, up by CAD 1.3 million, resulting mainly from the increase in capital assets acquired last year. For the first nine months, net earnings attributable to shareholders reached CAD 49.3 million, up by 3.2%. Net earnings per share was CAD 0.80 diluted, up by 3.7%. Third quarter cash flows from operating activities before net change in working capital balances amounted to CAD 22.6 million or CAD 0.39 per share, an increase of 3.2%. For the first nine months, they were up 5.9%, totaling CAD 61.1 million or CAD 1.05 per share.
For the third quarter of 2018, dividends paid to shareholders amounted to CAD 3.5 million, up by CAD 0.2 million over the corresponding quarter of 2017. During the first nine months, we paid dividends of CAD 10.4 million, up by 5.2%, and repurchased common shares for CAD 14.1 million. We also invested CAD 10.2 million, of which CAD 2 million for business acquisition and CAD 8.1 million primarily for the purchase of equipment to improve operational efficiency. As at August 31st, 2018, net cash total CAD 7.4 million and our working capital was CAD 328.9 million for a current ratio of 5 to 1. 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 30th. That concludes my overview. Thank you for your interest. I'll be happy to answer your questions.
Thank you, Mr. Lord. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touch-tone phone. Note that your questions will be taken in the order received. If you would like to withdraw your request, please press star followed by two. We ask that if you're using a speakerphone, to please lift your handset before pressing any key. Your first question will be from Zachary Evershed at National Bank Financial. Please go ahead.
Good afternoon, everyone. Zach here for Leon.
Good afternoon.
Thank 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 CAD 5 million. Now we're seeing about the same this quarter. Is that CAD 5 million figure correct?
Yes, it is.
Perfect. 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, thanks. Second question for you is on the drop in the retailers revenue. I understand that Q3 2017 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 product that we have introduced in stores. For example, we have additional business with Lowe's in Canada and some other customer as well. It's been a big move in the course of last year because we were losing those stores. It created sales that now are the cruising level. Instead of losing, 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 just perfectly normal to see what we're seeing now.
Perfect.
That doesn't mean we don't lose any business. We continue to gain business, but the main impact is the losing of the stores last year, plus the cyclical sales with the cyclical customers that typically buy only by cycle. You can have orders for one quarter like the type of Costco and that type of business. For a quarter, you have zero business. The next quarter you have CAD millions of dollars of business. We have to live with that. At the end of the year, you're going to see that things are going to be very positive.
That's very helpful. Thank you. You said at the end of the year things are going to be very positive. We do see that Q4 2017 looks like a fairly easy comp. You are expecting big things for Q4?
Maybe not big thing, but it should be okay.
Wonderful. 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 CAD 40 million a quarter business, roughly?
What you're saying makes sense, our goal here and our job is to continue to improve and to increase our market share in that market. We have many projects on the table that could bring further business at Richelieu in the future. For the time being, yes, your CAD 40 million 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?
Yeah, exactly. Actually, for the manufacturer's 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 5.5% for the Canadian market regarding the manufacturer. It's quite positive. We see various market like the kitchen cabinet manufacturers market still increasing by almost 6%. Commercial renovation with the structural woodworkers by over 6% as well. Residential furniture is up still by 3.2% in Canada and office furniture by over 5%. Basically most of the market, we feel that it's still very healthy. There is a lot of activity still.
Beautiful. You don't see any of your end markets slowing down?
No. The end market's slowing down. No.
Wonderful. The 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 for 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 finished with the improvement that we were making in the U.S. in certain warehouses and in Canada here, the main project was here in Montreal. We almost finished with installing the racking, which will replace the space that was available since we have installed in the AutoS tore. Basically in the fourth quarter, everything should be up and running smoothly and should bring some benefits.
Thank you very much. That's everything from me.
Thank you. Ladies and gentlemen, as a reminder, if you do have any questions, please press star followed by one. Your next question is from Scott Carscallen at Mackenzie Investments. Please go ahead.
Yes. Hi, gentlemen. I 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. In the event that the U.S., 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 would add something on the invoice for the extra duty that we have to pay due to that new regulation. There's no doubt that Richelieu Hardware is not going to pay for those new taxes. We will have to charge the customers. 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 are exactly saying that, they will charge the cost of the duty to their customers, as well as we will do at Richelieu Hardware.
We'll possibly see basically inflation across your sector.
That will be inflation for the Americans. That does not apply to Canada. As far as we are concerned, 3,500 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. Once again, ladies and gentlemen, if you do have any questions, please press star followed by one. At this time, Monsieur Lord, we have no other questions. I would like to turn the call back over to you, sir.
Thank you to all of you again, 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. At this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.