Richelieu Hardware sees profit rise on flat Canadian market, slow U.S. recovery

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MONTREAL – Richelieu Hardware says it continues to prosper as a slowly improving U.S. home renovation market compensates for a stalled Canadian sector.

“Canada is rather flat all over the place,” CEO Richard Lord said Thursday following the company’s annual meeting.

The Montreal-based manufacturer and distributor produces hinges, fasteners and other hardware for the manufacturing, home renovation and retail sectors as well as other products. Its portfolio includes about 100,000 products sold to 70,000 customers in North America.

Lord said the Canadian market, which accounts for about three-quarters of Richelieu’s sales, isn’t growing much but the company needs to constantly introduce new products to maintain its leading market share.

In addition to eco-friendly products and weather-resistant materials for outdoor use, Richelieu (TSX:RCH) has entered the glass market by acquiring Vancouver-based hardware supplier Hi-Tech Glazing Supplies last year.

Lord said he’s not concerned about the problems facing Canada’s largest home renovation retailer Rona (TSX:RON), saying its other large Canadian customers have similar challenges adjusting to weak consumer demand.

“The market for retail hardware has been difficult for the last three years. I think they’re all in the same bag… but that should improve in the future. It cannot be worse,” he said.

Lord said the company’s task is to help retailers earn solid returns on the products they sell and expand the number of items it sells in those stores.

In the United States, the home renovation market has fallen by about 40 per cent following the 2008 economic crisis, but it looks like it is slowly improving, especially along the East Coast where Richelieu has its greatest presence.

“We don’t expect a big boom but a slow growth in the years to come,” he said.

Richelieu said Thursday that it earned $8.8 million in the three months ended Feb. 28, up 8.2 per cent from a year earlier.

Its first-quarter profit amounted to 44 cents per share, up 12 per cent from 39 cents per share in a year earlier.

On the Toronto Stock Exchange, Richelieu’s shares hit a new all-time high of $51.30 before closing up $1.35, or 2.73 per cent, at $50.82.

Lord said the results are “very good under the circumstances in Canada” and exceeded forecasts in the U.S. because of efforts it has taken to increase its market penetration.

Richelieu’s sales rose to $136.1 million in the quarter, up from $126.1 million a year before. Internal growth accounted for most of the increased revenue, bolstered by acquisitions.

Canada accounted for $98.5 million of its total sales in the quarter, up 3.8 per cent from a year before. Sales to manufacturers grew four per cent to $79 million while sales to hardware retailers and renovation superstores was up 2.9 per cent to $19.5 million.

U.S. sales grew 10.6 per cent to US$34.6 million, mostly from internal growth. Sales to manufacturers surged 13.2 per cent and offset a 15 per cent decrease to retailers.

The company’s Canadian sales included contributions from Procraft Industrial Ltd, a finishing products distributor with three distribution centres that Richelieu acquired in the Maritime provinces in December.

The U.S. sales included CourterCo, a distributor of specialty and decorative hardware with three locations in Indiana, Kentucky and North Carolina.

Richelieu entered into two agreements in principle in March to acquire two distributors of specialty hardware that would add some $14 million of annual sales.

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