Reliance WorldWide Dominating Global Plumbing with Resilient Solutions.

About Reliance WorldWide Corporation Limited

Reliance WorldWide Corporation Limited (Reliance WorldWide, the Group, ASX: RWC) is the world’s largest manufacturer of “Push-to-Connect” behind the wall plumbing fittings. The Group’s unique end-to-end, metre-to-fixture and floor-to-ceiling plumbing solutions target the repair, service, re-model and construction markets. The Group’s innovative water delivery, control and optimisation systems save plumbers time and money.

FY24 was impacted by weaker residential remodel and new construction markets

FY24 net sales were US$1,245 billion, or 2.4 percent lower compared to FY23 on a like-for-like basis, while adjusted Net Profit After Tax was down 5.7 percent to US$147 million. Volumes were slightly lower in all regions due to softer remodelling and residential new construction activity.  The result was assisted by US$23 million in cost savings driven by prior period restructuring in the Americas, procurement savings and other continuous improvement initiatives.

The Americas region is the Group’s largest and strongest performing market segment and accounts for 63 percent of Group sales and 66 percent of Group EBITDA. FY24 sales were 1.4 percent lower but a 310 basis points higher Adjusted EBITDA Margin to 21 percent of Net Sales lifted Adjusted EBITDA 15.5 percent higher than in FY23 to US$184.3 million.

UK and Europe which accounts for 15 percent of Group sales and 22 percent of EBITDA turned in 7 percent lower sales at US$209 million for an Adjusted EBITDA Margin of 29.3 percent. UK plumbing and heating sales volumes were down in line with lower residential remodels and residential new construction activity.

Asia Pacific is the smallest profit contributor of the three market segments at 12 percent of EBITDA and 21 percent of Group sales, with the lowest EBITDA margin of 11.5 percent.

Sales were impacted by lower construction activity in Australia, where new dwelling commencements were down 12.6 per cent in FY23.

Global plumbing solutions is a growing market

Reliance WorldWide is a clever company that uses product engineering to create the future of plumbing by developing and manufacturing smart product solutions that improve contractor productivity and enable the Do-it-Yourself market to carry out household repairs, saving time and money.

Reliance WorldWide’s products feature in non-discretionary repair projects and its brands are globally recognised “go-to” products for repair work.

Plumbing jobs are less discretionary than other repair jobs and don’t require mortgage household funding in the same way as construction activity so demand for Reliance WorldWide’s repair solutions is less impacted by higher mortgage interest rates and lower new residential construction activity.

The Group has estimated the addressable market for its product at US$26 billion and considers the market to be highly fragmented.

FY25 outlook

Global interest rate settings in Reliance World Wide’s key markets will impact FY25 earnings because the Group’s earnings cycle is to some extent affected by the interest rate cycle and overall economic growth outlook.

However, investors should not rely on lower interest rates to drive earnings higher given the inherent uncertainty in interest rate forecasts. Instead, investors can take comfort from Reliance WorldWide’s exposure to the less cyclical and non-discretionary repair and maintenance sector. This sector is less interest rate sensitive to economic downturns and provides greater earnings resilience compared with the more cyclical new residential construction market. Furthermore, new products (for example, SharkBite Max and PEXa and expansion fittings) and operational efficiencies, will support future earnings growth.

While specific quantitative earnings guidance hasn’t been provided, management has stated that an easing of interest rates in the Group’s key geographies should drive product demand higher.

Margins are currently 4 percent below their prior peak and the operating environment has been challenging over the past 18 months. However, should expectations for lower interest rates in the US materialise next year, Group earnings should increase from the second half of FY25.