Plumbing and building supplies group Reliance Worldwide (RWC) shares hardly moved yesterday in the wake of an early solid March quarter sales update.
A feature of the update was the company’s confirmation that it is having cost problems in the price of brass inputs like zinc and copper but is working to recover those in higher prices for its copper and zinc products.
The shares firmed slightly to $4.92, up 0.8%. But that was after they hit a near three year high of $5.35 in early trading. The early enthusiasm then faded.
RWC told the ASX that consolidated net sales for the quarter rose 14% to $359.4 million from the first quarter of 2020 which was negatively impacted by Covid and the lockdowns.
Directors said the latest results saw reported net sales “negatively impacted by the strength of the Australian dollar relative to other currencies, particularly the US Dollar. On a constant currency basis, net sales were up 27%.”
Strong sales growth was recorded in all regions, reflecting buoyant demand for plumbing products, driven by increased spending on residential repairs and remodelling in particular.
A significant weather freeze event in the US in February also boosted demand for plumbing supplies in the quarter. We estimate that the impact of the freeze event accounted for over half of the sales increase in the Americas for the quarter.
Sales in Asia Pacific (APAC) were driven by continued strength in the residential new construction market in Australia and growth in remodelling activity. Export sales to the Americas were up strongly, the company said (despite the stronger dollar).
Europe and the Middle East and Africa (EMEA) “has continued to record a strong rebound in sales due to the growth in UK plumbing and heating arising from increased repair and remodel activity, as well as increased exports of FluidTech products to the Americas and APAC regions.”
Sales to date in April are substantially ahead of the same period last year, with sales in April 2020 “having been adversely impacted by COVID‐19.”
On costs, it seems as though RWC is getting cost recoveries.
“RWC is continuing to implement price rises for products which have seen sustained input cost increases, particularly brass products which have been impacted by higher copper and zinc costs,” it told the ASX.
“We continue to expect to be able to pass on the impact of metal commodity and other cost increases through price adjustments. Commercial confidentiality prevents us from elaborating further other than to re‐iterate that the process is progressing as expected.”
CEO Heath Sharp, said in the statement that the company had continued to perform strongly in the third quarter of the 2021 financial year.
“We achieved 14% reported net sales growth for the period, and 27% net sales growth on a constant currency basis. All our major markets are benefitting from increased household spending on repairs and remodelling activity, and Australia is also benefitting from increased new house building activity.
“The winter freeze event in the southern US in February also boosted sales in the quarter, with freeze‐associated purchasing activity flowing right the way through March and into April.
“In terms of pricing increases, our largest OEM (Original Equipment Manufacturers) customers are on indexed pricing and therefore adjustments have already been made. For our wholesale customers, we note that the market overall is moving a second time this year to pass through higher copper cost impacts.”
“Pricing discussions with other channel partners are progressing and we remain confident of achieving acceptable cost recovery outcomes”, Mr. Sharp said.
