Like Sonic Healthcare (see separate story) global plumbing, heating and piping firm Reliance Worldwide has declined to provide 2021-22 guidance due to the ongoing uncertainty surrounding market conditions and any potential impacts of further COVID outbreaks.
Perhaps it wonders if the flood of assistance to home building and construction in many of its markets from governments and central banks might be overwhelmed this time by Covid Delta?
But the company has benefited from record low interest rates and support schemes such as Homebuilder in Australia, that sparked a surge in construction of new homes and renovations, and by the upturn in online sales that saw a surge in the construction of logistics facilities such as warehouses and depots.
RWC yesterday reported that it more than doubled full year profit on a much slower rise in revenue, enabling it to triple its final dividend payout after heightened home building and renovation activity during the pandemic helped it beat sales expectations.
Reliance reported that profit had more than doubled to $188.5 million on a 15.3% to $1.34 billion, a figure better than the market was forecasting.
Final dividend rose from 2.5 cents in 2019-20 to 7 cents per share, partially franked. Wirth the 6 cents a share interim, the total for the year is 13 cents a share, almost double the Covid-impacted 7 cents a share paid for 2019-20.
While the shares hit an early high of $6.18 – approaching the record high of $6.38 set in 2018 – the gain could not be sustained the shares ended the day down 1.5% at $5.85.
Investors focused on the CEO’s remarks about tougher trading conditions in recent weeks because of Covid, even though sales were up.
CEO Heath Sharp said:
“We experienced positive sales growth over the equivalent period in the prior year in all three regions with reported net sales in July up 9% overall and 6% on a constant currency basis.
“The rate of growth was lower than for FY2021, reflecting very strong sales growth in the Americas at the start of FY2021 and the strong recovery in volumes experienced in the UK from July 2021 onwards.
“Australian sales maintained their growth momentum supported by growth in residential construction activity.
“Underlying demand remains strong, but sales are being constrained by ongoing supply chain disruption including raw materials availability, shipping delays, and a shortage of labour in plumbing trades.”
He said the company will update investors each quarter on trading conditions in its three regions, including sales and operating earnings.
Looking at 2020-21, Reliance said increased consumer spending on repair and remodel activity in all key markets – coupled with increased new residential home building activity – underpinned its result, while the winter freeze event in Texas in early 2021 also lifted sales demand.
Full-year net sales in the Americas grew 14% driven by the strength of the residential repair and remodelling markets in the US and Canada.
Asia Pacific sales were up 13% higher for the year with external sales up 11%, reflecting stronger Australian new housing construction and remodel (renovation) markets.
Higher commodity prices for copper, resins and steel pushed up manufacturing input costs, while higher packaging and freight costs combined to hit earnings by $16.9 million.
Disruptions arising from the incidence of COVID cases in the UK, Europe and the US also put additional pressure on our operations due to increased employee sickness and absenteeism as well as supply chain and logistics disruptions,” Mr Sharp said.
