Reliance shares soar after meeting guidance amid 'tough macro environment'
Make us a preferred source
Make us a preferred source on Google
More news: Reliance Worldwide was one of the best performing ASX 200 stocks in morning trading after delivering on its full-year guidance.
Reliance shares were up 8.7% to $5.11 by 11:10am AEST.
Jarden analysts described the result as a "solid set of numbers in a tough macro environment".
Operating margins held up, they said, particularly in Europe, Middle East and Africa, while improving margins in the Americas reflected an increasing manufacturing mix and cost-outs.
Reliance takes 21% profit hit on lower construction demand
The news: Plumbing supplies manufacturer Reliance Worldwide reported a 21% fall in full-year profit as higher interest rates reduced demand for new remodelling and construction activity during the 2024 financial year.
The numbers: Reliance posted net profit after tax of USD110.1 million ($163.56 million), down 21% on FY23, while adjusted NPAT fell 6% to USD146.9 million. Analysts had expected NPAT to lower 4.6% to USD133.2 million, according to Visible Alpha data.
Net sales were up 0.2% year on year to $1.25 billion, including a partial contribution from Holman Industries which was acquired for $160 million in March. Excluding Holman, sales were 2% lower compared to the year earlier.
External sales were down 1% in the Americas, 3% in Asia Pacific and 10% in Europe, Middle East and Africa (EMEA).
EBITDA for the year totalled $247.5 million, 10% lower year over year. The result included $27.1 million in one-off costs related to the closure of Reliance's Supply Smart business in the Americas, restructuring in EMEA and the impairment of manufacturing assets in Spain, as well as costs associated with the acquisition of Holman. Excluding these items, EBITDA was $274.6 million, in line with FY23.
Reliance declared a final distribution of 5 US cents per share, comprising an unfranked final cash dividend of 2.5 US cents per share and the undertaking of an on-market share buyback for USD19.6 million, equivalent to 2.5 US cents per share.
The context: Reliance said that sales volumes were softer in all regions due to weaker remodel and residential new construction markets, though new product revenues and the acquisition mitigated these impacts.
The company expects the external sales in the first half of FY25 to be "broadly flat" with a similar trajectory in each region. Cost reduction and efficiency measures will continue to be pursued, it said, with the target of improving its consolidated EBITDA margin relative to FY24.
Meanwhile, Reliance said that newly acquired Holman is "on track to meet the expectations established at the time of the takeover", which included doubling annual net external sales in the Asia Pacific region.
What they said: Reliance CEO Heath Sharp said: "The impact of higher interest rates in FY24 has led to reduced consumer appetite for remodel activity and lower levels of residential new construction activity."
"We introduced a range of new products in the Americas which drove an above-market sales performance, while cost reduction programs in all regions helped to mitigate the impact of lower volumes and offset cost inflation, enabling [Reliance] to achieve stable operating martins in line with the prior year," he said.
The sources: ASX announcement, Jarden research
