Reliance Worldwide faces headwinds in FY24 amid challenging market conditions

SYDNEY, AUSTRALIA: Reliance Worldwide Corporation (RWC), a global leader in plumbing and heating products, has released its guidance for the financial year 2024 (FY24), indicating a decline in revenues and operating margins due to lower demand and cost pressures.

RWC said that its exposure to the repair and maintenance sector, which is less cyclical than the new residential construction market, provides greater resilience to economic downturns. However, the company also acknowledged that macroeconomic conditions are expected to be more challenging in Europe, the Middle East and Africa (EMEA) compared with its other two regions, the Americas and Asia Pacific (APAC).

In the UK, RWC expects lower sales of plumbing and heating products due to a combination of lower new home construction activity and weaker demand for home remodelling. Demand for specialty products is also likely to be impacted by weakness in the broader UK economy. In Continental Europe, RWC anticipates depressed economic conditions to continue adversely affecting demand for water filtration and drinks dispense products.

Consequently, RWC expects external sales in local currency to be down by low double-digit percentage points in FY24 versus the prior corresponding period (pcp), consistent with the first half of FY24. Operating margins are also expected to be lower than pcp. RWC said that it plans to implement further cost reduction initiatives to help mitigate the impacts of lower volumes.

In the Americas, RWC expects sales to be broadly in line with the pcp, after adjusting for the impact of the closure of Supply Smart, a non-core business unit. Operating margins are expected to be higher than for FY23 and consistent with the first half of FY24, following the transfer of some SharkBite manufacturing and assembly from Australia to the US.

In APAC, RWC expects external sales, excluding the contribution from Holman Industries, a recent acquisition, to be down by low single digits, with repair and remodel activity helping to offset the decline in new home construction. Intercompany sales will be significantly lower in FY24 following the transfer of some SharkBite Max production to the US. For APAC overall, RWC expects operating margins to be around one third lower than in FY23 due to lower demand in the Australian market, along with the major changes in manufacturing orientation away from exports to the US.

At a consolidated level, RWC expects that its revenues will be down by low single digit percentage points in FY24 compared with FY23. The company said that it targets stable operating margins for the full year, with the impact of lower volumes to be offset by cost savings. This guidance excludes any contribution from Holman Industries in FY24.

RWC also provided the following key assumptions for FY24:

  • Operating cash flow conversion in the second half to be above 90% for the period.
  • Capital expenditure to be in the range of $50 million to $55 million.
  • Depreciation and amortisation expense to be in the range of $50 million to $55 million.
  • Net interest expense to be in the range of $26 million to $29 million, including the cost of additional borrowings to fund the acquisition of Holman Industries.
  • Adjusted effective tax rate to be in the range of 17% to 20%.
  • Cost saving measures to deliver $20 million in savings for the full year, an increase from the previous guidance of $18 million as a result of further cost savings targeted in EMEA.

RWC cautioned that variations in economic conditions, trading conditions or other circumstances may cause these key assumptions to change.

RWC is a global leader in the design, manufacture and supply of high-quality, reliable and innovative plumbing and heating products and solutions for the residential, commercial and industrial markets. RWC’s brands include SharkBite, Cash Acme, Holdrite, John Guest, RMC, Streamlabs, Reliance Water Controls, and Holman Industries.

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