Reliance Worldwide doubles profit on construction, renovation boom but feels rising costs pressure
Reliance Worldwide’s profit has soared during the housing boom, but the plumbing fittings group has warned that prices are on the rise.
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Plumbing and water fixtures maker Reliance Worldwide has ridden a Covid-led global boom in housing renovations and construction to a doubled profit and record dividend, leading chief executive Heath Sharp to conclude the way people think about their homes has shifted for good.
“There’s this whole my home is my castle mentally that has kicked in … every month for the last 15 months, we’ve been watching this and thinking ‘this has to come off at some point’ and it just hasn’t,” Mr Sharp said.
“That demand has remained, and it’s beginning to feel like a structural shift as opposed to a transient impact.”
But despite people staying at home boosting demand for Reliance’s products, Mr Sharp said he wanted to see the world open back up and was considering the feasibility of a mandatory jab policy for employees.
“At this stage certainly we’re on the encouragement and incentive side of things … I think it’s fair to say that we are looking at what the implications would be of a mandate, and that has all sorts of different implications depending on what part of the world you’re in,” he said.
Handing down a $188.2m net profit on Monday – up 111 per cent on the prior year – Mr Sharp said the residential construction and renovation boom was particularly noticeable in Australia.
“Each of our regions recorded strong sales growth, and this translated into strong earnings growth. The trend behind this growth was common to all our key markets, and it was the increased spending by property owners on their homes,” he said.
“It was supported by strong new homebuilding activity particularly in Australia where our business has its highest exposure to new residential construction.”
Revenue jumped 15 per cent to $1.3bn with underling earnings surging 39 per cent to $349.2m.
Reliance will pay shareholders a final dividend of 7c a share, taking the total for the year to a record 13c payout.
Sales surged in the key markets of the UK, North America and Australia – with a winter freeze in Texas earlier this year alone boosting sales by US$42m.
Although the company declined to provide guidance to the uncertainty created by Covid, Mr Sharp said the company was facing a number of headwinds caused by the booming economic conditions that have underpinned a red hot housing market – like the rising cost of input materials, which along with freight disruptions, cost the company $16.9m.
“The biggest issue for us over the last six months or so has been the move of copper pricing,” Mr Sharp said.
“We’ve moved our pricing in the marketplace and we’ve managed to offset that, so I think we’re in a good spot there.
“But everything’s moving – plastic resins, steel, cardboard, plastic bags.”
Another challenge comes from labour shortages – but in this case, it is not an issue caused by Covid-19.
“Labour shortages for plumbing contractors have been an issue for a long time in all of our major markets, it’s not unique to any one of our markets,” he said.
“There are more plumbers leaving, retiring than there are new plumbers coming in, even before Covid.”
Mr Sharp said he was confident home construction and renovation levels would remain strong across Reliance’s key markets – even when accounting for the impacts of intermittent lockdowns.
“We are confident that the housing market will remain strong, the asterisk there of course is construction shutdowns due to Covid,” he said.
“Now, our view is that there will be a delay as opposed to a removal of demand … Every time there is a lockdown it kind of re-energises this idea of investing in the home.”
Reliance shares closed down 1.5 per cent at $5.85 after earlier in the morning hitting a three-year high of $6.18.
Originally published as Reliance Worldwide doubles profit on construction, renovation boom but feels rising costs pressure
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