Housing boom helps buoy GWA Group earnings

The popularity of GWA bathroom brands like Caroma and Dorf help offset weakness in the commercial sector, and cost pressures.

GWA Group, which sells bathroom products, has benefited from an uplift in residential housing construction since February

Water systems, taps, toilet and bathroom fixtures business GWA Group has pushed through two price rises in the last year, the most recent last month, as it faced higher shipping, freight and raw commodity costs. It expects that cost pressure to continue.

However, an upturn in residential construction from around February has bolstered its earnings, as people fit out new homes with GWA bathroom brands such as Caroma, Dorf and Clark, with its order book filling up for the remainder of 2021.

GWA said its second half performance was boosted by the residential side of its business and this helped counter deteriorating trading conditions in its commercial business, with empty offices, stores and other commercial building sites needing fewer of its products.

The $777m business, with operations in both residential and commercial fittings and fixtures, on Monday posted a 20 per cent fall in full-year net profit to $35.06m, as sales rose 1.8 per cent to $405.73m. The company declared a final dividend of 6.5c per share, up from 3.5c.

The market warmed to the positive outlook for its residential business and the result, which was in line with market forecasts, and GWA shares shot up 25c, or 9.5 per cent, to $2.88.

GWA chief executive Urs Meyerhans told The Australian a tough first half was followed by a much improved second half of 2021, with residential housing activity helping to boost June half sales by 6 per cent and earnings by 13 per cent.

“We saw it (a recovery) in February and March coming through and it was across residential, and residential detached dwellings in particular,” Mr Meyerhans said.

“We believe residential detached dwellings will continue to perform quite strongly for the rest of fiscal 2022.”

He said GWA had pushed through two price rises, 5 per cent in August and another 3 per cent in July, to cope with its own higher input costs.

“If you look at the positive, we are not the only ones, everyone in this industry is facing imports, commodities and facing price increases.”

GWA expects renovation and replacement activity will be stable or slightly positive for the year, although the commercial part of the business is facing headwinds caused by the pandemic and the impact of lockdowns on construction sites.

“We do think commercial will be down for the rest of fiscal 2022,” Mr Meyerhans said.

“While GWA’s commercial order bank remains strong and 14 per cent above the prior year, completions are expected to remain subdued in fiscal 2022. Growth in education and health is expected to be offset by declines in offices and retail.

“As confidence and activity increases in the commercial segment, GWA remains well placed to capitalise on this improvement.

“The ongoing effects of Covid-19 lockdowns, particularly in Sydney/NSW and Melbourne/Victoria, continue to create uncertainty regarding potential impacts on construction markets.”