Plumbing giant Reece warns of weaker demand as cost of living bites

Plumbing products giant Reece expects a softer housing market and tougher economic conditions to weigh on its Australian operations this financial year.

Reece chief executive Peter Wilson says the company had a solid period despite a softer housing market. Picture: NCA NewsWire /Luis Enrique Ascui

Plumbing products giant Reece expects a softer housing market and tougher economic conditions to weigh on its Australian operations this financial year as it recruits former National Australia Bank chief executive Ross McEwan to its board.

Reece told investors on Monday that a softening housing market created headwinds for the ASX-listed company in the six months to June 30 as cost-of-living pressures and higher mortgage costs weakened demand for products. Falling demand in Australia and New Zealand saw sales below what markets had hoped for, but they were offset by renewed strength in North American over the second half.

Reece generated sales revenue of $9.1bn, which was up 3 per cent from a year ago and better than average analyst estimates of $8.95bn.

Its statutory profit was up 8 per cent to $419m, which was also better than the $415.7m markets had expected, while adjusted earnings before interest taxes, depreciation and amortisation rose 5 per cent to $1.1bn.

Reece chief executive Peter Wilson said the result was resilient in a difficult environment that he expected would continue well into the 2025 financial year.

“As we faced into the softer trading environment, we intentionally set out to refocus the team on the fundamentals of trade distribution, in core skill programs such as selling and trading. These are the foundations of the Reece model underpinning the success of our business,” he said.

“While we expect FY25 to remain challenging, we will continue to focus on the long term.”

A backlog of projects from the pandemic had been largely worked through, which would matter in the short term, Mr Wilson noted.

Former NAB chief executive Ross McEwan is joining the Reece board. Picture: Bloomberg

He said alterations and additions to residential buildings were down 6.6 per cent year-on-year compared to a 13.6 per cent year-on-year increase in 2021.

“Over the longer term, fundamentals of the sector remain positive, with demand for housing and infrastructure supported by long-term structural factors in regions,” Mr Wilson said.

The group also announced that Mr McEwan, who finished up at NAB earlier this year, would join its board as lead independent director from October 1 and would stand for election at its annual meeting on October 24.

Reece shares fell 4 per cent to $26.01 following its modest profit growth and lack of detail surrounding its outlook.

Mr Wilson said the appointment of Mr McEwan would allow Reece to tap his wealth of knowledge and experience of running large corporations in multiple countries.

“Ross’ global perspective, practical approach, and deep experience running large, complex businesses will be essential for us as we look ahead to our next stage of growth, and as I transition into the role of chair and CEO in November,” he said.

Citi analyst Samuel Seow said results were in line with expectations but there were diverging outlooks for the US and Australia.

“Looking forward we expect the outlooks for both markets to continue diverging, implying a balanced outlook,” he said.

The group will pay a final dividend of 17.75c per share.

Meanwhile, GWA, which owns the Caroma and Dorf brands, reported a 3.4 per cent increase in net profit to $45.6m for the financial year, while revenue edged up 0.4 per cent to $413.5m.

GWA said while most of its market segments faced headwinds, the company targeted specific market segments, such as commercial aged care and healthcare and volume home builders.

The company declared a fully franked final dividend of 8c a share.

Its shares closed up 2.38 per cent at $2.58 on Monday.