Reece warns on recovery timeline after Covid
Plumbing and bathroom products giant Reece has warned that overseas migration won’t return to pre-Covid-19 levels for four years.
Plumbing and bathroom products giant Reece has warned that overseas migration won’t return to pre-COVID-19 levels for four years, and is wary of the outlook for the year ahead despite positive sales growth at its Australasian and American operations in the first quarter.
At Thursday’s first virtual annual general meeting of the company, which saw patriarch and chairman Alan Wilson re-elected as a director for another three years, chief executive Peter Wilson said group sales revenue rose 4.4 per cent in the first quarter.
Australia and New Zealand sales revenue was up 6.9 per cent, while sales from Reece’s business in America was up 8.6 per cent on a constant currency basis.
Reece, which runs 630 outlets in Australia, made a big foray into the US in 2018 with the $1.9bn acquisition of MORSCO. Last year it also paid $221m for Californian plumbing wholesaler Todd Pipe.
“We have continued to see growth in both regions which has exceeded our initial expectations,’’ Mr Wilson said.
“It’s important to note that we do not see the first quarter’s performance as illustrative of the remainder of the financial year due to significant uncertainty and negative economic indicators across our regions. Trading conditions in the US are softening as we speak as the COVID-19 cases escalate and as we are being forced to close more stores.”
He said in Australia activity was increasing as COVID-19 restrictions eased, largely stimulated by government incentives and low interest rates.
“With borders closed, population growth — a key driver for new housing — has fallen sharply since March. And we don’t expect overseas migration to return to pre-COVID-19 levels until 2024. Dwelling approvals are expected to fall by 5 per cent in the 2021 financial year. This represents a 30 per cent decline since 2018,’’ he told the meeting.
“With more people spending time at home, we will continue to see an increase in demand for alterations and additions, helping to balance the short-term impact of the housing downturn. With less people in the office, coupled with a decline of inner-city investment, non-residential commencements are expected to decline in the 2021 financial year.”
Reece in April announced a fully franked final dividend of 6c per share after net profit increased 13.3 per cent to $229m in its 100th year of operations. The lift was driven by a 10 per cent increase in sales during a year of challenging market conditions.
In early April Reece said it was suspending dividends after raising $600m to bolster its balance sheet, as the COVID-19 pandemic took hold.
The Wilson family holds a 67 per cent stake in the company.
Reece shares, which were trading at $7.88 at the end of March, closed 1.9 per cent lower on Thursday at $14.
The company’s online sales increased by 68 per cent last year, including 89 per cent in the fourth quarter.
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