Reliance Worldwide says US tariffs could help turn profit tap

Reliance says Trump’s tariffs could give it an advantage in the US, as it warned of Brexit disruption.

Reliance Worldwid CEO Heath Sharp has warned of the uncertain impact from Brexit in the UK. Picture: Jeremy Piper

President Donald Trump’s tariff hikes could work as a “competitive advantage” for supplies business Reliance Worldwide, which says its underlying business is strong despite worries about economic conditions in several markets and a looming Brexit in the UK.

Reliance chief executive Heath Sharp told analysts on Tuesday that the tariffs could work in the company’s favour in the US, where it sells its SharkBite push-to-connect plumbing fittings used by tradespeople in bathrooms, kitchens and laundries.

When asked what effect rising tariffs could have on Reliance, Mr Sharp said “frankly, we have no idea what tariffs we will face next week … let alone by the end of the year.

“[But] We think it will actually be a competitive advantage given a high proportion of our products are made in our own factories …. whereas the majority of our competitors are procuring finished goods from China.”

Reliance (RWC) on Tuesday morning announced it had more than doubled full-year net profit to a record $133 million despite headwinds such as higher copper prices and a slowdown in new Australian housing construction.

Revenue for the 2019 financial year increased 43.5 per cent to $1.104 billion, including the first full-year contribution from its $1.22 billion acquisition of UK plastic fittings maker John Guest in May last year.

Reliance raised its fully franked final dividend by two cents to five cents.

The result pushed the Reliance share price up 5.8 per cent to $3.49 on Tuesday. Reliance shares slumped as much as 26 per cent in May after the company lowered its full-year earnings guidance, blaming events such as the lack of a big freeze in the US that would usually see Reliance benefiting from the repairing of cracked and broken pipes.

Mr Sharp described 2019 as a “momentous year” and said Reliance was “tremendously well placed to keep driving onwards”.

He forecast a net profit after tax of between $150m to $165m in the current 2020 financial year, from earnings before interest, tax, depreciation and amortisation of $280-305m.

“Performance … will be impacted by a number of external factors including the extent of Brexit disruption in the UK, economic and construction market conditions in other key markets, raw material costs and foreign currency impacts, “ Reliance said in a statement.

Former Reliance chairman Jonathan Munz. Picture: Supplied

In regards to Brexit, Mr Sharp said that “the key word is uncertainty and it has been a bit hard to read the marketplace.

“The last couple of months of 2019 were soft and the first bit of 2020 has been the same. It has been a mid-to-high-single-digit growth business, but if the market softens we are not going to see the same number in the UK market this year.”

But he said he was still expecting solid to above market growth rates across just about all the markets Reliance is operating in.

Reliance shares have fallen from a high of about $5.00 towards the end of April to about $3.50. The company’s former chairman and billionaire major shareholder Jonathan Munz sold his and his family’s last 10 per cent stake in the group in February.