‘Record demand’ not enough to lift RWC (ASX:RWC) share price on Monday

Shares in Reliance Worldwide Corporation Ltd (ASX: RWC) closed Monday up marginally after the company released its interim report and financial results for the half year ended 31 December 2021.

The RWC share price finished the day less than 1% in the green at $5.13 following the release of its earnings results today.

RWC share price flat amid earnings growth

Key takeouts from the company’s earnings results include:

• 12% growth in reported Net Sales to US$522 million over the prior corresponding period (pcp)
• Americas growth of 15% over pcp including an initial contribution from EZ-FLO which was acquired in November 2021
• Asia Pacific constant currency sales up 10% on pcp driven by strong Australian residential construction and remodel activity
• Continental Europe sales up strongly, while the UK saw lower volumes following a strong period of growth in the pcp
• Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of US$125.5 million, up 5% on pcp
• Adjusted net profit after tax (NPAT) of US$75.4 million, up 5% on pcp

What else happened this period for RWC?

The company’s performance this half was hallmarked by NPAT of US$63.7 million for the six months whereas Adjusted NPAT spiked 5%, up to US$75.4 million.

The result enabled RWC’s board to declare an interim dividend of US4.5 cents per share, slightly down on previous payments in 2021.

However, RWC wasn’t immune to the impacts that global supply chain pressures had on commodity prices in 2021. Rising costs for materials like copper, resins, and steel, were experienced during the period “together with higher costs for freight, packaging, energy and other costs”.

Whilst the company attempted to pass the costs onto consumers versus absorbing it themselves, it remains to be seen whether RWC has the pricing power in its segment to pull this off successfully.

“Price rises were implemented during the period to substantially offset these increased costs, although the timing lag between higher input costs being incurred and offsetting price increases negatively impacted operating margins”, it remarked.

In good news, the period included the first contribution from EZ-FLO, which was acquired back in November 2021. The segment contributed sales of US$22.5 million and EBITDA of US$2.3 million recorded for the 6-week period post-acquisition, RWC says.

Management commentary

Speaking on the announcement, RWC Chief Executive Officer Heath Sharp said:

We continued to experience robust market conditions and demand for our products. The trend of increased spending on home remodelling activity, coupled with strong new residential construction markets, has underpinned record levels of demand. We were able to consolidate our volumes following a period of exceptional growth in 2021. Importantly, we were able to meet our customer’s service and delivery expectations despite the increased incidence of COVID and supply chain challenges.

What’s next for RWC?

So far, this year to date, trends have been “broadly consistent with the trends seen in the first half”, the company said, although results have been mixed.

“Americas sales, excluding EZ-FLO, were higher than the same month last year reflecting ongoing strong demand and performance ahead of market. APAC external sales continued to benefit from ongoing strength in the residential construction and remodelling markets in Australia”, it said.

“Europe, Middle East and Africa (EMEA) also continued the trajectory of the first half with the overall result in line with the prior January”.

RWC share price snapshot

In the last 12 months, the RWC share price has climbed 8% but has struggled since trading recommenced on January 4. Since then it has collapsed over 18%.

The post ‘Record demand’ not enough to lift RWC (ASX:RWC) share price on Monday appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Reliance Worldwide Corporation Limited. The Motley Fool Australia has recommended Reliance Worldwide Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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