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Highlights
Reece Ltd cites subdued volumes in Australia, New Zealand, and the US
US residential sector slowdown and competition weigh on margins
Board member Ross McEwan resigns to focus on external role
Industrial supplies company Reece Ltd (ASX:REH), part of the ASX 200, experienced a sharp share price drop following the release of its latest trading update. The company highlighted ongoing headwinds across key operating regions, including Australia, New Zealand, and the United States, reflecting broader sector softness.
The update outlined that trading conditions remain difficult into the second half of FY25. Reece pointed to continued subdued volumes, driven by low housing activity and limited improvement from recent interest rate changes.
FY25 Earnings Expectations Reflect Market Pressure
Reece forecast its earnings before interest and tax for FY25 to be lower than the prior financial year, citing the persistent weakness in both the Australian and US housing sectors.
Chairman and CEO Peter Wilson remarked that the current cycle has not shown signs of a turnaround, as housing activity remains muted despite monetary policy adjustments. He noted the subdued construction pipeline across Reece’s Australasian footprint and the ongoing strain in the US residential new construction market.
US Housing Market and Competition Impact Performance
In the United States, where Reece operates over two hundred stores, conditions have continued to soften, particularly in the Sunbelt Region. The company noted that the number of housing units under construction remains down compared to the prior year.
Alongside these structural challenges, Reece acknowledged that mortgage affordability and elevated rates have continued to weigh on the residential market. The firm also flagged that increased competition from new market entrants in the US has impacted segment profitability.
Leadership Changes Announced Alongside Trading Update
Reece also reported a change to its board composition. Ross McEwan, former CEO of a major Australian bank, will resign from the Reece board within the month. McEwan's departure aligns with his decision to step down from another board position to concentrate on responsibilities as Chair of a major resources group.
