Reliance Worldwide (ASX:RWC) Shares Up 7% On Strong H1 Performance 

Summary

  • Reliance Worldwide Corporation has registered a robust performance for six months ended 31 December 2020.
  • Net sales grew by 13%, while EBITDA margins have also increased.
  • The Company is expecting EBITDA to increase by at least 30%.

The stock of Reliance Worldwide Corporation Limited (ASX:RWCtraded higher by 7.317% to AUD 4.400 on 27 January 2021 (AEDT:01:03 PM) after the Company unveiled a strong performance for the first half of FY2021.

H1 FY2021 Highlights

  • Net sales stood at AUD 642 million for the period, an increase of 13% on PCP.
  • Reliance Worldwide recorded a 17% year-on-year increase in net sales on a constant currency basis.
  • EBITDA is expected between AUD 164 million and AUD 167 million, up by a minimum of 30% on PCP.
  • EBITDA margins have expanded, thanks to the robust operational leverage due to increased volumes.
  • Improved margins are expected for all regions for the six-month period.
  • The Company unveiled a robust cash generation with a further reduction of AUD 76 million in net debt in the specified period.

The cost reduction initiatives have also contributed to increasing the margins. The Company delivered cost savings in the 1st half of FY2021 and is progressing towards achieving the goal of AUD 25 million in annual cost savings by the end of FY2021.

Its leverage ratio had decreased to 0.88 times at 31 December 2020 from 1.57 times in the previous year.

Segment-Wise Performance

Image source: ASX announcement dated 27 January 2021

In Americas, the Company registered net sales growth of 16% and 22% growth on a constant currency basis. The US segment witnessed robust demand in the repair and remodelled sectors and recorded strong sales through the retail and hardware channels.

The Asia-Pacific sales increased by 10%. Robust Australian new housing construction and remodel markets resulted in a boost of 8% in external sales. Due to the strong demand in the Americas, inter-company sales increased by 13%.

Europe, Middle East and Africa (EMEA) sales were up by 9% with robust sales recovery following the easing of restrictions in the UK.

The results for the six-month period ended 31 December 2020 remain subject to finalisation and audit report. The audit reviewed results are due for release on 22 February 2021.

Expectations from Second Half of FY2021

RWC Group Chief Executive Officer Heath Sharp has highlighted that all manufacturing facilities kept operating despite the pandemic-induced challenges. Additionally, the focus on execution has helped the Company to meet higher demand across its markets.

During the first half period, the Company performed strongly and continued to generate strong cash flows. Every region reported strong sales and increased operating earnings, Mr Sharp added.

While acknowledging the robust performance during the challenging circumstances, the Company has also stated that the performance cannot be extrapolated for the full year, owing to the ongoing uncertainties in all markets. RWC is expecting copper cost increases to negatively impact earnings in H2. Also, it is anticipating currency translation impacts to adversely impact reported earnings.

Do Watch: Reliance worldwide noted sales performance inline with expectation in Sep 2020 | Market update ASX |

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