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Highlights
- Reece reports a drop in sales for the first quarter of 2024-25.
- Difficult conditions noted in Australia and the US markets.
- The company expects a rebound due to housing sector demand.
Shares of Reece Group (ASX:REH), a leading supplier of bathroom and plumbing products, fell over 6% in early trade following the company’s first-quarter sales report. CEO Peter Wilson noted that sales for the quarter ended September showed a decline due to challenging market conditions, both in Australia and the United States.
Reece, which supplies a wide range of bathroom fixtures such as tapware, shower heads, and basins, faced a 5% decrease in total sales, reaching $2.23 billion compared to the same period last year. The company’s performance was impacted by flat sales in Australasia and a notable 6.5% dip in US sales when measured in US dollar terms.
Wilson mentioned that recent interest rate cuts in the US would take some time to filter through the broader market. The economic climate, along with subdued housing construction activity, weighed heavily on the company’s US operations. In Australia, similar headwinds were observed as construction activity remained low, affecting sales growth.
Reece’s stock saw a significant drop, sliding 6.5% to $24.84 during early trading on the ASX. This sharp fall comes after the shares were valued at $29.20 just a month ago, reflecting investor concerns about the company’s near-term performance.
Despite the recent slowdown, Wilson emphasized that long-term industry fundamentals remain solid. He pointed out that the housing market, particularly in Australia, is still grappling with an underbuild issue. The expected population growth and a need for more housing construction could support a future recovery for Reece’s sales figures.
Looking ahead, the company anticipates an EBIT (earnings before interest and taxes) of between $300 million and $320 million for the first half of the 2024-25 financial year. While short-term challenges persist, Reece’s management remains optimistic about the sector’s potential for improvement in the medium to long term.
