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Reliance Worldwide Corporation Limited, strong sales and operating earnings growth

Team Veye | 28 Jan 2021 ASX - RWC
Reliance Worldwide Corporation Limited, strong sales and operating earnings growth

Reliance Worldwide Corporation Limited (ASX: RWC)

Trading Update for six months ended 31 December 2020

Reliance Worldwide Corporation Limited (ASX: RWC) on 27 January 2021 provided a trading update for the six months ended 31 December 2020.

Despite the challenges presented by the COVID‐19 pandemic, the group kept all its manufacturing facilities operational and focussed on execution, which enabled it to meet the increased demand well seen across the markets.

The group had performed well in the first half of the 2021 financial year. Strong operating earnings growth and sales across all regions managed to generate strong cash flows.

(Chart source: TradingView)

Highlights

  • Group achieved 13% net sales growth for the half and 17% net sales growth on a constant currency basis.
  • Strong operating earnings performance, with EBITDA expected to be in the range of $164 million to $167 million, growth of at least 30% on the prior corresponding period
  • Strong operating leverage driven by higher volumes resulted in increased EBITDA margins
  • Reported Net debt reduction of $76 million since 30 June 2020.
  • Leverage reduced from 1.57 times to 0.88 times on 31 December 2020.
  • strong margin expansion across all region

Segment-wise Performance

Americas: Group achieved 16% net sales growth and 22% net sales growth on a constant currency basis in America. The growth was attributed to USA recording strong sales growth through retail and hardware channels are driven by strong demand in the repair and remodel sectors

Asia Pacific Asia Pacific sales were up 10%, with external sales up 8% reflecting strong Australian new housing construction and remodel markets. Inter‐company sales were up 13%and 20% on a constant currency basis due to the strength of demand in the Americas.  

Europe, Middle East and Africa (“EMEA”) EMEA sales were up 9% and 11% on a constant currency basis with a strong recovery in sales with the relaxation of UK Government restrictions to control the spread of COVID‐19 at the beginning of the period. (Data Source – Company Reports)

 

Veye’s Take

The group posted strong results for the first half of the 2021 financial year while performing in demanding circumstances. The company has taken varied cost reduction initiatives which have helped to lift margins. The company is well focussed and on track to meet its target of $25 million in annual cost savings on a run rate basis by the end of the 2021 financial year. The stock has managed to take support at the lower Bollinger band after a long bearish trend. MACD entered in a positive zone with a “Higher High” formation on the price charts supported by RSI. Veye maintains a “Hold” on “Reliance Worldwide Corporation Limited” at the current price of$4.37

Disclaimer

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