Release Date: August 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Reliance Worldwide Corp Ltd (RLLWF, Financial) achieved strong financial results for FY24, meeting revenue and operating margin guidance.
- The company successfully rolled out key new product initiatives, including SharkBite Max in North America and PEX-a pipe and expansion fittings in the US.
- Operationally, the company saw a 52% reduction in the reportable injury frequency rate, indicating improved health and safety performance.
- The integration of Holman with RWC is progressing well, with revenue opportunities being actively pursued.
- The company achieved a 35% reduction in Scope 1 and Scope 2 greenhouse gas emissions relative to the baseline set in FY21, on track to meet or exceed the 2030 goal.
Negative Points
- Net sales excluding Holman were down 2.4%, reflecting lower volumes in all regions.
- Adjusted net profit after tax was 5.7% lower than the previous corresponding period.
- The company faced significant challenges in the EMEA region, with sales down 9.6% and EBITDA margin impacted by lower volumes.
- The closure of the Supply Smart business in the US resulted in a $10 million non-cash write-off.
- The company incurred $27 million in one-off items related to restructuring and acquisitions, impacting overall financial performance.
Q & A Highlights
Q&A Highlights from Reliance Worldwide Corp Ltd (RLLWF) Earnings Call
Q: The 9% decline in UK sales matches your first half. Is that correct? And will most of the $10 million to $15 million cost savings benefit EMEA in the first half of FY25?
A: Yes, the comps in the first and second half were similar. We are seeing a consistent run rate and projecting that forward. The savings are driven across the board, with the majority falling in the Americas. (Heath Sharp, CEO & Andrew Johnson, CFO)
Q: Given that one of the big boxes called out positive plumbing comps in the last quarter, have you seen a similar trend? Were there any SharkBite Max launch costs that might cycle out this period?
A: Yes, the trend aligns with what we've seen. The costs associated with SharkBite Max were primarily in the first half and have been worked through by the second half. (Heath Sharp, CEO & Andrew Johnson, CFO)
Q: Can you give us a sense of how you're thinking about supply chain and strategic sourcing, especially considering geopolitical scenarios?
A: We aim to manufacture or source close to the market to reduce supply chain complexity. We also focus on providing redundancies and maintaining the lowest cost to manufacture. (Heath Sharp, CEO)
Q: What are the inflation expectations and the ability to recover costs through pricing in each region?
A: Inflation is ongoing but reduced from the peak. Our pricing is appropriate for current raw material costs, and we are comfortable with our process to handle commodity swings. (Heath Sharp, CEO & Andrew Johnson, CFO)
Q: Why is the EBITDA guidance relative to the first half of FY24 rather than the second half?
A: We restricted our guidance to the first half and pegged it as the reference point. The first half includes new salary and wages, impacting margins slightly. (Heath Sharp, CEO & Andrew Johnson, CFO)
Q: How are you seeing the recovery in EMEA end markets? Is there margin upside from a UK residential construction rebound?
A: There is significant pent-up demand in the UK. We have made restructuring changes and invested in capacity, which should lead to margin improvement when volumes return. (Heath Sharp, CEO)
Q: Can you talk through how Holman is performing and the expected synergies?
A: Holman is performing well, as expected. We anticipate realizing synergies in line with the numbers presented at the time of acquisition, with most benefits coming in the second year. (Heath Sharp, CEO)
Q: What are the mid-cycle margin expectations for the US and APAC following the transfer of manufacturing operations?
A: In APAC, we expect mid-teens margins for the combined business. EMEA margins should return to 30%+ with volume recovery. Americas margins should maintain in the low-20s, focusing on growth. (Andrew Johnson, CFO)
Q: How sustainable is the current CapEx level in terms of maintaining and pursuing growth ambitions?
A: The current CapEx level is appropriate. We have invested significantly in recent years, positioning us well for capacity and new product growth. (Heath Sharp, CEO)
Q: Would you describe the current channel inventory as lean, full, or normal for Reliance's products?
A: The channel inventory feels pretty normal across most parts of the world. (Heath Sharp, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
