Global plumbing and heating specialist Reliance Worldwide (ASX:RWC) reported on its September quarter, while at the same time, announced the acquisition to EZ-FLO International.
Total sales increased 8 per cent year-on-year to US$246 million ($328 million) and earnings before interest, taxes and amortisation increased 4 per cent year-on-year. Sales grew in all 3 regions, as underlying demand for home repair and remodelling remained steady.
“Supply chain constraints including shipping delays, freight and logistics disruptions, and raw materials shortages, have all been headwinds in the first quarter that have suppressed volume growth. While these have not always impacted RWC directly, they are having a knock-on effect throughout the construction sector,” said CEO Heath Sharp.
“As expected, our operating margins were lower, reflecting price increases we have achieved to offset raw materials cost rises together with other cost pressures that are yet to be fully offset,” Sharp added.
Operating margins were impacted by price rises introduced to cover input cost inflation. Net debt was 10 per cent lower year-on-year but $29.9 million higher quarter-on-quarter. This was due to the $28 million spent on the LCL acquisition in August, as well as higher capital expenditure and planned inventory increases.
While the company has warned that these supply chain constraints are likely to remain headwinds for much of FY22, they believe their “local manufacturing operations and strong track record of class-leading customer service is well placed to navigate these challenges and respond to customer needs.”
In addition, Reliance Worldwide entered into an unconditional agreement to acquire the manufacturer and distributor of plumbing supplies EZ-FLO International, for US$325 million. The company noted that this is 12 times EZ-FLO’s adjusted operating earnings before synergies, and 7 times EZ-FLO’s adjusted EBITDA including expected revenue and cost synergies.
“The acquisition of EZ-FLO is strongly aligned with RWC’s strategy of adding complementary products that broaden the depth of solutions offered to end users and expand our market presence in aligned sectors. The combination of EZ-FLO’s product portfolio, manufacturing and sourcing capabilities, distribution footprint, customer service, performance track record and future growth prospects make it an important and attractive addition to RWC.”
Shares in Reliance Worldwide Corporation (ASX:RWC) are trading 0.1 per cent higher at $5.18.