RWC Targets 30% China Sourcing Cut in FY25 to Offset Tariff Costs

• RWC targets growth in a $25.3 billion global plumbing market
• Mitigation strategies include reducing China-sourced costs by 30% in FY25
• FY25 sales expected broadly flat with slight margin compression
• Price increases underway to offset tariff impacts on EBITDA
• Manufacturing footprint spans US, Australia, UK, and Asia for sourcing flexibility

Strategic Positioning in a Fragmented Market

Reliance Worldwide Corporation Limited (RWC) presented its May 2025 investor update, reaffirming its ambition to be the global leader in plumbing products. The company highlights its extensive portfolio, spanning residential and commercial segments across new construction, repair, and remodel markets. With a total addressable market estimated at US$25.3 billion, RWC sees significant room for growth, particularly in the US, Australia, and UK/Ireland, where it holds market shares ranging from 4% to 12%.

RWC’s strategy focuses on product leadership, operational excellence, and broad distribution channels, aiming to deliver value to contractors, distributors, and end-users alike. The company’s trusted brands and smart product solutions are positioned to meet evolving customer demands amid labour shortages and sustainability trends.

Tariff Mitigation and Supply Chain Diversification

A key theme of the presentation was RWC’s proactive approach to mitigating the impact of US tariffs on Chinese imports. Since 2018, the company has been shifting sourcing away from China, accelerating this effort in response to recent tariff escalations. RWC aims to reduce China-sourced cost of goods sold (COGS) by approximately 30% in FY25 compared to FY24, targeting near-zero tariff-impacted sourcing by the end of FY26.

This diversification includes ramping up manufacturing and sourcing in Vietnam, Indonesia, Thailand, Taiwan, the US, Australia, and the UK. The company’s global manufacturing footprint supports this flexibility, with facilities producing key products such as push-to-connect fittings, pipes, valves, and water filtration systems across multiple continents.

Financial Outlook and Margin Management

Despite the tariff headwinds, RWC expects FY25 external sales to be broadly flat, with a slight downward bias due to softer US demand. The company anticipates some margin pressure, with consolidated EBITDA margin expected to be slightly lower relative to the prior year (excluding Holman). However, RWC is implementing systematic price increases with channel partners to offset tariff costs and protect gross margins.

Management estimates the net cost impact of tariffs on FY26 EBITDA to be between US$25 million and US$35 million, but expects this impact to be largely mitigated by FY27 through ongoing sourcing and pricing strategies. The company emphasizes its strong balance sheet and customer relationships as key advantages in navigating this challenging environment.

Looking Ahead: Execution and Market Dynamics

RWC’s near-term focus remains on execution, accelerating tariff mitigation, maintaining supply chain resilience, and capitalizing on growth opportunities in repair/remodel and new construction markets. The company’s investments in local manufacturing, such as moving SharkBite production to the US, provide competitive advantages amid global trade uncertainties.

While external factors like tariff rates and market demand introduce some uncertainty, RWC’s diversified portfolio and strategic initiatives position it well to sustain long-term growth and margin improvement.

Bottom Line?

RWC’s disciplined tariff mitigation and market focus set the stage for resilience amid ongoing global trade challenges.

Questions in the middle?

• How will evolving US tariff policies impact RWC’s supply chain beyond FY27?
• What is the potential effect of price increases on RWC’s sales volumes and customer retention?
• Can RWC accelerate market share gains in key regions amid competitive pressures?