Reece’s Earnings Fall Amid Housing Market Slowdown—What’s Next?
Reece Limited reported a modest revenue decline and a sharper drop in profits for FY25, reflecting subdued demand in key markets and ongoing investment in growth. The company declared a reduced fully franked dividend as it navigates a challenging housing environment.
- FY25 revenue down 1.4% to AUD 8.98 billion
- EBITDA fell 10.6% to AUD 901 million; NPAT down 24.4% to AUD 317 million
- Expanded branch network by 39 locations, including 24 in the US
- Three small acquisitions completed, including digital firm Shadowboxer
- Final dividend declared at 11.86 cents per share, down from 17.75 cents
Financial Performance Overview
Reece Limited, a leading distributor of plumbing and HVAC products across Australia, New Zealand, and the United States, released its preliminary final report for the fiscal year ended June 30, 2025. The company posted a slight revenue decline of 1.4% to AUD 8.98 billion, signaling the impact of softer demand conditions in both its core markets. Earnings before interest, tax, depreciation, and amortisation (EBITDA) dropped by over 10% to AUD 901 million, while net profit after tax (NPAT) fell sharply by 24.4% to AUD 317 million.
This earnings contraction reflects a combination of subdued market activity, particularly in the US housing sector, and continued investment in expanding the company’s footprint and capabilities. Despite the pressures, Reece maintained steady capital expenditure at AUD 258 million, supporting network growth and technology upgrades.
Regional Performance and Expansion
The ANZ region showed resilience with a 1% increase in sales revenue to AUD 3.88 billion, helped by acquisition activity and stable pricing. However, earnings in ANZ were pressured by higher operating costs and inflationary factors, leading to a 12% decline in EBITDA and a 17% fall in EBIT. The network grew by 15 net new branches, combining organic growth and bolt-on acquisitions.
Conversely, the US market faced a 5% revenue decline in US dollars, driven by lower volumes and competitive pricing amid a slowdown in residential new construction. EBITDA and EBIT in the US fell by 10% and 23%, respectively. The US branch network expanded by 24 locations, including six acquired businesses, and completed a rebranding initiative to unify its plumbing, bath+kitchen, and HVAC branches under the Reece name.
Strategic Initiatives and Outlook
Reece continued to invest in operational efficiencies and digital capabilities, highlighted by the acquisition of Shadowboxer, a digital services firm, and the launch of the maX app in the US to enhance customer service. The company also focused on employee training to strengthen trade distribution expertise.
Looking ahead, Reece anticipates a slow recovery in housing markets. The ANZ region faces ongoing uncertainty with soft activity expected to persist, while the US housing market is forecast to remain constrained for 12 to 18 months due to affordability challenges. Despite these headwinds, Reece points to long-term growth drivers such as housing underbuild and population growth, which should sustain demand for its products and services.
Dividend and Capital Position
The Board declared a fully franked final dividend of 11.86 cents per share, bringing total dividends for FY25 to 18.36 cents per share, down from 25.75 cents in the prior year. The company’s balance sheet remains robust with a net leverage ratio of 0.8 times EBITDA and net tangible assets per share increasing to 305 cents.
Reece’s ability to balance investment in growth with prudent cost management will be critical as it navigates a challenging macroeconomic environment and competitive pressures in its key markets.
Bottom Line?
Reece’s FY25 results underscore the challenges of a soft housing market, but its strategic investments position it for a gradual recovery.
Questions in the middle?
- How will Reece’s recent acquisitions impact earnings and market share in FY26?
- What specific operational efficiencies will drive cost savings in the coming year?
- How sensitive is Reece’s US business to prolonged housing market weakness?