Reece Reports 1% Revenue Dip and 24% EPS Decline in FY25
Reece Limited reported a 20% decline in EBIT for FY25, reflecting soft demand in both ANZ and US markets despite strategic branch expansions and acquisitions.
- Sales revenue declined 1% to $8.978 billion
- EBIT fell 20% to $548 million, EPS down 24%
- Expanded branch network by 39 locations and completed three bolt-on acquisitions
- Net debt increased to $590 million with leverage rising to 0.8x
- Final fully franked dividend set at 11.86 cents per share
A Challenging Year for Reece
Reece Limited, a leading distributor of plumbing and HVAC products across Australia, New Zealand, and the United States, has released its FY25 financial results, revealing a year marked by subdued market conditions and strategic expansion efforts. The company’s sales revenue edged down 1% to $8.978 billion, while earnings before interest and tax (EBIT) dropped sharply by 20% to $548 million. Earnings per share (EPS) followed suit, falling 24% to 49 cents.
Chairman and CEO Peter Wilson described FY25 as "turbulent," citing soft end markets in both the ANZ and US regions as key factors behind the disappointing results. Despite these headwinds, Reece continued to invest in growth, completing three bolt-on acquisitions and adding 39 new branches to its network.
Operational and Financial Highlights
The company’s EBITDA declined 11% to $901 million, with group costs rising 3% due to higher salaries and operating expenses. Reece implemented corporate cost streamlining in the second half of the year, aiming to improve efficiency and better support its expanded branch network. These cost-saving measures are expected to yield benefits in FY26.
Capital expenditure remained steady at $258 million, supporting organic growth, branch refurbishments, and technology investments, including the launch of the maX app in the US and the acquisition of digital firm Shadowboxer. However, net operating cash inflows fell to $600 million from $751 million the previous year, and net debt increased to $590 million, pushing the net leverage ratio to 0.8 times EBITDA.
Regional Performance Divergence
In the ANZ region, sales revenue grew slightly by 1% to $3.882 billion, bolstered by acquisitions, though underlying volumes remained flat. EBITDA and EBIT declined by 12% and 17% respectively, pressured by elevated costs and moderate inflation. The ANZ network expanded by 15 branches, reaching 676 locations.
The US segment faced a tougher environment, with sales revenue falling 5% to US$3.296 billion amid a sluggish housing market and increased competition. EBITDA dropped 10% and EBIT declined 23%, impacted by lower volumes and higher depreciation linked to network expansion. The US branch network grew by 24 to 267 branches, completing a rebranding initiative that unified most operations under the Reece name.
Outlook and Dividend
Looking forward, Reece anticipates a slow recovery in housing markets, with the ANZ region expected to experience continued softness and the US market constrained by high mortgage rates and affordability challenges for the next 12 to 18 months. Despite these near-term challenges, the company remains confident in the long-term fundamentals driven by housing undersupply and population growth.
The Board declared a fully franked final dividend of 11.86 cents per share, bringing total dividends for FY25 to 18.36 cents, down from 25.75 cents the previous year. This cautious dividend reflects the company’s focus on balancing shareholder returns with ongoing investment in growth and operational resilience.
Bottom Line?
Reece’s FY25 results underscore the challenges of current market softness but highlight strategic investments that could position the company for recovery.
Questions in the middle?
- How will Reece’s recent acquisitions contribute to earnings growth in FY26 and beyond?
- What specific cost efficiencies can investors expect from the corporate streamlining initiatives?
- How might prolonged housing market softness in the US impact Reece’s competitive positioning?
