Waterco Limited reported a modest 4% revenue increase for FY25 but saw net profit fall sharply by 31%, weighed down by restructuring and foreign exchange losses. The company maintains its dividend and eyes growth through innovation and regional expansion.
- Revenue up 4% to $254.9 million
- Net profit down 31% to $9.6 million
- Underlying EBIT declined 8% to $20.6 million
- Dividend maintained at 15 cents per share, fully franked
- Expansion plans include new manufacturing plant and IoT platform launch
Financial Overview
Waterco Limited has released its preliminary final report for the fiscal year ended 30 June 2025, revealing a mixed performance amid challenging economic conditions. The company recorded a 4% increase in revenue to $254.9 million, reflecting steady demand across its core water treatment and pool equipment segments. However, net profit after tax dropped sharply by 31% to $9.6 million, primarily due to one-off restructuring costs and significant foreign exchange translation losses.
Underlying earnings before interest and tax (EBIT) fell by a more moderate 8% to $20.6 million, supported by operational synergies following the integration of the Davey Water Products acquisition. Despite the profit decline, Waterco has maintained its fully franked dividend at 15 cents per share, signaling confidence in its sustainable cash flow and future prospects.
Operational Challenges and Regional Performance
The year was marked by macroeconomic headwinds including high interest rates, cost of living pressures, and a weaker Australian dollar. These factors increased input costs and contributed to a $2.5 million foreign exchange loss on intra-group balances. Additionally, drought conditions in parts of rural South Eastern Australia dampened growth in the domestic market, particularly impacting the Davey business.
Regionally, the Australia and New Zealand division saw EBIT decline 12% due to rising operating costs and subdued new pool builds in NSW and Victoria. Conversely, the North America and Europe segment delivered a 42% EBIT increase, benefiting from improved margins despite tariff challenges in the US and economic pressures in Europe. The Asia division faced a steep 121% EBIT decline, largely driven by foreign exchange losses and plateauing demand in Malaysia, though growth opportunities remain in commercial water solutions and expanded product offerings.
Strategic Initiatives and Growth Outlook
Waterco is actively pursuing growth through innovation and geographic expansion. The company plans to launch a new Internet of Things (IoT) platform in FY26, designed to enhance pool management through remote monitoring and data analytics. This technology aims to improve customer experience and operational efficiency in the pool division.
To support anticipated demand, Waterco has acquired land for a new manufacturing plant, with construction set to begin in FY26, expanding production capacity notably in Malaysia. The company also established a subsidiary in the UAE to capitalize on growth opportunities in the Middle East, leveraging the region’s economic development.
Further cost efficiencies are expected from ongoing integration efforts with Davey Water Products, including warehouse consolidations and bringing plastics moulding in-house. These initiatives should help improve margins and underpin profitability recovery in the coming years.
Capital Management and Shareholder Returns
Waterco reduced its net debt by $8 million to $24.9 million, reflecting disciplined working capital management. The company also continues its share buyback program, with a tenth buyback announced in July 2025 targeting $1 million in shares. The dividend reinvestment plan remains suspended during buyback periods.
Despite the profit decline, the board’s decision to maintain dividends at 15 cents per share fully franked underscores confidence in the company’s cash flow and strategic direction.
Bottom Line?
Waterco’s FY25 results highlight resilience amid headwinds, with innovation and regional expansion poised to drive the next phase of growth.
Questions in the middle?
- How will Waterco mitigate foreign exchange risks going forward?
- What impact will the new IoT platform have on revenue and margins?
- Can the Middle East expansion significantly contribute to future earnings?