Why Did Reliance Worldwide’s Profit Plunge 35% Despite Cost Savings?
Reliance Worldwide Corporation reported a 4.6% revenue decline and a 34.9% drop in net profit for H1 FY2026, citing US tariffs and weaker demand in key markets. The company balances challenges with cost savings and a shareholder-friendly capital return strategy.
- Revenue down 4.6% to US$645.4 million
- Net profit after tax falls 34.9% to US$43.7 million
- US tariffs and weaker US/UK demand weigh on results
- Cost savings of US$4.4 million achieved
- Interim dividend and on-market share buy-back declared
Financial Performance Under Pressure
Reliance Worldwide Corporation Limited (ASX, RWC) has reported a challenging first half for the 2026 financial year, with revenue slipping 4.6% to US$645.4 million and net profit after tax plunging 34.9% to US$43.7 million. The decline was primarily driven by the impact of US tariffs and softer demand in the United States and United Kingdom markets, as flagged in the company’s FY2025 earnings update last August.
The company’s earnings before interest, tax, depreciation and amortisation (EBITDA) also fell sharply by 22.2% to US$111.1 million, reflecting the combined pressures of tariff-related cost increases and subdued sales volumes, particularly in the Americas segment.
Regional Dynamics and Operational Adjustments
Sales in the Americas declined 7.2%, while the Asia Pacific region saw a marginal 0.7% dip. Europe, Middle East and Africa (EMEA) bucked the trend with a 2.4% increase in external sales, though this was offset by increased costs linked to new manufacturing processes aimed at enhancing customer service. The company also noted lower overhead recoveries in APAC due to reduced manufacturing volumes.
Despite these headwinds, Reliance Worldwide achieved cost savings of US$4.4 million through improved sourcing, procurement, manufacturing efficiencies and distribution optimisation. The company’s net tangible assets per share edged up slightly to $0.25, signalling a stable asset base amid the profit contraction.
Capital Management and Shareholder Returns
In line with its capital management policy, Reliance Worldwide declared a total distribution of US4.0 cents per share for the half-year ended 31 December 2025, amounting to approximately US$30.7 million. This distribution is split evenly between an unfranked interim cash dividend of US2.0 cents per share and an on-market share buy-back valued at around US$15.3 million.
The Board emphasised its commitment to balancing cash dividends with share buy-backs to enhance shareholder value, acknowledging investor preferences for ongoing cash returns. The interim dividend will be paid in Australian dollars on 2 April 2026, with the record date set for 3 March 2026. The company does not offer a dividend reinvestment plan.
Balance Sheet and Outlook
Reliance Worldwide maintains a robust balance sheet, with net debt standing at approximately US$310 million and a weighted average debt maturity of 6.3 years. The company confirmed no impairment of goodwill or intangible assets was required at the half-year mark. Directors reaffirmed the company’s ability to continue as a going concern despite the current market challenges.
Looking ahead, the company faces uncertainty around the duration and future impact of US tariffs and demand fluctuations in key markets. While cost-saving initiatives provide some buffer, the path to recovery will depend on geopolitical developments and market conditions in the Americas and UK.
Bottom Line?
Reliance Worldwide’s interim results highlight tariff-driven headwinds and demand softness, setting the stage for a critical second half as the company navigates cost pressures and shareholder expectations.
Questions in the middle?
- How long will the US tariffs continue to impact Reliance Worldwide’s profitability?
- Can demand in the US and UK markets rebound sufficiently to restore growth?
- What further cost efficiencies or strategic shifts might the company pursue to offset margin pressures?
