The Reliance Worldwide Corporation Ltd (ASX: RWC) share price rose 7% to $4.44 after the company released its half year results this morning. Here's what you need to know:
- Revenues grew 28% to $362.6 million
- Net profit after tax grew 18% to $41.5 million
- Earnings per share up 19% to 8 cents per share
- Dividends per share of 3.5 cents fully franked
- Sharkbite Push To Connect (PTC) fittings growing sales at double digits
- Expansion into new markets via EvoPEX and Holdrite products
- Spending on capital expansion to meet forecast demand for products
- Outlook for full year earnings before interest, tax, depreciation and amortisation (EBITDA) of $150 million to $155 million (assuming that currency rates and costs stay constant)
- Reliance expects its tax rate will be 4% to 6% lower by the time US corporate tax rates take full effect.
So what?
It was a strong year for Reliance Worldwide, and I'm thinking maybe I should have been a bit more aggressive when I identified the company as worthy of further investigation at $2.91 last January.
Reliance has clearly shrugged off competition as well as the loss of exclusivity at Home Depot. The sales rollout to Lowes has gone well and SharkBite continues to deliver double-digit sales growth. Reliance is also reporting growth in EvoPEX and Holdrite sales, two ancillary product lines that complement SharkBite.
Reliance's strong result came despite higher materials (e.g. copper) input costs and a weaker U.S. dollar, a reminder that the company is a manufacturer with a reliance on commodity prices.
Now what?
Management provided an outlook for significant investment in sales and marketing functions in the second half, a sign that Reliance will be looking to maximise the penetration of its SharkBite product, which is clearly a winner. Reliance stated that it expects full year EBITDA of around $150 million to $155 million, compared to $79.3 million in this half.
Reliance is clearly on a roll, but a lot of that is built into the valuation, and the company faces a variety of threats from competing products and commodity prices. While I like the company, I'm not sure it's a buy at the moment.
