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Reliance (ASX:RWC) share price on watch after strong Q1 sales growth

Plumbing Supplies

The Reliance Worldwide Corporation Ltd (ASX: RWC) share price will be on watch today after the release of a trading update ahead of its investor day event.

What did Reliance announce?

This morning the plumbing parts company revealed that its sales have continued their strong recovery early in FY 2021.

According to the release, up to and including 25 September, the company’s sales performance in each of its three regions remains in line with what was reported in late August.

In the Americas its sales were up 15% in August and 29% in September compared to the prior corresponding period. Management revealed that it experienced improved sales in wholesale channels and a continued recovery in the Canadian market. US retail and hardware point of sales growth in September was relatively consistent with July and August trends.

Though, it has warned that it doesn’t expect this elevated demand to continue through FY 2021. Especially with COVID-19 stimulus measures winding down.

In the APAC region, Reliance recorded a 2% decline in sales in August and a 4% lift in September. This was driven largely by external sales growth.

Once again, management has warned that lower housing approvals and new dwelling commencements could cause headwinds.

Finally, in the EMEA region the company recorded a 5% increase in sales in August and a sizeable 24% jump in September. Management advised that this jump was driven by pent-up demand following lockdowns in Europe and inventory rebuilding.

Remaining cautious.

The company’s CEO, Heath Sharp, commented: “The first quarter of the 2021 financial year has been particularly strong from a sales perspective. Looking ahead, we remain cautious. The US has been boosted by the surge in DIY activity and the return of construction activity to pre-COVID levels, but without further government stimulus measures this growth is likely to slow.”

“We expect some softening in the Australian market as the reduction in new housing construction approvals leads to lower building activity. In the UK we are uncertain as to where underlying demand levels will settle once the pent-up demand for products and plumbing services has been satisfied. We are also watchful as to the impact the recent rise in COVID-19 case numbers may have on demand and plumbing activities there,” he added.

In light of the above, the CEO has warned investors not to expect this level of sales growth to persist.

Mr Sharp concluded: “Given the continuing uncertainties in all our markets as a result of COVID-19 we would caution against extrapolating the first quarter’s sales performance for the full year.”

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Reliance Worldwide Limited. The Motley Fool Australia has recommended Reliance Worldwide Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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