Reece (ASX:REH) share price climbs on surging Q1 FY22 sales

The plumbing parts company is off to a flying start in FY22…

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The Reece Ltd (ASX: REH) share price raced higher on Thursday following the company’s first-quarter sales update for FY22.

At Thursday’s closing bell, the plumbing parts company’s shares finished up 4.38% to $18.83.

How did Reece perform for Q1 FY22?

In today’s release, Reece said sales continued to accelerate from the momentum of FY21.

Sales revenue grew to $1,771 million for the first quarter, representing a 13.2% increase on the prior corresponding period. This was made up of ANZ and United States sales revenue lifting 9% and 18.6%, respectively. These figures seem to have impressed investors, given the jump in the Reece share price today.

Reece noted that tight labour markets and wage inflation impacted operating expenses across both regions. This is expected to run into the remainder of the financial year which will weigh on earnings before interest, tax, depreciation, and amortisation (EBITDA) margins.

As such, EBITDA for the first half of FY22 is forecasted to be up between 8% and 11% on H1 FY21’s EBITDA ($349 million).

While the near term remains unpredictable, Reece will look at boosting both operating expenditure and capital expenditure. The company is planning a significant step-up in branch refurbishments as well as investing in market-facing digital tools.

Furthermore, management will focus on ensuring Reece’s stock position is strong, particularly on critical items.

Commenting on the update likely fuelling the Reece share price today, group CEO and managing director Peter Wilson said:

Sales revenue for the first quarter has been positive, reflecting momentum from FY21. We have continued to see growth in both regions which has exceeded our expectations. However, the future continues to be unpredictable with inflation dynamics, supply chain disruptions together with tight labour markets and wage inflation we are expecting to accelerate in Q2 and persist for the balance of FY22.

As an essential service we will rely on our adaptive and resilient business model to protect and preserve our business today, whilst creating a position of strength to accelerate our long-term strategy

Reece share price snapshot

Reece shares have moved on an upwards trajectory for most of the year, hitting an all-time high of $25.97 in August.

However, those gains have since been reversed with the Reece share price plummeting almost 30% in 2 months. Lately, Reece shares have stabilised and are up around 32% in the past year and 27% year-to-date.

Reece commands a market capitalisation of roughly $12.24 billion, making it the 40th largest company on the ASX.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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