Reliance Worldwide Corporation Ltd (ASX: RWC), in its own words, had a "challenging first half", reporting this week that both sales and profits had fallen.
But that has, at least in the eyes of the team at Macquarie, created a buying opportunity for a company they see as fundamentally sound.
So let's have a look at the first-half results.
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Falls across the board
Reliance said earlier this week that net sales fell 4.6% to US$645.4 million, while net profit fell 34.9% to US$34.7 million.
The plumbing supplies company also announced an interim dividend of US2 cents, down from US2.5 cents, and a buyback of US$15.3 million, which it said would be the equivalent of another US2 cents per share in value.
A lot of the negative impact during the half, the company said, was caused by US tariffs.
The company said:
The expected full year net impact of tariffs in FY26 is in the range of US$25 million to US$30 million, with the impact weighted to the first half of FY26. The benefits from the transfer of product sourcing away from China to lower tariff countries, coupled with price adjustments and cost reduction measures, will continue to flow through in the second half of FY26.
The company's Chief Executive, Heath Sharp, said it was a difficult start to the year.
He added:
The first half has been particularly challenging as we have dealt with the twin impacts of US tariffs and weak end markets. However, we are really pleased with the progress we have made with our key strategic initiatives, which have further strengthened the business and mean we are well placed to benefit from an upturn in volumes. While residential remodelling and new construction markets remained subdued, we have made significant progress on a number of strategic initiatives. We commissioned our new assembly facility in Poland and finalised plans for a new facility in Mexico which will support activity in the Americas and lower the impact of associated tariffs. During the half we also launched new product ranges with key distributors in Germany, France and Italy, while SharkBite Max was launched nationwide across Australia.
The company said it expected trading conditions for the second half of the year to be "broadly consistent" with the first half.
Shares looking cheap
The team at Macquarie have looked at the result and believes there's room for significant share price recovery.
They said the company looks well-positioned for volume recovery alongside improvements in pricing, "so we believe any indication of volume recovery will be positive for the stock''.
The Macquarie team added:
This was a disappointing result, with known issues lingering longer than expected. At its core, Reliance is still executing well in a tough context. We believe valuation remains attractive given the leverage to an improvement in the volume outlook.
Macquarie has a price target of $4.75 on Reliance shares compared with $3.50 currently. If the price target were achieved, it would represent a total shareholder return of 37% including dividends.
