The Reliance Worldwide Corporation Ltd (ASX: RWC) share price is up 10% this morning after giving a trading update.
Reliance Worldwide has a variety of plumbing products. SharkBite, which is brass push-to-connect plumbing & heating systems. It also sells plastic versions (called Speedfit). Reliance Valves are pressure and temperature control valves.
Reliance Worldwide trading update
The update is for the period to 25 September 2020. The below numbers are against the prior corresponding period:
In July, Americas sales grew 22%, Asia Pacific sales rose 5% and EMEA (Europe. Middle East and Africa) sales fell 4%.
In August Americas sales grew 15%, Asia Pacific sales fell 2% and EMEA sales grew 5%.
September sales to the 25th showed Americas sales grew 29%, Asia Pacific sales grew 4% and EMEA sales grew 24%.
The Americans were clearly a standout. There has been improved sales in wholesale channels and a continued recovery in the Canadian market. US retail and hardware point of sales growth in September has been relatively consistent with July and August trends. However, Reliance doesn’t expect this elevated level of demand to continue through FY21, particularly as US government stimulus measures wind down.
Reliance CEO Heath Sharp said: “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 pent-up demand for products and plumbing services has been satisfied.”
Summary
I can see why the Reliance share price jumped in response to the Americas revenue growth. But I’m not sure how much further it can grow with demand likely to weaken. There are other industrial ASX growth shares I’d buy first like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) which I covered at length here.
