The Reece Ltd (ASX: REH) share price has sunk after the business announced a FY25 trading update.
Reece is a major bathroom, plumbing and HVAC business in Australia and the US.
FY25 trading update
As the company feared in the FY25 half-year result, the trading environment has “remained challenging” during the second half of FY25 because of ongoing housing market softness across both regions.
Reece said underlying volumes continue to be subdued and the EBIT (EBIT explained) margins remain under pressure as it works through this cycle.
Due to this, Reece expects overall EBIT for FY25 to be within the range of A$548 million to A$558 million.
Profit generation is usually a key driver of the Reece share price.
In Australia and New Zealand, volume settings remain soft and recent interest rate cuts have not yet translated into improved housing activity. Reece expects this will take time to flow through.
In the US, its high exposure to the residential new construction continues to impact its performance. Housing units under construction are still down year on year, particularly in the ‘Sunbelt’ region where it operates. US mortgage rates remain high and housing affordability continues to weigh on the US residential market.
Reece said it has seen increased competition across all segments of its US business from new market entrants and the slowdown in residential new construction, which has impacted profitability for the year.
Management said the company has seen similar cycles before and remain confident in its long-term approach.
Is this an opportunity to invest at this Reece share price?
If we view Reece as a cyclical or discretionary ASX share, then this time could be a good time to invest in the business for when, eventually, the economic picture could rebound.
Reece is a solid business with plenty of growth prospects, particularly in the US. But, there is a fair amount of uncertainty with the US economy right now – how will the tariff picture play out? It could take time for Reece to return to sustained growth.
For now, there are other ASX growth shares that are executing more strongly in other areas.
