Plumbing supplies group Reliance Worldwide steps up cost-cutting as China’s COVID lockdowns extend problems

However, Australia’s new home construction and renovation market remained strong despite the Reserve Bank of Australia having hiked interest rates for six straight months since May. The group’s sales in Asia Pacific rose 1 percent in the September quarter.

The group’s Americas business accounts for about 50 percent of total profits, with the company’s flagship product being the Sharkbite line of brass push-to-connect fittings, which save plumbers time by avoiding the traditional soldering of parts.

Reliance also has a headache over the extended COVID-19 lockdowns in China. The group’s EZ-Flo business, which was sold for 434 million in November last year.

Mr Sharp said if a lockdown lasted until the end of next week, Reliance would have to “get a little confused” to ensure it had enough stock to fulfill orders.

Reliance reported Tuesday that net sales for the September quarter rose 23 percent to $303.1 million ($479 million), with EZ-Flo contributing $53.8 million. Reliance increased earnings before interest and taxes by 15 percent to $64.6 million, but the EBIT margin fell to 21.4 percent from 22.8 percent a year earlier.

Mr. Sharp stressed that the uncertainty about the economic outlook makes it very difficult to forecast demand. “It’s just super difficult right now,” he said.

“What the next month looks like is really impossible to judge.”

Andrew Johnson, Reliance’s chief financial officer, said all three of the group’s main regions had been set cost-cutting targets to be met, but declined to specify the size.

“We certainly have goals that we have assigned to the regions,” he said.

The company made a big bet on offshore expansion in 2018 when it spent $1.2 billion to acquire the John Guest business in the UK.

In early September, economists declared the end of the pandemic-related renovation boom in Australia. After rising 25 percent over the past two years, remodeling and addition activity, which is taken as an indicator of home renovations, declined, falling 1.6 percent in the June quarter in the national accounts.

Mr Sharp said Reliance should be spared the worst of the economic downturn as a large part of its business is related to repair and maintenance.