The Reliance Worldwide Corporation Ltd [ASX:RWC] share price has opened strongly today on the back of a trading update released by the company.
RWC designs, manufactures, and supplies a variety of water flow, control and monitoring products and solutions for the plumbing and heating industry.
Not the sexiest line of products, but certainly crucial to building and renovating.
And that’s been shown in today’s trading update.
At the time of writing, RWC shares are 45 cents higher or 11.78%, trading at $4.27 per share.
Does RWC’s first quarter signal COVID-19 bounce back?
RWC’s share price is still at a ~3.65% loss year-on-year.
Though today’s Q1 FY21 results could signal a better year ahead.
Trade across all three of RWC operating regions showed moderate to strong sales growth month-on-month.
With the Australian Pacific region the laggard of the bunch.
Source: Reliance Worldwide Corporation
While the results seem positive; they could be a red herring.
RWC said the strong sales growth in the Americas came from improved sales in wholesale channels and continued recovery in the Canadian market. But do not currently expect this elevated level of demand to continue through FY2021 particularly as US government COVID-19 stimulus measures wind down.
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In APAC, lower housing approvals and new dwelling commencements in Australia continue to weigh no sales growth — and is expected to continue throughout the financial year.
EMEA saw a bumper September after a sluggish start to the financial year.
RWC said it continued to see a recovery in volumes in the UK and Continental Europe, with markets now largely reopened.
Meaning the depleted inventory levels from lockdowns are now able to be replenished.
So, what to make of all of this?
RWC’s CEO Heath Sharp is remaining cautious.
‘The first quarter of the 2021 financial year has been particularly strong from a sales perspective. 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.
‘Given the continuing uncertainties in all our markets as a result of COVID-19 we would caution against extrapolating the first quarter’s sales performance for the full year.’
Is there value to draw from RWC’s results?
RWC struggled through FY2020.
Despite recording a 5.3% bump in sales, RWC’s net profit tumbled ~33%.
Today’s results could hint a perhaps a better year ahead reflecting on today’s share price action.
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