Shares in Reliance Worldwide Corporation (ASX:RWC) have de-rated over the last 18 months. US tariff uncertainty, challenging macro conditions across each of the segments and margin pressure have been the main contributing factors.

Following a recent trading update, we revisited the investment case in The Dynamic Investor. Are there indicators emerging to suggest the worst is over? Or is it best to remain on the sidelines?

About Reliance Worldwide Corporation

Reliance Worldwide Corporation is a global designer, manufacturer and supplier of premium-branded water flow and control products. These products are typically used by end-users such as plumbers/contractors. They are purchased through a number of distributors.

The Company reports results across three geographic-based segments: Americas, Europe, Middle East & Africa (EMEA) and Asia Pacific (APAC).

Key Fundamental Drivers

Macro Conditions Remain Challenging

The Company’s key customers still report a cautious consumer that is avoiding larger, discretionary projects. Fixed mortgage rates in the US are easing and there are government policies are aimed at stimulating demand. However, RWC noted that conditions have not yet improved enough to drive higher new home sales or existing home turnover. Weak consumer confidence is also weighing on remodelling activity. In the recent interim result, underlying sales in the Americas segment were 3.4% lower due to: i) Weaker residential remodel and residential new construction, ii) Reduction in inventory weeks on hand by major customers versus the prior corresponding period. The Leading Indicator of Remodeling Activity projects that year-over-year growth in home renovation and repair spending will be +2.1% in the middle of this year before easing to +1.6% growth by the end of the year.

In the UK, the macroeconomic backdrop remains soft, weighing on residential new construction and remodelling activity.

In Australia, demand for new homes remains high, driven by a structural undersupply and intense population growth. However, there are simultaneous headwinds from high interest rates and affordability constraints. New detached home approvals reached a 4-year high in March 2026. Although, the overall market is experiencing a “two-speed” trend, with significant divergence between different states.

Strategy To Diversify Away from Copper

RWC is accelerating actions to reduce the impact of copper volatility by replacing components with polymers or alternative metals. The Company is aiming for copper to be a non-material cost for the business by FY29.

It is estimated that copper costs account for ~10% of RWC’s Cost of Goods Sold and that copper/brass inclusive products represent ~35% of sales. To this end, it is worth noting that increasing copper prices may accelerate an ongoing shift from brass/copper to plastic fittings/pipes.

Copper prices have increased by ~30% over the past 12 months, RWC expects to largely offset the earnings impact in FY27 through mitigation strategies such as supply chain optimisation, cost control, and price recovery.

One risk to the strategy is that acceptance amongst end user plumbers will be limited. This is because plumbers will need to transition from a proven, well-regarded incumbent material to a newer alternative.

Balance Sheet Provides Scope for Further Capital Management

Gearing (on a net debt to EBITDA basis) as at 31 December 2025 was 1.4x. Importantly, the current gearing level is below the lower end of the target gearing range of 1.5-2.5x. The high levels of cash conversion and minimal CAPEX requirements over the near term provide scope for to pursue both capital management and potential Merger & Acquisition (M&A) opportunities. However, management’s current focus is on capital management.

The Company recently announced a ~$120m share buyback (representing ~ 5% of RWC’s total shares on issue).
With gearing below the lower end of the target range, there is potential for additional capital returns throughout 1H27 and thereafter. This is consistent with management’s stated framework of returning 40–60% of Net Profit After Tax (NPAT) split evenly between share buybacks and dividends.

Fundamental View

The Company is well placed to achieve operating leverage when volumes eventually improve. This is due to the progress to date on new product initiatives, cost-out measures & restructuring benefits and continued manufacturing optimisation.

RWC shares are currently trading on a 1-year forward P/E multiple of ~11.5x, which is below the 3-year average of ~15x. Notwithstanding, we struggle to see any meaningful catalysts for the shares over the near term. In particular:

i. Macroeconomic conditions across the three geographic-based segments remain challenging and
ii. While current and future share buybacks are likely to be modestly EPS-accretive, further M&A activity would be needed to provide the next growth leg.

Charting View

RWC remains in a long-term downtrend, however, there are some signs that it might push higher in the short-term. It spent March – April trading sideways in a tightening range before breaking out and retesting the old resistance line. It looks ready to move higher from here but there is a major level of resistance near $3.70. From a long-term point of view, we need to see RWC move above this resistance line before we can be positive on the chart.

 

Michael Gable is managing director of Fairmont Equities.

 

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