Reece (REH) - Moving through the cyclical low

July 10, 2025

Reece supplies plumbing, bathroom, heating, ventilation, air-conditioning, waterworks, and refrigeration products to commercial and residential customers in Australia, the US and New Zealand. Reece was founded in 1919 and is based in Cremorne in Melbourne.

Challenging conditions persisted for Reece’s end-markets in 2H25, with FY25 EBIT expected to decline 18.5% to $553 million, falling short of Ord Minnett and market expectations by 5% and 6%, respectively. Volumes remain soft, with recent interest rate cuts yet to translate into improved activity, although we note Reece is a late cycle beneficiary of improved building activity.

In the US, where the company highlighted greater competition, Reece’s exposure to a weak new residential construction market continues to hurt performance. Despite the cyclical downturn in earnings, Reece continues to invest through the cycle, which should ensure the company benefits from an eventual uptick in building activity. Following share price weakness, we have upgraded to Buy from Accumulate, although our price target falls to$18.40 from $20.40.

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