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Investing.com-- Shares of Reece Ltd (ASX:REH) fell sharply on Monday after the Australian plumbing fittings maker clocked a sharp drop in its annual profit and warned of a sluggish U.S. housing market.
Reece’s shares sank as much as 20% to A$11.01, lagging a 0.4% rise in the ASX 200 index.
The company’s net profit after tax for the year to June 30 fell 24% to A$317.0 million ($205.3 million), also missing expectations of A$325.1 million.
Sales revenue fell 1.4% to A$8.89 billion, while its annual dividend fell to 18.36 cents from 25.75 cents per share.
Reece said the weak earnings come chiefly from low demand in both of its key markets, the U.S. and Australia. Its U.S. earnings fell 5% due to lower volumes and increased competition due to a broader slowdown in new residential construction.
Going forward, Reece said the U.S. housing market is expected to be constrained for at least the next 12-18 months, especially with limited affordability weighing on volumes.
Australian volumes are also expected to be limited in the coming months.
High mortgage rates, sticky inflation, and increased uncertainty over the economy saw consumers largely scale back house purchases in recent years, which in turn weighed on construction volumes and also battered the fittings industry.