Key Highlights

  • FY26 group sales rose 4.5% to AUD 9.378 billion.
  • Australia and New Zealand delivered higher sales and earnings.
  • US operations remained constrained by weak residential construction activity.
  • Housing demand, currency movements and Margin execution remain key drivers.

Reece Limited (ASX: REH), Australia's largest plumbing, bathroom and waterworks products distributor, has delivered a full-year result that tells two very different stories on two sides of the Pacific — a resilient, improving home market and a US division still working through a sluggish residential construction cycle. For a company whose share price has spent much of the past two years tracking the health of housing markets in Australia, New Zealand and America, the FY26 numbers offer both reassurance and a reminder of how much still depends on the timing of a genuine construction upswing.

For the year ended 30 June 2026, Reece reported group sales of AUD 9,378 million, up 4.5% on the prior year (7.3% at constant currency), while statutory net profit after tax came in at AUD 308 million, down 2.8%. Earnings per share nudged up 0.7% to 49.5 cents, reflecting the modest lift in profit against a broadly stable share count. Group underlying EBITDA was essentially flat on a reported basis at AUD 901 million, though it rose 2.1% in constant-currency terms, underlining how much currency movements shaped the headline figures.

What the Numbers Show

The divergence between Reece's two main markets is the real story of this result. In Australia and New Zealand, sales rose 8.3% to AUD 4,204 million, with EBITDA up 7.3% to AUD 532 million and EBIT up 6.1% to AUD 360 million across a network of 678 branches. That is a solid outcome for a Business exposed to residential renovation, new-build plumbing and trade demand, and it suggests the domestic construction sector — long hampered by high interest rates, labour shortages and approval delays — is finding firmer footing.

The United States division told a more difficult story. Sales rose 6.5% in US dollar terms to USD 3,511 million, but like-for-like sales fell 1.7%, and EBITDA dropped 4.5% to USD 251 million while EBIT slid 13.0% to USD 118 million. Reece has continued to expand its US branch footprint, opening a net 25 new locations during the year, but that Investment has come at a cost to near-term margins as the American residential construction market remains soft. Management specifically flagged weak US residential activity as an ongoing headwind, even as non-residential and infrastructure-linked Demand held up better.

Dividends and Balance Sheet

Reece's board declared a final Dividend of 13.40 cents per share, fully franked, lifting the full-year dividend to 18.84 cents, up from 18.36 cents in FY25 — a modest increase of roughly 2.6%, broadly in line with earnings growth. That leaves the Payout Ratio at approximately 38% of statutory earnings, a conservative level that gives the company flexibility to keep investing in its US expansion without straining the balance sheet. Net Debt rose to AUD 744 million from AUD 590 million a year earlier, taking the net Leverage Ratio to a still-comfortable 1.0 times EBITDA on a pre-AASB 16 basis. Operating Cash Flow of AUD 645 million comfortably covered Capital Expenditure of AUD 174 million, equivalent to around 1.9% of sales, most of which continues to fund new branch openings and supply-chain investment in the US.

Why Investors Are Watching

Reece has long been viewed by the market as a bellwether for both the Australian trade and construction sector and, increasingly, for the fragmented US plumbing and building-products distribution market it has been consolidating since its 2018 Acquisition of Morsco. The company's strategy in the US has been to build density and scale over a multi-year horizon, accepting near-term margin pressure in exchange for Market Share gains once the housing cycle turns. That bet has looked expensive during a period of elevated US Mortgage rates and subdued new-home starts, and the FY26 result shows the US business is still absorbing that cost.

Domestically, the ANZ recovery is the more encouraging signal for shareholders. Renovation activity, population growth and a slow easing in financing conditions have supported trade volumes, and management pointed to a “solid pipeline” of work expected to support the first half of FY27. Whether that translates into sustained double-digit growth will depend heavily on the trajectory of interest rates and housing approvals over the coming year.

The Bigger Industry Picture

Australia's construction sector has been through a prolonged soft patch, with elevated build costs, tight labour markets and cautious lenders slowing both greenfield residential projects and larger renovation work. Any genuine recovery — driven by rate relief, government housing initiatives or pent-up demand — would flow relatively quickly to a distributor like Reece, given its exposure across trade, retail and commercial waterworks customers. In the US, the picture is more mixed: existing-home sales and new construction starts have remained well below pre-2022 levels in many regions, even as non-residential and infrastructure spending has provided some offset.

Key Risks

The most obvious risk to Reece's outlook is a slower-than-expected recovery in US residential construction, which would continue to pressure the American division's margins even as the branch network expands. Currency movements between the Australian and US dollar also introduce Volatility into reported earnings, as this result demonstrated. Domestically, any renewed tightening in Credit conditions or a stalling of the nascent construction recovery could dent the ANZ momentum that has underpinned this year's growth. Rising net debt, while still modest relative to earnings, is also worth monitoring if capital expenditure continues at current levels without a corresponding lift in US profitability.

What Could Drive the Stock Next?

Investors will be watching for signs that US like-for-like sales stabilise and turn positive, which would suggest the worst of the residential downturn has passed. Interest-rate decisions in both Australia and the US, further detail on FY27 guidance, and the pace of branch profitability in newer US locations are all likely to feature in how the market assesses Reece's next moves. For now, the company's ANZ strength provides a reassuring core, while the US remains the swing Factor that will determine whether this housing-cycle story turns into a genuine reacceleration of growth.