How Will RWC Offset $30M Tariff Hit After Holman Boosted FY25 Sales?
RWC reported a 5.5% increase in FY25 net sales driven by the Holman acquisition, while adjusted EBITDA edged up 1.1% amid margin pressures. The company warns of tariff-related cost impacts in FY26, offset by ongoing cost savings and strategic adjustments.
- FY25 net sales rose 5.5% to $1.31 billion, boosted by Holman acquisition
- Adjusted EBITDA increased 1.1% to $277.7 million, with margin slipping to 21.1%
- Americas sales declined due to weak remodel markets and tariff costs
- Asia Pacific sales surged 43.2%, largely from Holman integration
- FY26 outlook cautious with tariff costs expected to reduce margins
Solid Growth Fueled by Acquisition
RWC closed FY25 with net sales of US$1.31 billion, marking a 5.5% increase over the prior year. This growth was largely attributable to the full-year contribution from Holman Industries, acquired in March 2024. Excluding Holman and the prior year’s Supply Smart sales model closure, sales were essentially flat, underscoring the acquisition’s pivotal role in driving top-line expansion.
Adjusted EBITDA rose modestly by 1.1% to US$277.7 million, though margins contracted to 21.1% from 22.0% the previous year. The margin dip reflects a combination of lower volumes in key markets and inflationary pressures, partially offset by $17.4 million in cost savings and $2.3 million in Holman synergies.
Regional Performance Diverges
The Americas segment faced headwinds with sales down 2.1%, impacted by subdued remodel activity in the US and UK, as well as the exit of low-margin Canadian product lines. Tariffs introduced during the year added $3.3 million in costs, further pressuring margins despite cost reduction efforts.
Conversely, Asia Pacific sales soared 43.2%, driven by Holman’s integration and organic growth in Australia’s stabilizing new home construction market. However, margins in the region declined due to higher input costs, supply disruptions, and ERP implementation expenses.
EMEA sales declined slightly by 1.6%, with ongoing restructuring and the sale of manufacturing operations in Spain weighing on results. Despite lower volumes, cost efficiencies helped limit margin erosion to 50 basis points.
Financial Health and Capital Management
RWC’s net debt fell to US$331.6 million, reducing leverage to 1.3 times EBITDA, below the company’s target range. Strong cash flow generation allowed a $150 million reduction in committed debt facilities. The company declared a final distribution of US5.0 cents per share, split evenly between cash dividends and on-market share buy-backs, reflecting a balanced capital return approach.
Looking Ahead, Tariffs and Market Uncertainty
RWC anticipates FY26 sales to be flat to slightly down, with tariff-related costs expected to reduce EBITDA by US$25-30 million in the first half. The company aims to eliminate tariff exposure from China-sourced products by FY27 through diversification and pricing strategies. However, macroeconomic uncertainties, particularly in the US and UK housing markets, cloud near-term prospects, prompting RWC to withhold full-year guidance.
Cost reduction initiatives are expected to deliver an additional US$8-10 million in savings, while capital expenditure is forecast between US$25-30 million. The company remains focused on maintaining strong cash flow conversion and managing its manufacturing footprint to adapt to evolving market conditions.
Bottom Line?
RWC’s FY25 results reflect strategic acquisition gains tempered by tariff and market pressures, setting the stage for a cautious FY26.
Questions in the middle?
- How effectively can RWC mitigate escalating US tariff impacts beyond FY26?
- Will the Holman acquisition continue to drive growth amid uncertain housing markets?
- How will ongoing cost savings balance against inflation and supply chain challenges?
