Ann: FY2022 results presentation, page-5

At the briefing, CFO Andrew Johnson said that RWC remained comfortable with growth in Ez-Flo of 10 per cent for each of the initial three years.

The CEO, Heath Sharp said that the backlog of work in Australia will help results in FY 23, and emphasised the lower positioning in new construction, but the outlook has become more uncertain since February 2022. It was premature to assume that commodity prices would return to pre-pandemic levels.

In the USA, RWC has seen some wholesale channels reducing their inventory levels. Many OEMs have 'pulled back' in production: this and other factors obscures true demand. At the moment, there seems stable demand.

In Australia, 1H 23 is expected to continue to see stronger volumes, but slightly lower levels later. Repair and remodel OK.

The UK seems the most challenged of RWC's markets (see my points above). Underlying demand in Europe strong, but geopolitical tensions including Ukraine are risks the company is conscious of.

Inflation is likely to be a continuing challenge.

Mr Sharp emphasised the resilience of RWC demonstrated by how it handled the pandemic along with the completion of two acquisitions, plus changes to warehouses and product development.

Questions commenced.

RWC's planning varies by regions: in USA, point-of-sale data shows stable demand, and Australia is similar but subject to possible decline later in the year. Europe is quite strong, but being watched closely by RWC as it has the biggest uncertainty over it. UK has been flat and is soft.

The order intake is bouncing around. Bigger retail customers are sophisticated. Smaller independent merchants tend to get conservative more quickly and reduce orders, and they had more inventory than normal due to COVID-19.

Re price rises, the discussion has been different to what Mr Sharp has ever previously seen: it's constant and at about the right level, but RWC is watching commodity costs closely.

Regarding inventories, the CFO said RWC from a retail perspective felt it was in good shape, but volatility with smaller independent wholesalers will be reflected in July (sales).

Cash conversion should be better in FY 23 than FY 22, but no significant inventory change in 1H 23. It may be a change in 2H 23.

In retailers, it is 'professionals' that are driving sales - the average 'ticket' (amount of a sale) has risen - so it's not DIY (householders) slight declines that are so far driving results even though foot traffic at retailers has declined.

The three per cent decline in July 2022 RWC sales implies a seven per cent cut to volumes, one analyst said. Mr Sharp said he'd be wary of rolling out a one month result into a 12 month month result. In July, it was more the USA independent merchants' lower orders, and RWC called out is OEMs in July 2022. (The latter had hit their internal inventory targets due to previous over production, so these clients reduced their orders at short notice. There was also an additional week of holidays in USA in July 2022). Retail POS numbers don't indicate a demand issue in 1H 22.

The CFO said that re price increases, there would be a two per cent carryover into FY 23. From where it sits right now, no more (immediate) rises but watching inflation closely.

Commodities have reduced in price but too early to have discussions with customers regarding copper.