Reliance Worldwide Makes Acquisition of EZ-FLO

Industry News

& Articles

Reliance Worldwide Makes Acquisition of EZ-FLO

Facebooktwitterlinkedin
  • EZ-FLO owns the powerful EASTMAN brand, the market-leader in large appliance connections in the US and provides a low-cost manufacturing and sourcing capability in China
  • Price is 7 times EZ-FLO’s Pro Forma Adjusted EBITDA post synergies, for the 12 months ended 31 July 2024
  • Leverage increased to 1.78 times Net Debt to Pro Forma EBITDA, at completion of the acquisition, comfortably within target leverage ratio range of 1.5 to 2.5 times
  • First quarter sales up 8 percent, EBIT up 5 percent, but higher raw material and freight costs trim operating margin by 1 percent
  • Increased expenditure on home remodelling and new house construction supports medium-term outlook.

 Reliance Worldwide Corporation Limited (‘Reliance’ or the ‘Company‘) designs, manufactures and supplies premium branded quality water flow and control products and solutions. The Company’s products have application in the residential and commercial property sectors, especially the less cyclical residential repair and renovation end-market. Reliance operates in Australia, New Zealand, Canada, the United States, Spain and the United Kingdom, through 5000 channel partner outlets.

Acquisition of EZ-FLO International, Inc. for US$325 million

Reliance has expanded its brand presence in the US with the acquisition of premium brand manufacturer and distributor, EZ-FLO, which manufactures and distributes plumbing specialty products, appliance supply lines, gas connectors and other accessories. Since 2000, EZ-FLO has owned the powerful EASTMAN brand, which is the market-leader in large appliance connections in the US. The acquisition also provides Reliance with a low-cost manufacturing and sourcing capability in China.

At US$325 million, Reliance is paying 12 times EZ-FLO’s Pro Forma Adjusted EBITDA before synergies, for the 12 months ended 31 July 2021. Including estimated revenue and cost synergies, this multiple reduces to 7 times, by 2024. Shareholders are not being asked to fund the acquisition. Instead, reliance has used cash and an AUD$100 million bank draw down to fund the purchase.  This will leave Reliance with US$127 million of undrawn, committed borrowing facilities. Leverage has been increased to 1.78 times Net Debt to Pro Forma EBITDA at the completion of the acquisition, comfortably within Reliance’s target leverage ratio range of 1.5 to 2.5 times.  

EZ-FLO recorded net sales of US$169 million in FY21, and Pro Forma Adjusted EBITDA of US$27 million. Ninety percent of sales are sourced from the US, while Eastman products account for 70 percent of total sales.

First Quarter Trading Update

Reliance has experienced net sales growth of 8 percent to US$246 million while EBIT is up 5 percent, compared to the first quarter in FY21. The outlook for RWC’s key markets in FY22 is positive, from a demand perspective. However, operating margins are being impacted by higher input costs, including the price of steel, copper and resins, as well as rising energy and freight costs. The margin impact is 100 basis points or 1 percent, at the EBITDA level. Reliance expects to pass on these commodity cost increases to customers, although the customary lag effect means that the Company doesn’t anticipate that it will restore operating margins before the third quarter, at the earliest.

The Future

Fundamentally, Reliance is supported by resilient demand for its premium brand products and the trend of increased expenditure on home remodelling activity and new house construction. The combination of a low-cost Chinese manufacturing capability and powerful brands like SharkBite, HoldRite and now EASTMAN, suggest that this trend appears sustainable for the foreseeable future.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

Comment on this company

Latest Stories

Sandfire Announces 147Mt Mineral Resource Estimate For MATSA Mine Project

Sandfire today released an update of the Measured, Indicated and……

Piedmonts North American Lithium Mine To Restart In First Quarter Of 2023

Piedmont has confirmed the restart of spodumene (lithium) concentrate production……

Collins Foods KFC Brand Strength Boosts FY22 Sales, Profits and Dividends

The financial year ended 1 May 2022 saw Group revenue increase by……

More for you

EVN Down On Wet Weather Impacts And COVID Related Staff Absenteeism

COVID related staff absenteeism and wet weather has……

APA Group To Pay 28c Final Distribution For 6mths Ending June 2022

APA has announced a final distribution of 28 cents per stapled……

Arena REIT To Pay 4.05 Cents Quarterly Distribution On August 4

Arena REIT (Arena or ARF) is an internally managed stapled real estate Group……

Iluka To De-Merge Mineral Sands Assets To Focus On Rare Earths Operations

Iluka is set to become an Australian-based critical minerals company……

US Federal Reserve 0.75% Rate Rise Is The Largest Increase Since 1994

In a decisive move that was well received by markets around the globe……

RIO’s New $4.3B Gudai-Darri Mine Delivers First Iron Ore Shipment

RIO’s first greenfield mine site in the Pilbara in 10 years has delivered……

KOSEC Terms & Conditions

Kodari Securities Pty Ltd (CAR 399556) trading as KOSEC is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC is a financial services company and any information provided by its platforms, portals, reports and documents is protected by copyright. Any unauthorised production of this information is prohibited.
KOSEC reserves the right to change or remove any information provided on our website, reports or any documents including these terms and conditions at any time without notice. The change or modification to the terms and conditions will be effective immediately upon posting an updated version on our website, necessary platforms and documents. It is recommended that you review the information provided on our website, including these terms and conditions frequently for any changes.

Disclaimer
KOSEC provides general advice only. The information provided is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. KOSEC recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Please make sure you read our Financial Services Guide (FSG).

KOSEC does not guarantee any returns. Past performance of any product discussed is not indicative of future performance. (We urge that caution should be exercised in assessing past performance. All financial products are subject to market forces and unpredictable events that may adversely affect their future performance). Investing in the stock market can incur huge losses. Please also be aware that fees will incur on every transaction regardless of the performance of your investments or returns generated. Employees and or associates of KOSEC may hold one or more of the stocks, securities or investments reviewed by the company.

Your use of information from our website, reports, documents and from talking to our representatives/associates is at your risk. Under no circumstance should the investment be based solely on KOSEC information and general advice. You should seek professional financial planning advice.
KOSEC aims to maintain the accuracy of the data and information provided on this website, by using information prepared from a wide variety of sources, which KOSEC to the best of its knowledge and belief, considers accurate and does not make any representations or warranties of any kind, expressed or implied, about the completeness, accuracy, reliability, suitability or availability of the information provided.

We may at times refer to third parties, which the details of these third parties have been provided solely for you to obtain further information about other relevant products and entities in the market. KOSEC has no control over the information third parties have, or the products or services offered, and therefore make no representations regarding the accuracy or suitability of such information, products or services. You are advised to make your own enquiries in relation to third parties. Our inclusion of any third party content is not an endorsement of that content or the third party.

Fees
As a client you will be charged a yearly service fee and a set brokerage fee per transaction. Your service fee will automatically renew at the end of your agreed 12 month period at the same rate advertised at the time. Your credit card or bank account will be charged for a further year following which will again auto renew until you cancel your yearly service fee. You can cancel the auto renewal at any time in advance of the renewal date by contacting us. KOSEC is aware of the need to ensure the security of your credit card details and our payment systems are compliant with the Payment Card Industry (PCI) Data Security Standard.

Privacy
You consent to receiving email correspondence from KOSEC, as well as companies KOSEC has an association with. These emails will be sent by KOSEC and third party companies. You can opt out of receiving any category of emails at any time by contacting us. We may from time to time inform you of special offers, or even ask your opinion of the services we provide, but your involvement is optional. Should you request us to do so, we will archive your details.

Indemnity and Liability
You indemnify KOSEC from all claims or threatened claims, suits, demands, damages, costs as well as including legal costs incurred in dealing with any threatened claim, expenses made by any person or corporation against KOSEC and any other amounts which is caused by KOSEC providing information, execution and General Advice.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from a decision made by you on the basis of information obtained through the use of our portal, reports, documents or any General Advice given and any transaction taken place.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from delays in executing orders for the client and acknowledges KOSEC makes no guarantees about the time taken to execute an order on behalf of the client. You acknowledge that KOSEC relies on third parties in providing technology and release KOSEC from any harm, loss or damage you may suffer as a result of the failure of such information technology.

Cookies and Links
KOSEC website, and its portal uses cookies, which lets us identify your browser while you are using the site or our portal. Cookies do not identify you personally. They simply allow us to track your usage patterns. If you prefer not to receive cookies, you can configure your browser to reject them or to notify you when they are being used. The functionality of the KOSEC website may be impacted if you restrict the use of cookies.

Fill up the form below and we will get back to you as soon as possible.

CLAIM YOUR FREE E-BOOK &
7 DAY ACCESS TO LOTUS BLUE

STOCK MARKET SUCCESS

KOSEC’s CEO, Michael Kodari’s new book, “Stock Market Success” valued at $39.95, available at Dymocks book stores with all the proceeds going to Dymocks Children’s Charities.

CLAIM YOUR FREE E-BOOK WHEN YOU LOGIN TO LOTUS BLUE INVESTMENT PORTAL

Latest TV Commercial