Reece's U.S. Expansion and Data Center Bet: Cautious Growth Amid Housing Softness
Reece Limited maintains modest U.S. growth outlook, steps up branch rollout, and highlights data center demand as a key nonresidential driver.
REH.AX · Earnings Call · 2026-08-23
Results: A Tale of Two Markets
Reece Limited delivered FY26 sales of $9.4 billion, up 4.5%, but EBITDA was flat at $901 million and EBIT slipped 2.6% to $534 million. The split is stark: ANZ sales rose 8% on higher volumes, while the U.S. grew 6.5% but only via network expansion — like-for-like sales fell 1.7% as new residential construction remained weak. As U.S. business continues to scale, the company is doubling down on expansion and a new growth vector: data centers.U.S. Expansion: More Branches, Same Patience
Management raised its annual branch opening guidance to 15–20, a step up from the prior 10–15 pace. Peter Wilson framed this as a long-term commitment: “we're far from where we want to be in the U.S. We're far from the finished product.” — Peter Wilson · 2026-08-23 The network expansion is deliberate, with new branches scaling over 2–5 years to breakeven. The company is also exploring M&A but remains disciplined given high valuations. Andrew Young noted that capex, which came in at 1.9% of sales, will normalize to the historical 2–3% range, and the second half of FY26 saw net debt drop to 1x EBITDA from 1.5x at the half.Data Centers: A New Tailwind
For the first time, data centers feature prominently as a growth driver. The nonresidential segment in the U.S. is "supported by the data center build-out" (Peter Wilson). “There is a lot of plumbing, HVAC, waterworks product that goes into them.” — Peter Wilson · 2026-08-23 The company sees parallels to Australia's mining boom and is positioning to capture this demand across both regions. This aligns with a global surge in data center investment, making data center exposure a fresh, company-specific theme that wasn't articulated in prior quarters.ANZ Momentum and Cost Discipline
ANZ second-half sales accelerated to +13% YoY, though inflation contributed only 2%. This momentum is expected to continue into H1 FY27, but management remains cautious on the second half. Costs are rising from discretionary investment — including a new LTIP and AI tools — but underlying costs are tightly managed. In the U.S., margins contracted 76 bps at EBIT, driven by new branches. As stores mature, margins should improve; Sasha Nikolic highlighted that "as our new rollouts start to mature and they do take time, we would expect to see the margin profile change in the U.S."Outlook: Modest by Design
The U.S. outlook is deliberately cautious: “modest is definitely modest.” — Peter Wilson · 2026-08-23 Consensus may expect ~10% sales growth, but Reece is guiding to something more subdued given housing affordability and a post-COVID hangover. Data centers, however, provide a partial offset.Overall, Reece is making a patient, capital-intensive bet on the U.S. and data centers, while ANZ hums along. The step-up in store rollout and the new data center theme are the key changes. With a strong balance sheet and a through-the-cycle approach, the company is well-positioned to ride the infrastructure wave without sacrificing discipline.My analogy of this, it's a little bit like when we had the mining boom in Australia, we benefited to that while the mining boom went on. So all these big infrastructure plays, companies like Reece do benefit because we're going to supply the product of all the trades that are doing the work for the hyperscalers.