Reliance Worldwide Earnings: North America Restructure Yields Significant Margin Improvement

We raise our fair value estimate for Reliance Worldwide by 8% to AUD 4.20 on a more optimistic midcycle outlook for the North America segment, which accounts for around two thirds of group EBITDA. Reliance’s North America restructure delivered 200 basis points of EBITDA margin improvement in the first half of fiscal 2024, despite flat sales. We believe the restructure makes the North America segment a structurally better business, and as the housing construction cycle recovers, we think a midcycle EBITDA margin of 21% is achievable, up from our previous forecast of 19%. This lifts midcycle EBITDA by around 8% at the group level.