Dona Ferentes
Did the Thessalonians write back?
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abbreviated AFR version
‘I’m being pretty honest’: The dramatic call that smashed an ASX darling
Over 40 painful minutes, the CEO of plumbing supplies giant Reece, Peter Wilson, swung from emotional to frustrated to helpless and even paranoid as he laid bare the group’s problems.25 Aug 2025
This was less an earnings call and more like a visit to the confessional.
Over 40 painful minutes, the chief executive of plumbing supplies giant Reece, Peter Wilson, swung from emotional to frustrated to helpless and even paranoid (“our competitors are listening to this”) as he provided an unvarnished view of what he described from the starter’s gun as “one of the most challenging years in our history”.
This was a call like few others we can remember, for a company whose run as a market darling is well and truly over. Reece shares plunged as much as 21 per cent when the market opened on Monday, before recovering a little ground. But it was Wilson’s tone and his concerns about the future of his business that made this such an extraordinary moment.
Exactly how Reece can recapture its former glory is simply unclear.
For years, Reece was revered among fund managers for its uncanny ability to churn out consistent profit growth and dividends for shareholders. Obviously, the 62-fold increase in its share price over 25 years, which ended in September 2024 when the stock peaked at $29.20, helped it win an army of loyal followers.
But the mystery surrounding the company didn’t hurt either; the founding brothers, Alan, John and Bruce Wilson, never spoke to the media, and ran annual general meetings that lasted minutes. When Alan’s son Peter took over as chief executive in 2008 he continued the “never complain, never explain” mantra.
But that started to change in 2018, when Peter orchestrated what was supposed to be Reece’s next big growth chapter: the $1.9 billion acquisition of a US company called Morsco. The logic was simple: this was a huge market in which the plumbing sector was growing at twice the rate of that in Australia. If Reece could deploy the same long-term, patient approach to growth that its Australian business was built on, then it would be onto a winner.
But seven years down the track, Peter Wilson sounds stumped by what’s driven the 20 per cent slump in earnings at the group in the 2025 financial year, to $548 million.
The first problem is America’s high long-term mortgage rates, which Wilson says have hammered the US house building and renovation market. American borrowers favour 30-year mortgages, and most locked in ultra-low rates during the pandemic; if they move house, or take on a new loan to fund a renovation, they face rates up about 7 per cent, rather than the sub-3 per cent rates they are currently paying.
“In the US, the housing market is still frozen and we expect it to be constrained for the next 12 to 18 months,” Wilson told analysts on Monday.
But that’s just part of the problem: it’s also becoming increasingly clear that Reece bought a lemon. Wilson says his idea was always to buy “the worst house on the best street” in America, a fixer-upper that Reece could mould into a powerhouse over time. But now he confesses the business is a price-taker that is being belted by cheaper competitors who are stealing market share.
But Reece has also been the victim of one of the oldest tricks in the book.
Two years before Wilson went into the US, Morsco bought a business called Fortiline Waterworks, which was one of the largest wholesale distributors of underground water, sewer and storm utility products in the United States.
But in late 2023, the founder of Fortiline, Tim Tysinger, launched a new business called STAline with VC funding. Tysinger has resumed his position as the market’s cost leader, and is hurting Reece badly.
Wilson hasn’t hidden this fact; in February he told investors about STAline and called out “some of the most unethical [behaviour] that I’ve witnessed” from his competitors. But on Monday, Wilson revealed that the president of Fortiline Waterworks recently left the business for reasons he refused to go into, leaving this key part of the group rudderless, at least temporarily.
Wilson isn’t giving up on the US and is continuing to preach patience. But at the same time, he couldn’t find a lot to be positive about.
“We’re seven years in. We’ve definitely hit a big speed hump. We thought we might have bottomed, but we keep getting surprises.”
At least Reece’s Australian business is going OK, right? Well, no. While sales fell just 1 per cent, earnings before interest and tax fell 17 per cent. Even more concerning was the drop in EBIT margin over the six months to June, from 9.7 per cent in the December half to 7.7 per cent.
The market had been expecting earnings to bounce back sharply in the Australian business in 2026 as interest rate cuts got the construction sector firing. But Wilson poured a bucket of cold water on that, too – July was the same as June, and EBIT margins are not headed back to double digits any time soon.
“The next financial year is not going to be any better than this one.”
A big part of Reece’s problem is that it’s biased to its home state of Victoria, where the fact the economy is performing worse than in every other part of the country has been underlined in bright red texta throughout the profit season.
But Wilson put a different spin on Victoria’s woes: the state’s long COVID lockdown has fundamentally changed for the worse how Reece works. Its headquarters in the inner-city suburb of Cremorne has traditionally been the heart of the group’s innovation efforts, Wilson says, but Reece simply cannot get enough key staff back into the office, and innovation has stalled.
“Through a huge period of lockdown, we are really struggling to uncouple innovation and productivity. We have struggled to get people to come into the office.”
The Reece share price might have been smashed, but Wilson’s radical transparency lost him no admirers on Monday morning. He is, as one stock picker said, a different cat. Another pointed at the stark contrast between Wilson’s honesty and the attempt by James Hardie chief executive Aaron Erter to dress up the company’s ugly US results last week.
But Wilson himself says investors have failed to listen to what he’s been saying in recent years. They’ve failed to listen to his warnings about how long it will take Reece to make good on its US promise. And they failed to listen to him when he said the changes across the Australian business are structural, not cyclical – input costs, including wages, have been reset higher and competition has become more intense and desperate. EBIT margins are not bouncing back quickly unless Reece can find a fresh burst of productivity, and Wilson is telling the market that’s hard to do when too many of his staff are still working from home.
“If we, in the next period, can’t come to grips with that, then we will be pivoting and everything will be on the table,” Wilson says.
He insists Reece is holding its nerve, but there is no quick turnaround here. Investors looking to Reece for growth are essentially ignoring Peter Wilson’s warnings once again, and putting their faith in the old family magic.
“From a Reece perspective, we are in a perfect storm,” he says. “You really find out a lot about yourself at these times. And your team and the alignment with all your stakeholders.”
