Housing decline in U.S. hits Wolseley

Industrial Distribution staff -- Industrial Distribution, 3/17/2008 8:46:00 AM

Wolseley plc said March 17 its pre-tax profit was $124.3 million, down 72.5 percent for the first six months of FY 2008.

The housing slump in the United States was the main reason, Wolseley CEO Chip Hornsby told investors, adding that he did not expect a U.S. improvement any time soon.

“At some point we will hit bottom,” he told the Financial Times. “But I don’t think we’re there yet.”

In the U.S., Stock Building Supply’s revenues were $1.8 billion, down 25.7 percent from a year ago. Stock also reported a loss in profits of $89 million in FY ’08. Last year, for the same period, it managed to show a profit of $81 million.

CFO Steve Webster pointed to areas of the U.S., specifically Texas, Florida, the Northeast and the construction services industries in Nevada, as areas “which have all been impacted severely in this [residential] downturn.”

Webster said that for the rest of this year, Stock will focus less on residential construction and more on the commercial end.

The plumbing division, Ferguson Enterprises, fared somewhat better, posting revenues of approximately $5.6 billion, an increase of 3.2 percent over the same period a year ago.

“There’s no doubt that Ferguson’s strength and diversity in business areas such as waterworks, industrial and commercial … enable it to outperform the market generally and take further market share," said Webster.

Wolseley Canada, where residential is holding up well, saw its revenues increase by 3.7 percent to $687.4 million.

In Europe, overall revenues were approximately $640 million, up 15.8 percent.

“In the short-term, we remain very focused on maximizing cash flow, reducing costs and growing market share,” Hornsby said in a statement. “We are confident in the long term fundamentals of our markets and will emerge from this current downturn as a stronger organization with an excellent platform for future growth.”

Addressing reporters on the conference call, Hornsby said, “The first six months [of FY ‘08] have been very challenging. Conditions have continued to weaken … and are increasingly difficult, particularly in the U.S.” 

In addition, Wolseley said in its financial statement that it expects business conditions in a number of its markets to become more challenging over the next few months.

“Our response will be to reduce costs by targeting specific locations, customer type and shifts in local economies,” Hornsby said.