Wolseley Profit Declines 30% in 1Q

UK-based Wolseley plc, distributor of plumbing and heating products and building materials, reported group sales for the three months ended Oct. 31, 2008, were up 2% from the same period a year ago. Profit was down about 30%.
 
Results continue to be impacted by the events in the financial markets and weakness in the housing markets. The decline in profit was primarily due to lower profitability in Stock Building Supply and Wolseley UK.
 
While these results reflect a further deterioration in the business environment in the first quarter it was not unexpected, and, we continue to react swiftly to market conditions with aggressive but measured cost reduction,"said Chip Hornsby, group chief executive. "In these unprecedented circumstances, the key priorities remain driving cost reduction and enhancing cash flow to ensure the Group remains compliant with its banking covenants."
 
Actions initiated in first quarter have resulted in combined restructuring charges of £163 million, annualized savings of £134 million and headcount reductions of around 5,000. Further actions announced will incur restructuring charges of £45 million, generate annual savings of £103 million and headcount reductions of over 2,300, primarily in the UK. 
 
Sales in North America  
In North America, overall revenue for the three months was marginally up compared to the corresponding period in the prior year. Profit was down by around 15% reflecting a first quarter loss reported by Stock. 
 
U.S. results have continued to be affected by the ongoing decline in U.S. housing starts and falling consumer confidence.   
 
Ferguson performed well in the first quarter despite the slowing new residential and RMI markets. Sales were down around 10%. Continued focus on increasing private label sales and refining pricing more than offset the effect of lower commodity prices. 
 
The company announced further cost reduction programs to be implemented at Ferguson with the expected decline in the commercial and industrial segment in the early part of 2009, including additional headcount reduction of 1,100 employees and 50 branch closures.
 
Stock Building Supply recorded a loss of US$60 million for the quarter, compared to a loss of US$6 million for the same period a year ago. The restructuring announced earlier this year of the Stock business to further downsize its operations in line with the deteriorating market conditions is largely completed. Remaining branch closures should be completed by the end of November 2008. Headcount has been reduced by 3,400.
 
Wolseley Canada reported modest growth in sales and profit. The Canadian residential market has not been significantly impacted by the factors affecting the US housing market. 
 
Europe 
In Europe, sales were marginally up in the three months, while profit was down by around 50% mainly as a result of the lower level of profitability in the UK. 
 
Revenues for Wolseley France also increased marginally, in spite of consumer confidence continuing to weaken.