Wolseley Profit Off 80% In First 9 Months

UK-based building materials distributor Wolseley plc reported sales for the nine months ended April 30, 2009, were £12 billion (US$19.2 billion), up 0.2% year-over-year. Excluding the impact of foreign currency, sales were down 15%. Pre-tax profit fell 80% - 88% in constant dollars - to £72 million (US$115 million).
 
Continued weakness across most markets, led by the commercial and industrial sectors in the U.S., and significant declines in the UK and Ireland and Nordic region, have led to continued cost reduction measures being implemented. These measures include further headcount reductions. In the nine month reporting period, Wolseley has reduced headcount by 13,746 worldwide - including the elimination of 5,317 positions through the exit from Stock Building Supply in the U.S., effective May 5.
 
Excluding the impact of discontinued operations at Stock, sales were £11 billion (US$17.6 billion), up slightly from 2008.
 
North America Results
Ferguson revenues declined by 15% in local currency. Because of increasingly competitive market conditions, Ferguson has shifted focus to higher margin activities including showrooms, private label and counter sales. In the nine month reporting period, Ferguson reduced headcount by 3,238.
 
Wolseley Canada reported a 2% local currency revenue decline.
 
Europe
Sales in the UK and Ireland continued to deteriorate.  The Irish construction market, in particular, remained severely depressed with activity over 70% lower than the equivalent period in the prior year.  Sales for the UK and Ireland decreased by 15% in the nine months ended 30 April 2009 and trading profit was 75% lower than the equivalent period in the prior year.
 
Wolseley France saw decreased local currency revenue of 10% in the nine month period and trading profit was around 70% lower. 
 
The Nordic markets continued to deteriorate in the third quarter although the rate of deterioration has slowed in recent weeks.  DT saw local currency revenue down 19% and trading profit down around 50%, although gross margins continue to hold up well. 
 
In Central and Eastern Europe local currency revenue was down 8% and the business incurred a small loss in the period, before taking account of the one off loss of £10 million on the disposal of Hungarian operations.
 
Stock Building Supply
Stock Building Supply continued to be affected by the US housing slow-down and saw local currency revenue fall by 30% with additional pressure on gross margins.  Stock's trading loss for the nine months to 30 April 2009, excluding £20 million of losses relating to the construction loans activities, was £108 million (US$172.5 million).  
 
On 8 May 2009, Stock announced the approval of all of its first-day motions by the United States Bankruptcy Court of Delaware, enabling Stock to operate normally through the Pre-Packaged Chapter 11 process. 
 
Outlook
The Group expects market conditions to continue to deteriorate in the short term and anticipates that trading conditions will remain challenging until at least early 2010. 
 
Recent trading has proved extremely challenging and we continue to anticipate this will be the case until at least early 2010.  In the circumstances our drive for tighter cost control and strong cash generation remains a key area of focus for the Group, Group Chief Executive Chip Hornsby said. "These actions, coupled with the Group's recently strengthened financial position through the capital raising and exit of Stock, leaves Wolseley well placed both to meet the current challenges and to capitalize on a future market recovery."