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UK-based Wolseley plc, global distributor of plumbing and heating products to professional contractors and supplier of building materials, reported it continues to be affected by the slowdown in housing and lower lumber prices in the U.S.
For the first five months to Dec. 31, 2006, Wolseley sales increased 15%, with 3% organic growth. Profit was slightly lower. In constant currency, revenue and trading profit would be about 5% higher. Results for the first six months will be reported in mid-March.
Wolseley says the housing slowdown effect was offset by good organic growth in the U.S. plumbing and heating business (Ferguson), an improved performance in continental Europe and contributions from acquisitions.
In the U.S., new housing starts have fallen more sharply than originally expected, Wolseley, said, but the repairs and remodeling market and the commercial and industrial sectors continue to hold up. Aggregate local currency revenue from the group's U.S. businesses was around 10% higher and profit was down by around 8%.
Ferguson produced good growth, albeit at a slower rate, with revenue in local currency for the five months up by more than 15%. Organic growth was nearly 10%. Profit was up by around 10% on the equivalent period in the prior year. Lower profit growth reflects the lower level of commodity price inflation, the initial effect of acquisitions and the effects of the weakening new residential markets which has necessitated headcount reductions of around 500 people in softer markets.
At Stock Building Supply, local currency revenue and profit have also been impacted by the continued slowdown in the new residential market resulting in increased price competition and also by the significantly lower lumber and structural panel prices.
Lumber and structural panel prices, which when combined account for around 45% of Stock's revenues, have fallen by 22% and 35%, respectively. Including the impact of acquisitions, local currency revenue for the first five months of the current financial year was slightly down.
Organic sales volumes were down by around 9% compared to the 22% decline in average housing starts. Profit was down by around 45%, after charging one off costs of around
In the U.S., Wolseley says the housing market is expected to continue to remain soft for the next several months, but with significant regional variations. As the year progresses, the relative performance of Stock should improve as housing starts and lumber/panel price comparators become more favorable and the benefits of the cost reduction program are realized. The RMI and commercial and industrial markets are expected to continue to hold up. Ferguson should increase its market share and achieve good levels of organic revenue growth, albeit at a more modest