Wolseley Warns U.S. Slump Could Worsen

Wolseley warns US slump could worsen
Housing slump causes a sharp fall in US profits and Wolseley confirms that group results will fall below last year's level

http://business.timesonline.co.uk/to...cle2082656.ece

Steve Hawkes
7/16/2007

Wolseley, the building materials group, gave warning today that the dramatic slowdown in the US housing market could get worse as it revealed that profits in its North American business had tumbled 17 per cent in the past year.

The group, which generates half of its revenue in the US, said that pressure caused by the property downturn had pushed prices for lumber and structural panels down by about a quarter.

Steve Webster, finance director, told Times Online that there was still no sign of an upturn in the market and said that conditions in the US could get even bleaker.

“At the end of the day it has been a very challenging year,” he said. “We have already said that this is the worst downturn in the US housing sector since the late 1980s, early 1990s and it could get worse.”

In a trading statement, Wolseley said that the US slowdown, coupled with the weaker US dollar, meant that group pre-tax profits in the 11 months to June 30 had fallen 5 per cent below the level of a year ago.

Profits for the financial year to the end of July will be hit by a further £9 million of restructuring costs in the US as the group closes 24 of the 311 branches run by its Stock business in North America.

Before today the investment bank UBS lowered its forecasts for Wolseley’s full-year profits by £35 million to £765 million. Wolseley made £817 million last year.

Shares in the group fell 15p to £11.40 in early trading.

Mr Webster insisted that although profits would be down, the group was still performing better than most of its rivals on the other side of the Atlantic.

He said that Wolseley’s dividend payout would be unaffected and that it still planned to spend about £450 million on bolt-on acqusitions in the coming year around the world.

He added that although there were mixed signals, the UK housing market seemed strong despite the recent series of interest rate increases from the Bank of England.

Trading profits in the UK, where Wolseley runs Plumb Center and Drain Center, were up 5 per cent in the 11 months to June 30.

Mr Webster said: “I think the UK housing market has been through its downturn. The housing market got tighter 18 months ago, and I think it’s been through that cycle.”