Wolseley hit by Europe's market struggles while US remains strong
PLUMBING supplies giant Wolseley felt the heat yesterday as profits took a knock from struggling European markets and a big writedown in the value of its Nordic business, overshadowing a strong performance in the US.
The FTSE 100 group also warned that like-for-like revenue growth would slow in the second half, although it expects annual trading profit to meet City forecasts.
Wolseley, which owns Plumb Center and Ferguson, reaped the benefit of stronger industrial and residential construction markets in the US, where it generates 76 per cent of its trading profit, as revenue there increased by 11.7 per cent.
In the UK, it was buoyed by an upturn in housebuilding activity, but RMI (repair, maintenance and improvement) markets remained “subdued”, while profit margins were squeezed by a boiler price war.
The group delivered a good trading performance against a backdrop of decent market conditions in the US
Although Wolseley’s halfyear trading profit was up 11.1 per cent at £390million, pre-tax profit plunged by more than two thirds to £103million after a £245 million impairment charge on Scandinavian materials firm DT Group acquired in 2006.
It said: “This is as a result of challenging market conditions and reduced expectations of future profitability.”
Chief executive Ian Meakins, said Wolseley had gained market share in all of its major businesses as revenue rose nearly 9 per cent to £6.4billion.
He added: “The group delivered a good trading performance against a backdrop of decent market conditions in the US.
We generated better revenue growth in Europe despite challenging markets and we are taking action to improve profitability in Europe in the second half.” Wolseley shares fell 112p to 4098p.
Peel Hunt analyst Clyde Lewis said: “Maybe the future for the group lies in two companies – one based in North America and one in Europe.”
