Wolseley blames US slump for profit loss

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The US housing market crisis could "get worse before it gets better", Wolseley, the world's biggest plumbing and heating distributor, warned yesterday as it reported a fall in annual profits of almost 10 per cent.

Wolseley, which depends on the US for around half its sales, said the slump in the US housing market and the weakness of the dollar, had seriously hindered its performance over the year to the end of July, with group profits down to £753m from £834m in the previous year.

Chip Hornsby, the company's chief executive, said: "The housing market in the US will continue to soften – the most challenging will be the winter months and it could get worse before it gets better."

Wolseley is exposed to the US through two business units. Stock, the number two building contractor in the US and responsible for around a third of the group's sales, has been particularly hard hit by the collapse in the housing market, while Ferguson, the plumbing supplier that produces 15 per cent of Wolseley's revenues, has also suffered, though it still grew last year.

US home sales have fallen sharply over the past six months in both the new home sector and the resale market.

The decline in the new homes sector has caused particular problems for Wolseley, but analysts were particularly concerned yesterday by the company's warning that the market for repairs, maintenance and improvements had also begun to deteriorate.

"The US housing market shows no sign of recovery," said Aynsley Lammin, an analyst at Citigroup.

Mr Hornsby also warned that it was too early to tell how serious an impact the sub-prime mortgage crisis in the US would have on Wolseley going forward, but said that uncertainty about the outlook for the housing market was already damaging sales. Shares in Wolseley fell 5 per cent to 807.5p yesterday, amid fears that a slowdown in the UK housing sector would compound the problems caused by a further deterioration in the US market, where the company has already taken steps to cut costs.

However, the company pointed out that its results last year were significantly bolstered by an improved performance from its European operations, where sales rose 47 per cent. Its acquisition of DT Group in Denmark boosted the overall results, while contracts at schools and hospitals in the UK have also supported the group.