Wolseley cuts 2,000 US jobs after slump in housing market

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The Independent Online

Wolseley is axing 2,000 jobs across its US operations as the slump in the housing market there continues to weigh on the building materials and plumbing products group.

The company, however, predicted the recovery in the UK housing market would continue, despite the recent rise in interest rates.

Wolseley will cut 1,500 jobs at its US building materials division Stock, taking the total number of cuts at the unit in recent months to 3,500. It has also cut 500 jobs at its American plumbing unit Ferguson.

The company derives 50 per cent of its sales in the US and has suffered from the slowdown in the housing market and a substantial decline in the price of lumber. The Reading- based company employs around 50,000 workers in the region, including a large number of contractors. It hopes to slice up to $50m from its cost base as a result of the cuts.

Steve Webster, Wolseley's chief financial officer, said that the US housing market declined 22 per cent in the last five months of 2006. He said that the brunt of the cost cuts have been made in the "industrial North" in cities such as Detroit and Minneapolis and in locations that are popular with people buying second homes such as Florida, Las Vegas and Phoenix.

Mr Webster said that the US market could get worse before it gets better, although it is hard to predict which way the market will go given the size and diversity of the region. "The US market will remain soft for some months. It is too early to call a turn in the market but I would be surprised if the market is not better by the end of our fiscal year on 31 July," he said.

The US weakness was compounded by a soft US dollar. Wolseley's pre-tax profit slipped 14 per cent in the last five months of 2006, despite a 15 per cent rise in revenue as the US problems offset strong growth in Europe.

The company's performance in the UK was also weaker than analysts had expected during the first half. Mr Webster said it was too early to say what the impact of the recent increase in UK interest rates would be on the business. However, he said that he expects the UK housing market recovery to continue even factoring in another rise in interest rates.

Mr Webster said that despite "pausing for breath" on the acquisition front, the company was not entering an "anti-growth phase" under Chip Hornsby, Wolseley's chief executive who took over in August. The company has spent £330m on 29 bolt-on acquisitions this year and Mr Webster said that it has a further £70m available to spend this financial year.

He added that Danish DT Group - its largest ever deal at £1.3bn - has already performed ahead of analyst's expectations.

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