Wolseley mauled 12% on asbestos worries

Shares in Wolseley, the world's biggest plumbing and heating equipment merchant, fell 12 per cent yesterday after investors panicked over its exposure to asbestos-related lawsuits in the United States.

The market largely ignored the company's solid set of full-year figures, concentrating instead on Wolseley's mention of asbestos. Although the company only raised the subject to state that its exposure was "immaterial" and more than covered by insurance, the mere mention of the deadly building material was enough to provoke a sell-off.

David Taylor, analyst at Teather & Greenwood, said: "The real risk is pretty low but no one can satisfy investors that there is no risk at all [from asbestos claims]. There is a school of thought that says that as soon as the 'a' word is mentioned, they're off."

Wolseley shares closed down 63p to 458p to top the list of FTSE 100 fallers. The company's chief executive, Charles Banks, was bemused by the City response. "In our view, this is a gross over-reaction.... We were trying to be helpful. We really don't think it [asbestos] is an issue. It is not a significant risk and there is no effect on [profits]," he said.

Wolseley did not manufacture any asbestos products, which have been linked with causing fatal illnesses and have led to multibillion-dollar litigation in the US. Wolseley did distribute some building products that contained used asbestos, Mr Banks said, mostly before 1975. Some of the pipes it supplied would have been reinforced with asbestos.

"We are not the primary candidate [for litigation]. We were just the distributors. We just felt an obligation to disclose something about this in the current environment," he said.

However, Mr Banks admitted there were some questions that the company could not answer about its links to asbestos. Wolseley does not have records on the quantity of its products that would have contained asbestos in the past. He said the insurers would not allow the company to reveal the level of its insurance cover or the size of claims that it faced.

"We have received claims over the years, which we have passed on to our insurers. They number in the hundreds rather than the thousands.... This [subject] is made difficult because there's a limit to the amount of information we can disclose," Mr Banks said.

Wolseley delivered 2002 results well up to City expectations, with turnover up 11 per cent to £8bn and pre-tax profits 15 per cent higher at £437.2m, for the year ended 31 July. It was the sixth consecutive year of record trading performance. "Our increased scale, market strength and diverse product range enables us to look forward with confidence against a background of challenging market conditions," Mr Banks said.

Analysts said the company was well placed in the UK and in Europe, where it did not have operations in the sluggish German economy. In the US, it is dependent mostly on the housing market which, despite more general economic concerns, was so far holding up well.