US housing decline hits Wolseley profits

Wolseley, the world's largest distributor of plumbing and heating products, saw first-half profits plunge 18 per cent as a result of the fall in new housebuilding in the US.

The company has axed over a quarter of its American staff, 4,500 jobs - 1,000 more than it announced in January - to reduce costs. However, the results announced yesterday, for the six months to the end of January, were better than feared. That meant Wolseley shares closed up 4 per cent at 1,243p.

Around half group revenues come from the US and of those American revenues, around 40 per cent is exposed to the new housing market - the rest serves the repair/maintenance market or commercial construction, both of which held up well.

Steve Webster, the group finance director, said: "The US [housing market] will continue to be soft for the rest of this year. It is too early to call the bottom."

Housing starts in the US have dropped by around 25 per cent but Wolseley's volumes were down 10 per cent. The downturn also meant price deflation of up to 25 per cent on some product lines. The company's main business that supplies products to new houses, Stock, saw profits shredded by 49 per cent.

Elsewhere, continental Europe grew strongly while the UK also saw growth. Group revenues were up 17 per cent to £7.9bn, while profit before tax came in at £285m, down 18 per cent.

Mr Webster said the UK market, where the company mostly serves the domestic repairs and maintenance sector, had picked up over the past year.

"People [in the UK] realised that house prices are not going to slump significantly and that we are not going to see huge interest rate rises," he said.