WOLSELEY Plc, the world's biggest distributor of plumbing and heating equipment, fell the most in five years in London trading yesterday after saying five-month earnings slumped.
The supplier of radiators and piping declined as much as 12 percent, the sharpest drop since September 2002. Operating profit through December dropped 25 percent, led by North America, the Reading-based company said yesterday.
Wolseley, which gets half its sales in North America, has cut about one-fifth of its United States workforce over the past 18 months as the worst housing recession in almost three decades hurts profit. The owner of the Stock Building Supply and Ferguson plumbing chains forecast the slowdown in the US market will deteriorate further and is spreading to some European markets, according to Bloomberg News.
"This is a lot worse than we expected," said Kevin Lapwood, an analyst at Seymour Pierce Ltd in London with a "hold" rating on the stock. "The worrying thing is Europe seems to be much worse than we had anticipated, so it all seems to be going wrong at once. They're doing everything they can to ameliorate it, but the market is against them."
Wolseley has fallen 53 percent over the past 12 months, cutting the company's market value to 4.74 billion pounds (US$9 billion). The stock was trading at 638.5 pence at 8:07am yesterday.
Chief Executive Officer Chip Hornsby has made more than 50 acquisitions in the US in the past two fiscal years and the market slowdown there is reducing the return on the total US$1 billion investment. Planned workforce reductions for the first half will generate annual savings of 60 million pounds.
Wolseley, which currently employs around 77,000 people in 28 countries in Europe and North America, primarily serves building contractors. Profit declined 40 percent in North America on a 10-percent drop in sales.
"Market conditions are likely to worsen," Wolseley said. "There are signs of further weakening in some European markets as a result of lower consumer confidence, credit pressures and the increased cost of credit."
US home builders are being hurt by a glut in unsold homes, falling prices and tighter lending standards that have made it harder to get mortgages. Builders broke ground in December on fewer houses than forecast, making 2007's industry decline the worst in almost three decades, according to Commerce Department figures released last week.
The deterioration in the US market has migrated to Britain, where home owners are scaling back investment on upgrades in response to sliding consumer confidence and tighter credit conditions, the CEO said.