Building products distributor Wolseley reported today a 15 per cent drop in quarterly pretax profit and 1,700 job cuts to fight a tough US market and warned of a further 1,300 headcount reduction.
Wolseley, which slashed about 6,000 jobs in its last financial year when it reported its first profit fall in more than a decade, said it had cut another 1,700 in its first quarter to end-October and plans to trim another 1,300 in the current quarter.
Wolseley, a world leading distributor of plumbing and heating products, said the combined annual savings relating to the headcount cuts would be about £60 million.
"The group's results continued to be affected by the slowing US housing market, low consumer confidence following uncertainty relating to liquidity in global financial markets and the weakness of the dollar," it said in a statement.
At 09:32am, Wolseley shares, which have nearly halved this year, fell 3.3 per cent to 620 pence.
"This is a profit warning from Wolseley...Trading conditions are expected to deteriorate further meaning a big downgrade to our forecasts," Panmure Gordon analysts said, adding they were now assuming a 20 per cent fall in profits.
The group said the US housing market was likely to worsen until the current high levels of unsold inventory had declined and the full effects of problems in the subprime market had been assimilated.
Wolseley, the world's largest distributor of plumbing and heating products, said profit before tax and exceptionals fell 15 per cent in its first quarter to October 31, although revenue rose more than 5 per cent.
Trading profit from North America, which generates roughly half of the group revenue, fell about 30 per cent, as its building materials distribution business Stock posted a quarterly loss.
Its US plumbing and heating division Ferguson continued to gain market share, although it was also hit by weakness in the new residential market and a slowdown in the repair, maintenance and improvement (RMI) sector, it said.
In Europe, where revenue rose more than 25 per cent and trading profit by more than 15 per cent as solid growth in the RMI and commercial and industrial segment offset growing signs of weakness in some housing markets, it said.
When completed, the cumulative job cuts will represent one third of Stock's workforce and more than 10 percent of Ferguson's.