Wolseley to cut 250 more jobs, close 90 branches
Industrial Distribution staff -- Industrial Distribution, 5/21/2008 8:20:00 AM
Wolseley plc will cut 250 jobs in the United States and Canada and close 90 branches, as the construction downturn continues to hammer its results.
The British building materials distributor said it would close 75 of its Ferguson Enterprises locations in the U.S., laying off 200 workers, and shutter or consolidate another 15 branches in Canada, laying off 50 workers.
The moves, aimed at saving roughly $138 million a year, will mean a $98.2 million charge during the fourth quarter.
Wolseley said further closures and layoffs are in the cards and will be announced before July 31.
The closures came in response to poor results for the nine months ended April 30. Though overall sales rose 2 percent, profits fell 23 percent.
“The U.S. housing and Repairs, Maintenance and Improvement (RMI) markets have continued to soften, but U.S. commercial and industrial markets have held up well. In Europe, there has been a more pronounced slowdown in the U.K. over recent weeks and many other European markets continue to soften,” the company said in a statement.
In North America, Wolseley said Ferguson “continued to take market share,” with overall sales up 1 percent on acquisitions, but organic revenue growth slipped by 3 percent.
The company’s Stock Building Supply division posted a loss of $158 million on lower gross margins and a 25 percent drop in sales.
Revenues grew 2 percent for Wolseley Canada, but not enough to prevent a 15 percent decline in profits.
The company reported slumping market conditions in the United Kingdom and France. U.K. sales rose 3 percent but profits fell 6 percent. Sales in France also rose 3 percent, but profits fell 18 percent.
Wolseley said it put the brakes on acquisitions, saying no purchases were made during the third quarter.
“Capital expenditure plans have been curtailed and total capital expenditure for the year ended 31 July 2008 is now expected to be [$628 million to $648 million],” the company said in a statement. “Challenging conditions in many markets are expected to continue, although the U.S. commercial and industrial market, which accounts for the majority of Ferguson’s business, is likely to remain stable into the next financial year. The group’s rigorous focus on cost reduction and cash maximization will continue.”
“Given the continuing tough market conditions, our response has been to take further action to lower the cost base and improve cash flow, while continuing to pursue our longer term strategic aims. The cost reduction actions outlined today will enable us to restructure the business further, so that we are better positioned for the challenges ahead,” added CEO Chip Hornsby.
Wolseley ranked first on INDUSTRIAL DISTRIBUTION’s 2007 Big 50 list of distributors, with 2006 sales of $25.3 billion.
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