Wolseley’s 2008 profits slump 22 percent; sale of Stock Building Supply possible
Industrial Distribution staff -- Industrial Distribution, 9/22/2008 6:26:00 AM
Despite a 2008 revenue increase of 2 percent to $33.1 billion, annual profits for Wolseley plc slumped 22.1 percent to $1.37 billion, compared with $1.71 billion during 2007.The British building materials distributor said it will continue to slash costs—Wolseley laid off 7,100 workers during the fiscal year, 600 more have departed since then and the company closed 270 branches during fiscal 2008—and pledged to consider the sale of its American Stock Building Supply division, which drove much of the decline.
“We have continued to take action to reduce costs and drive working capital improvements, in response to challenging market conditions,” CEO Chip Hornsby said. “While these conditions have impacted many of our businesses significantly during the year, our employees have done a good job at responding to the tough markets and we are seeing the benefits of our actions with market out-performance in many areas. Financial discipline, in terms of cost reduction and cash flow enhancement, remains our primary focus to ensure the group remains compliant with our banking covenants and is well-positioned for any market recovery.”
Wolseley said its cost-cutting measures cost $152 million but saved $94 million, with $352 million in full-year savings still to come to the measures. The firm stepped off the acquisition trail after spending $66.6 million buying five smaller distributors in March.
And the downturn is forcing to once-voracious company to contemplate the sale of Stock, which Hornsby declined to rule out during a conference call with analysts, the Bloomberg news service reported.
The company will embark on a “fundamental review” of whether to sell Stock, he told the analysts, with a sale or further cutbacks to the division among the considerations. During the fiscal year roughly 20 percent of the workforce, or 3,150 employees, were laid off; another 135 workers departed in August.
“Stock faces an uphill battle. We've had to take some tough and painful actions,” Hornsby said. “We cannot continue with the loss we're experiencing today. The losses at Stock mask strong performances elsewhere in the business.”
Rival building materials distributor HD Supply is said to be in the running to buy Stock, the Reuters news service reported.
Stock’s revenues slid by 24.5 percent to $3.47 billion during fiscal 2008; same-store sales volume fell 21 percent and the division posted a $246 million loss compared with an $86 million gain during the prior year.
And while Wolseley’s operating profit before one-time items fell 22.1 percent, that number dropped only 3.2 percent with the Raleigh, N.C.-based subsidiary excluded from the results.
The news was brighter for Wolseley’s other American division, Newport News, Va.-based plumbing supplies distributor Ferguson Enterprises. Revenues increased 1.3 percent to $11.23 billion and profits dropped slightly to $794 million, compared with $800 million last year. Ferguson laid off 2,250 workers and closed 123 branches during fiscal 2008, moves the company expects to deliver $148 million in annualized savings, including the $53 million the reductions saved during the 2008 fiscal year.
In a video presentation posted on Wolseley’s Web site, Hornsby said Ferguson cut inventory by 25 percent compared with two years ago, but raised its service level by focusing on increasing sales at trade counters and showrooms and higher sales of private-label products.
Revenues slid 7.3 percent for all of its North American businesses, with profits slumping 37.4 percent.
Wolseley ranked first on INDUSTRIAL DISTRIBUTION's 2008 Big 50 list of distributors, with 2007 sales of $31.6 billion. HD Supply ranked second with sales of $12.3 billion.
For more on Wolseley’s fiscal 2008 results from ID Editor Jack Keough, click here.
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