Wolseley Cuts Outlook As 2015 Profit Drops Despite Sales Gain

The company – No. 1 on Industrial Distribution's 2015 Big 50 List – warned of weakened U.S. industrial demand in Q4 as it lowed its outlook for the first half of fiscal 2016.

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U.K.-based Wolseley plc – No. 1 on Industrial Distribution's 2015 Big 50 List – reported its fiscal 2015 full year financial results on Tuesday for the year ended July 31.

The heating and plumbing supplies distributor's figures were highlighted by 2015 total sales of $20.2 billion, up 11.3 percent over 2014. However, pre-tax profit tumbled 25 percent to $771 million. Profit took a large hit from a one-time $337 million charge related to impairment costs at Wolseley's struggling Nordics business.

Wolseley's stock was down as much as 12 percent in the early Tuesday U.K. trading hours, which Reuters noted was the company's worst stock day since May 2009.

Wolseley noted its continued growth in e-commerce, which accounted for 13 percent of its total revenue at $2.58 billion in 2015.

Wolseley's trading profit rose 11.4 percent to $1.3 billion, while like-for-like sales increased 7.1 percent on the strength of its U.S. business – Ferguson Enterprises. Ferguson, which accounted for 76 percent of Wolseley's trading profit, increased its yearly sales 12 percent to $13 billion. Like-for-like sales improved 9.6 percent, while trading profit increased 19.8 percent.

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Despite Ferguson's strong showing, Wolseley CEO Ian Meakins had cautious comments in regards to future growth in both the U.S. and U.K. markets.

"Industrial markets in North America, which account for about 15 per cent of revenue in the region, were challenging in the fourth quarter and we expect this to continue," Meakins said in a release. "We expect a continued steady recovery in Nordic markets, although the heating market in the UK is expected to remain very competitive with little growth. Overall, we expect to make continued progress in 2016."

Meakins says the company now expects 4 percent sales growth in the first six months of 2016, down from its 6 percent growth outlook given in June.

Wolseley's Q4 like-for-like revenue grew 5.4 percent, including a 7.1 percent gain in the U.S., 3.1 percent gain in the U.K., 6.4 percent gain in Nordics, 5.8 percent decline in Canada, and 3.4 percent decline in Central Europe.

U.S. Market – Ferguson

Ferguson said its U.S. B2C e-commerce business – Build.com – continued to grow, with e-commerce accounting for 18 percent of Ferguson's 2015 revenue. Like for the overall company, Despite Ferguson's its strong sales growth. the volatile oil and gas market continues to have negative business impacts, as well as the strong U.S. dollar. Wolseley said that Industrial, which represents about 15 percent of Ferguson’s revenues, grew strongly in the first half but declined in the fourth quarter as activity levels fell, particularly in the major oil producing states. Industrial includes oil and gas, mining, and power generation.

Wolseley made 13 acquisitions during 2015, and opened a net 14 branches. Headcount growth at Ferguson was 9 percent, of which 2 percent came from acquisitions.

 

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