In response to a sharper than expected drop in new housing starts and significantly lower lumber and structural panel prices, both of which impacted local currency revenue and trading profit, a “major program” of cost reduction has been underway at Wolseley’s Stock Building Supply division, based in Raleigh, NC. Employee headcount was reduced by more than 10%, the company reported. The cost base will continue to be kept under review in response to changing market conditions.

Housing starts in the United States fell from an annual rate of more than 2 million in October 2005 to under 1.5 million in October 2006 with significant regional variations. Lumber and structural panel prices, which when combined account for about 45% of Stock’s revenues, fell by 23% and 38%, respectively. Including the beneficial impact of acquisitions, revenue for the first three months of the current financial year was slightly up, but trading profit was down by around a quarter. Organic sales volumes were down by around 6% compared to the 27% decline in overall housing starts.

Wolseley’s North America operations overall, which includes Ferguson, Stock and Wolseley Canada, saw sales, including acquisitions, rise about 9% vs. the prior year for the three months ended Oct. 31. Trading profit was marginally up.

Newport News, VA-based Ferguson reported sales and trading profit up by more than 20% for the three-month period, including double-digit organic growth. The trading margin was slightly lower due to the ongoing investment in infrastructure, the company said.

Wolseley noted that the repair and remodeling market in the U.S. benefited from the positive economic environment and the commercial and industrial sectors continued to improve.

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