“In the last year, the building industry has faced challenges with the decline in housing starts and a significant fall in lumber prices,” Stegeman said. “As a result of more challenging market conditions, an efficiency program has been implemented at all operating companies throughout the Wolseley group. Wolseley is focused on a sustainable growth strategy throughout the 27 countries in which they operate.
“In November, Stock Building Supply, Wolseley’s North American building products company, announced they would reduce headcount by more than 10%.” (See story in Supply House Times January 2007, page 6, or visit the archived article ”Wolseley Cuts Jobs At Stock,” free registration required.)
“Currently, Ferguson branches and corporate departments are adjusting staffing levels to support current levels of business and to prepare for more manageable growth,” Stegeman said. “Ferguson leaders are prioritizing growth initiatives and being more disciplined in managing associate productivity and labor expense.
“We are always focused on adjusting our business model to adapt to market conditions,” he said.
“Increases in the repair and remodel business and the commercial and industrial sectors have offset a downturn in the new residential housing market. Ferguson continues to perform well and continues to take market share throughout the United States.
“Ferguson is a very diversified company,” Stegeman said. “We are prepared to weather market challenges through our vast product offering and continue to invest in future opportunities.”
(Watch Supply House Times for an upcoming interview with John Stegeman regarding Ferguson’s current and future market position.)
In other news, Wolseley issued its regular trading statement for the five months ended Dec. 31 prior to entering its close period. The company reported that its sales in North America for the period, including acquisitions, increased by about 2% vs. the prior year, while trading profit was down by around 15%, after charging one off costs relating to headcount reductions and store closures.
The U.S. plumbing operations (Ferguson) produced good growth but at a slower rate, with sales in local currency for the five months ended Dec. 31 up by more than 15% and organic growth of nearly 10%, Wolseley reported. Trading profit was up by around 10% vs. the prior year. The slightly lower trading margin reflects the lower level of commodity price inflation, the initial effect of acquisitions and the effects of the weakening new residential markets which has necessitated headcount reductions of around 500 people in the softer markets, Wolseley said.
At Stock Building Supply, local currency revenue and trading profit have also been impacted by the continued slowdown in the new residential market resulting in increased price competition and also by the significantly lower lumber and structural panel prices, Wolseley said. Housing starts in the U.S. have fallen from an average annual rate of 2.1 million for the five months ended Dec. 31, 2005, to 1.6 million in the comparable period in 2006.
“There continues to be significant regional variations,” Wolseley said in the statement. “Lumber and structural panel prices, which when combined account for around 45% of Stock’s revenues, have fallen by 22% and 35%, respectively. Organic sales volumes were down by around 9% compared to the 22% decline in average housing starts. Trading profit was down by more than 40%, after charging one off costs of around $11 million relating to 22 branch closures and headcount reductions of around 3,500. The cost base will continue to be kept under review in response to changing market conditions.”
In Canada, business from the exploration industries in western Canada has slowed as a result of warmer weather, lower gas prices and higher inventory levels, Wolseley reported. Against this background, Wolseley Canada achieved modest revenue and trading profit growth compared to the equivalent period in the prior year.