Plumbing and heating distributor Wolseley plc (Reading, England) announced plans for a significant restructuring of Stock Building Supply to further downsize its operations as a result of the continued deteriorating market conditions in the United States.

The board of directors has decided to cut another 3,000 jobs (7,000 jobs were cut last year) and close 86 branches (about 25 percent of Stock’s revenue and 28 percent of its employees). Stock Building Supply will focus on maintaining a presence in those markets where it is a leading player and where it will benefit most from any market recovery - North Carolina, Florida, Texas, California, Utah and South Carolina are its top states. However, it will exit Louisiana completely, where it does not have a significant presence.

Despite cutting jobs about 40 percent and closing 70 branches since the market peak in January 2006, Stock reported a trading loss of $246 million in the year ended July 31, 2008, on revenues of $3,471 million.

“With the on-going decline in U.S. new residential construction, significant over-capacity in the industry and the consequential negative impact that Stock is having on the group’s results, it is imperative that we take further action to restructure this business,” saidChip Hornsby, group chief executive of Wolseley. “The measures we are taking will move us back towards profitability, while still keeping a presence in key districts for when the market recovers.”

Despite this, the board of directors believes there is significant potential to create long-term value in the business. 

Over the last six months, the board has explored four principal options for the company, including outright disposal, a joint venture with another party, complete closure and a significant restructuring of the business. Given the current conditions in the global financial markets, concluding a transaction with a third party that recognises the long-term value of Stock and that is financeable has not been feasible, the company stated.

In addition, it was decided that completely closing the operations was not an appropriate strategy, since it would deprive shareholders of the opportunity to benefit from a market recovery.

The restructuring of Stock does not affect any of the other operations in the group.