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Wolseley hit by European headwinds

European headwinds blew builders merchant Wolseley (LON:WOS) off course in its latest half year.

The Plumb Center’s owner underlying profits missed market forecasts in the six months to January, growing by 7.6% to £324m against expectations of £340m. Pre-tax profits tumbled by 20% after one-off charges, while sales fell by 8% to £6.3bn.

Europe was the main problem. Sales in the region fell by 12.5% in the last three months of the period and the company described trading conditions in the region going into the remainder of the year as “very weak”.

Other regions did better, especially the US which helped group like-for–like revenues overall to grow by 2.2% in the first half. The UK was flat, but the Nordic area was another weak spot.

Wolseley said it is taking appropriate action to protect its profitability in Europe, which includes talks to dispose of 88 building materials branches in France and alongside a restructuring of the business there.

Ian Meakins, Wolseley’s chief executive, said: “"Like-for-like growth in the third quarter to date has been consistent with the second quarter overall.

“We continue to see strong growth in the US, a broadly flat performance in Canada and the UK and very weak conditions in Europe.

“We will invest in growth opportunities where they are available and maintain tight control of the cost base in Europe, whilst implementing the strategic proposals we have outlined in France."
Shares fell 3% to 3,121p.

Source : Philip Whiterow - Proactive Investors

26 March 2013
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