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Wolseley defends US cutbacks

Heating and plumbing distributor Wolesley has insisted a decision to axe thousands of jobs and close down dozens of branches at its United States building materials business Stock will not damage the rest of the group.

Following a fundamental review Wolseley has announced the closure of 86 Stock branches, the exiting of 16 markets in six states and job cuts of around 3,000.

This leaves a workforce of close to 8,700 in 27 states including North Carolina, Florida, Texas, California, Utah and South Carolina where it holds leading positions in the market.

Chip Hornsby, group chief executive, told analysts: “The restructuring of Stock does not impact on any other operations of the group.”

He refused to be drawn on the performance of other divisions or geographical businesses until the Annual General Meeting on Tuesday November 18 when a trading update on the three months to 31 October 2008 will be released.

He told analysts: “On the 18th we will give a broad update on the United States and Europe. We are still evaluating all that now. We want to see October’s numbers and look at the books. We need a few more weeks until we can give an update.”

Stock reported a trading loss of $246 million (£123 million) in the year ended 31 July 2008, on revenues of $3.47bill (£1.74bill)

Alongside major restructuring the board had explored selling off Stock, a joint venture with another party and complete closure.

The cutbacks are expected to ensure Stock makes losses of less than £200mill in the year ending 31 July 2009, but Wolseley’s management believes despite these losses if will be well placed to exploit any future recovery in the building sector.

Mr Hornsby said: “With the on-going decline in US 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.

'The measures we are taking will move us back towards profitability, while still keeping a presence in key districts for when the market recovers.”