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Credit Crunch begins to Bite for Oil Equipment Suppliers
18th November 2008
Wolseley, the world's largest supplier to the HVAC and construction sector and arguably the largest supplier of oil heating equipment in the British Isles, has announced a significant restructuring of its UK operations.
The company said that it expects to shed 2,300 jobs over the coming months and it is expected that around 2,000 of the jobs will be within the company's operations in the UK and Republic of Ireland. In a statement released today, the company said that it expected the reorganisation to result in exceptional costs of £45 million and to produce savings of over £100 million annually.
The latest redundancies are on top of 5,000 jobs which were lost earlier in the year, largely from the business' international operations.
The restructuring announcement, accompanied an interim management statement by the company, which showed that the overall pattern and scale of current market deterioration for the past quarter, has been broadly in line with the Group's expectations. The Group notes a further deterioration in trading conditions, particularly within Northern European markets and it expects the major markets in which it operates, to continue to deteriorate in the short term.
In a pre-prepared statement, Wolseley's Chief Executive, Chip Hornsby said, "While these results reflect a further deterioration in the business environment in the first quarter it was not unexpected, and, we continue to react swiftly to market conditions with aggressive but measured cost reduction.
"In these unprecedented circumstances, the key priorities remain driving cost reduction and enhancing cash flow to ensure the Group remains compliant with its banking covenants."
No details were provided of which Wolseley branches will close, or when.
The announcement by Wolseley, follows an Interim Management Statement on Monday by Kingspan plc.
Best known to oil heating technicians as the manufacturer of oil tanks under the Atlas, Deso, PC Rotomoulding and Titan brands, the Irish company notes that sales for the period ending 31 October 2008 were 3% down on a constant currency basis. Profits for the full year are expected to be down around 33% on a comparable basis.
However, the company which is the dominant supplier of tanks throughout the British Isles, stated that sales at its Environmental & Renewables Dvision, which includes its tank manufacturing and Sensor Systems Watchman operations were up 4%., although no details of the division's profitability or otherwise were reported.
Kingspan shares reacted negatively closing on Tuesday at just EUR3.13 representing a significant deterioration, on the 12 month High of EUR11.23.