March 26, 2019 / 10:01 AM / 2 months ago

Ferguson sees U.S. slowdown pushing profits to low end of expectations

(Reuters) - British plumbing products distributor Ferguson Plc said trading profit will likely be at the lower end of analyst expectations this year, with a slowing U.S. economy set to dent growth in its dominant market.

Previously known as Wolseley, Ferguson’s U.S. performance has long offset declining profits at its UK business, which has been in the process of restructuring.

The world’s largest supplier of heating and plumbing equipment said it expected trading profit for its 2019 financial year to be at the lower end of market expectations of between $1.59 billion and $1.65 billion.

“After a strong revenue performance in the first half, our growth rate has moderated recently in line with conditions in our markets,” Chief Executive Officer John Martin said.

Shares in the company fell more than 9 percent to their lowest level since late August 2017 at 4,650 pence.

The FTSE-100 group had said in December that it expected trading profit for the full year to meet analysts’ expectations, led by an optimistic outlook for its U.S. business.

However, the U.S. Federal Reserve last week downgraded its U.S. growth, unemployment and inflation forecasts and brought its three-year drive to tighten monetary policy to an abrupt end.

Ferguson also said organic revenue growth would slow to between 3 to 5 percent for the second half of the year, compared to the more than 8 percent it posted in the first half and 7.6 percent in the second half of 2018.

Earlier on Thursday, the company reported a 7.7 percent rise in half-year ongoing trading profit but missed analyst expectations because of weaker-than-expected margin growth.

Ongoing trading profit for the six months to Jan. 31 rose to $744 million from $691 million a year earlier. J.P.Morgan analysts said that was 1.6 percent below their own expectations and cut their target for the stock to 5950 pence from 6350 pence.

Ongoing revenue grew to $10.85 billion from $10.03 billion, with revenues at the U.S. business, which accounts for over 90 percent of the company’s profit, up more than 12 percent to $8.87 billion. Revenues in Canada, where the company is trying to replicate its U.S. success, grew nearly 8 percent.

However, UK revenues fell by more than 10 percent.

In early March, Britain’s construction industry reported the first fall in activity in almost a year last month, as Brexit uncertainty and a slow housing market delayed new building projects.

Reporting by Sangameswaran S in Bengaluru; Editing by Patrick Graham and Kirsten Donovan

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