North American plumbing and heating
Market strengths - Ferguson is the leading distributor of plumbing and heating supplies to professional contractors and the second largest distributor of pipes, valves and fittings, in the US. The business continues to deliver strong performance and returns despite increasingly challenging new residential and repairs, maintenance and improvement (“RMI”) markets. We believe that central to Ferguson’s success are its large scale distribution centre model and branch network; its price competitiveness; proven margin management systems; its access to credit; and employees with extensive local knowledge. Wolseley Canada is a significant player in wholesale distribution of plumbing, heating and ventilation products.
Market opportunity - Current indications are that the US economy will be the first to recover from the economic downturn and we believe Ferguson is well positioned to benefit from this. Our belief is that the Group’s North American Plumbing and Heating business does not need to significantly increase its footprint in order to capitalise on the recovery when it occurs, due to the operational leverage in the business model. As the current downturn continues, we believe that a number of its competitors will exit the industry and that this should create the opportunity to increase market share organically.
Furthermore, as a market leader, we believe that the Group’s North American Plumbing and Heating business will be in a strong position to consolidate the market. We intend to grow the business organically and through selective bolt-on acquisitions as well as through using new formats and routes to market such as eCommerce and expanding its product range.
The integration of Wolseley Canada into the Ferguson business is expected to improve operating results by providing improved access to infrastructure, sourcing and pricing matrix management. The business continues to review its cost base and seek opportunities to further enhance the performance and efficiency of its distribution network and is currently expected to commence roll-out of the Business Change Programme, involving an SAP-based supply chain management system, in June 2010 after a comprehensive testing and pilot stage.
More information about our North American businesses.