Wolseley, the building materials group, said yesterday that the slowdown in the American housing market may get worse as it indicated that profits would fall short of expectations this year.

It revealed that a sharp fall in the price of timber and structual panels in the United States had sent trading profits in its North American division down 17 per cent in the 11 months to June 30.

Pre-tax profits across the Wolseley group in the same period were down 5 per cent, despite growth in Britain and Europe. Steve Webster, the finance director, insisted that the group had outperformed its rivals in America, where a series of interest rate rises and a glut of new properties had sparked a housing slump.

He admitted that there was still no sign of when the market may improve: “It has been a very challenging year. We have already said that this is the worst downturn in the US housing sector since the late 1980searly 1990s, and it could get worse.”

Analysts downgraded their forecasts for the full year to the end of July. UBS said that it expected Wolseley to report pretax profits of £765 million, down £35 million on previous guidance and £52 million lower than a year ago.

However, shares closed 17p higher at £11.72 on relief that the statement was not as bleak as had been feared.

Kevin Lapwood, an analyst at Seymour Pierce, said: “My first reaction was that the statement was a lot more negative than I expected, but having considered it, it’s okay. They will perform well next year and should deliver some earnings growth.”

Wolseley generates half of its revenue in the US. It is shutting a further 24 branches of the Stock building supply business that has been hardest-hit by the slowdown. This will lead to an extra £6 million in restructuring costs at the full-year results.

Mr Webster said he was confident that Britain had escaped any housing downturn despite the five increases in interest rates from the Bank of England in the past year.

Wolseley’s UK business, best known for its Plumb, Build and Drain Center chains, reported trading profits growth of 5 per cent in the 11 months to June 30.

Mr Webster said: “I think the UK housing market has been through its downturn. The housing market got tighter 18 months ago, and I think it’s been through that cycle.”

Wolseley expects to spend £450 million on bolt-on acquisitions in the coming year. Mr Webster added that the group’s dividend policy would not be affected by the likely profits fall.

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