Plumbing group Ferguson bets on windfall from new US chip factories

Plumbing and heating equipment supplier Ferguson is betting on a big windfall from new semiconductor factories in the United States, as Washington releases subsidies for chipmakers in a bid to counter the influence of the China.

The British-American group’s chief executive, Kevin Murphy, said demand for its products from chipmakers would offset falling sales to the residential sector as rising interest rates hit construction activity of houses.

“The offshoring of chip manufacturing. . . these are big projects for us in all areas, from groundwater transmission [to] fire protection,” he said. “There are a good number of megaprojects. . . which are good for the country, good for our business.

Ferguson is a leading distributor of heating, ventilation, air conditioning equipment and industrial products and services.

Kevin Murphy, General Manager of Ferguson

Murphy’s comments underscore the hope that a drive to bring semiconductor manufacturing back to the United States will bring broad benefits to the national economy.

In recent decades, American companies have become increasingly dependent on chipmakers in countries like Taiwan, before supply chain disruptions during the Covid-19 pandemic led to severe shortages of chips. vital electronic components used in everything from cars to smartphones.

In July, Congress passed a $280 billion Chips and Science Act that included billions of dollars in subsidies for semiconductor makers in the United States after concerns mounted over the rise of China as a technological power and its aggression towards Taiwan.

“The projects we are engaged in at the moment are multi-year projects which will provide us with good business opportunities over the next few years,” said Murphy, whose business is based in the UK but generates around 95% of its income in the United States.

Murphy pointed to a planned plant in Ohio by Intel and another in Texas being developed by Samsung as some of the major developments in the United States that could benefit his company.

Despite the expected boost from chipmakers, Murphy acknowledged that Ferguson could suffer a drop in revenue from the residential market, which is responsible for just over half of its revenue.

“As you can imagine, with rising interest rates there is concern about what building new homes might look like,” he said.

But “we think that can be more than offset when we think about the non-residential side of our business,” he added, pointing to U.S. investments in electric car and natural gas facilities as well as new semi factories. -drivers.

Ferguson, a former FTSE 100 company, has increasingly focused on the US in recent years.

In 2021, the group spun off its UK operations before moving its main listing from London to the New York Stock Exchange in May this year.

The company reported an increase in revenue in the 12 months to July, supported by a series of acquisitions of US companies. Sales rose 25% from a year earlier to $28 billion, while operating profits rose 44% to $2.8 billion.