March 19 (Bloomberg) -- Wolseley Plc, the world's biggest distributor of plumbing and heating equipment, said a surge in European sales helped limit a decline in earnings prompted by a U.S. housing slump. The stock rose 3.7 percent.

European revenue jumped 44 percent in the fiscal first half after demand in the U.K. and France picked up and purchases took the company into eight new countries. While net income fell 15 percent on the worst U.S. property slowdown in 17 years, 4,000 job cuts there should save money in the second half, it said.

Wolseley, based in Reading, southern England, spent $2 billion on DT Group last September, gaining a foothold in Denmark, Finland, Sweden and Norway. Other purchases established it in Croatia, Slovakia, Poland and Romania. The company still gets more than half its revenue in North America, where U.S. sales of new houses fell 18 percent last year, the sharpest contraction since 1990, after borrowing costs rose and buyers lost confidence.

``The real surprise was their strength in Europe,'' said Kevin Lapwood, an analyst at Seymour Pierce in London with a ``buy'' rating on Wolseley stock. ``The whole European building-materials market is ripe for consolidation and Wolseley will be able to make huge progress.''

Shares of Wolseley advanced 44 pence to 1,243 pence after earlier gaining as much as 6.6 percent. The stock has added 8.6 percent in the past six months, giving the company a market value of 8.19 billion pounds ($16 billion).

Earnings Decline

Net income in the six months through January fell to 209 million pounds, or 32.78 pence a share, from 245 million pounds, or 41.13 pence, a year earlier, Wolseley said in a statement today. Sales rose 17 percent to 7.87 billion pounds.

Analysts had expected profit of 204.5 million pounds on revenue of 7.69 billion pounds.

European revenue climbed to 3.5 billion pounds from 2.43 billion pounds as new branches boosted U.K. sales and French plumbing unit Brossette benefited from a new management structure, a national product range and central purchasing. Sales in central and eastern Europe advanced 21 percent.

North American revenue was little changed at 4.37 billion pounds. Since Jan. 31 Wolseley has cut a further 500 jobs at North Carolina-based building-materials unit Stock and 150 at plumbing supplier Ferguson of Virginia, the U.K. company said today. That will help deliver savings of as much as $50 million in the second half, it said.

`Soft Market'

``Increasing benefits are expected in the second half from the recent cost-reduction initiatives,'' Wolseley Chief Executive Officer Chip Hornsby said. ``The U.S. housing market is expected to remain soft for the remainder of the calendar year.''

Stock, acquired in 1986, serves professional builders in 33 states. The unit makes and sells roof and floor trusses, wall panels and other structural components for new homes. It also provides stairs, doors, window frames and moldings for interior and exterior decorations.

Ferguson distributes pipes and valves used in heating systems, together with cooling equipment, bathroom appliances and tools, according to the unit's Web site. Founded in 1953 and bought in 1982, it serves 50 states.

Shares of Wolseley had their sharpest gain in more than four years on Feb. 14, rising 7.2 percent after London newspaper City A.M. said that Cinven Ltd. might make a 10 billion-pound bid, citing unidentified people. Cinven spokesman Edward Bridges declined to confirm or deny the report.

Wolseley CEO Hornsby, a 51-year-old American who previously headed Ferguson, became chief executive in August following the retirement of Charlie Banks.

To contact the reporter on this story: Brian McGee in London at bmcgee3@bloomberg.net.

Last Updated: March 19, 2007 12:37 EDT