Wagners’ stock crashed over 23% after the company suspended cement supply to Boral

  • Mar 19, 2019 AEDT
  • Team Kalkine
Wagners’ stock crashed over 23% after the company suspended cement supply to Boral

Material sector company, Wagners Holdings Company Limited (ASX: WGN) suspends the cement supply to its ASX-listed partner Boral Limited. It is in relation to the Cement Supply Agreement between Wagners and Boral Limited under which BLD is required to purchase a minimum volume of cement from Wagners on an annual basis at a determined price.

The issue brings the ‘Pricing Notice’ into the highlight! Wagners contest the validity of the pricing notice which was issued by Boral Limited, presenting the price quoted by cement supplier within South East Queensland that is much lower than that charged by Wagners.

Wagners believes that this unsigned offer questions the bona fide nature of the market pricing evidence and therefore the company has started the formal process of disputing the validity of the Pricing Notice.

As per the initial terms of Cement Supply Agreement, it was agreed that the Pricing Notice could be issued by BLD which has to be bona fide in nature supported by the third party offer from a supplier of cement as a market pricing evidence. And in the event of Pricing Notice, if the price offered by the third party is lower than currently charged by the company, in accordance with above-stated conditions, Wagners will have to either reduce the prices or suspend the supply.

So, when the company was left with the option to either bring down the price of the cement products supplied to BLD to the price notified in the Pricing Notice or to suspend supply of cement products for a period of up to six months, it elected to suspend the supply.

The news sent the Wagners stock price to crash straight, carving out 23.853% from the stock value on 19 March 2019. This led the WGN to close at $2.490 with the price to earnings multiple of 35.540 x and a market capitalisation of $527.7 million.

The market sentiments were driven by the prospective financial impact of suspension which could wipe out approximately $20 million of the company’s revenue during the maximum suspension period of six months.

However, the suspension may be lifted on the dissolution of dispute subsequent to courts orders or resolution regarding the validity of the Pricing Notice. As of now, both the resolution and determination by the courts remain pending.

The report further confirmed that if the Pricing Notice gets proved not to be bona fide and therefore invalid, the company’s Fiscal 2019 revenue and earnings are expected not be impacted.

To win the trust of shareholders, Wagners stated that as per its belief the election it has taken under the CSA to suspend supply and to dispute the validity of the Pricing Notice is in the best long term interest of its shareholders. It is supported by the fact that if the Pricing Notice gets proved to be valid and accepted it might have long term impact on the company as well as on the entire the cement industry throughout Queensland and New South Wales.

Also Read: Wagners misses on the earnings guidance for 1HFY19


Disclaimer

This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.

 

All pictures are copyright to their respective owner(s).Kalkinemedia.com does not claim ownership of any of the pictures displayed on this website unless stated otherwise. Some of the images used on this website are taken from the web and are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it below the image.

 

There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.

Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.

As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.

CLICK HERE FOR YOUR FREE REPORT!
   
x
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK