- Construction materials supplier Wagners has been chasing up a dispute with builders Boral since March this year
- Boral has been Wagners’ biggest cement customer, making up 40 per cent of its cement sales, but Wagners had a problem when Boral was sizing up a new seller for its cement needs — which could cause Wagners to lower its prices in competition
- As part of the mutual agreement, Boral would need to supply documentation showing a third party competitor offering lower prices but Wagners raised concerns over the validity of the new business that came up in March
- A month later Wagners was looking to take it to Queensland Supreme Court which was scheduled to begin this month, now delayed until late November
A dispute bubbling since March between construction company Boral and materials suppliers Wagners Holding has been delayed today until late November.
What we know
On March 18 this year, Wagners broke news to shareholders that the company was unhappy about a supply agreement with ASX 200 listed Boral.
According to Wagners, Boral is required to purchase minimum amount of cement from the company on an annual basis and stipulated to a fixed determined pricing.
If Boral wishes to change cement supplier, the construction company would need to supply documentation of a third party offering better pricing which would allow Wagners to lower their prices in response.
It was in March that Boral had done just that, but Wagners wasn’t buying the story.
The company alleges Boral showed pricing from an unnamed third party, believed to be Cement Australia, and suspended its supply amid concerns of validity.
The problem is that not only is Boral the company’s largest cement customer, it also represents 40 per cent of its cement sales in total.
Over a month later in April, Wagners gave an update saying it was taking matters to Queensland Supreme Court.
Wagners claimed seeking an end to matters with Boral was a dead end, turning its focus on the court to settle the dispute. According to Wagners, the dispute would knock off $10 million to its 2019 financial year guidance.
This latest development at the time put a major hit on Wagners’ shares, knocking it from all time October high of $4.29 to an even $2 apiece.
Today the company is worth even less on the ASX at $1.76 per share — a 5.65 per cent reduction from this morning’s open of $1.82.
Back in April, Wagners’ release to the ASX crying for the court stated the company expected a full return to its revenue in the case of a win against Boral.
Releasing its 2019 financial year earnings last month, the company scraped by its guidance of $25 million to $28 million at a resolved $25.6 million.
Cement and delays
Cement is Wagners most profitable product, and according to The Australian, an analyst gauged it makes up a third of the company’s income.
Today another update has hit shareholders on the court dispute.
Wagners released a new ASX report, stating the court date slated to start on September 16 has been delayed until November 28.
The report is most likely culprit to Wagners’ latest share pricing downgrade, with Boral trading at a 1.05 per cent premium — $4.82 apiece.