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Wagners Holding Company Ltd

Wagners suspends cement supply to Boral due to pricing

Boral has fired a shot across Wagners' bow saying it wants lower cement prices.

bull and bear
Wagners has commenced a formal process disputing the validity of the action

Wagners Holding Company Ltd (ASX:WGN) has opted to suspend the supply of cement for six months to its largest customer Boral Ltd (ASX:BLD).

The move comes after Boral issued a third party pricing notice to Wagners under their cement supply agreement.

For some background, when supply agreements don’t have a fixed price, they are often linked to market prices in various forms.

In this case, Boral has determined it can be supplied cement cheaper in the market, which means Wagners must either match the price or suspend supply for up to six months.

Wagners challenging the validity of the notice

Boral’s market pricing evidence is in the form of an unsigned offer and Wagners has commenced a formal process disputing the validity of the action.

While there are no details on why Wagners is disputing the validity of the action, a possibility is that Wagners believes the unsigned offer is not genuine.

Wagners pointed out that the pricing would cost the company around $20 million in revenue in the event of supply suspension for six months.

Shares hit a low this morning of $2.61, below their $2.70 IPO price from December 2017 but have since rallied to be trading around $2.75 around midday.

This morning’s buyers of Wagners shares will likely be patting themselves on the back if the pricing notice turns out to be invalid.

Quick facts: Wagners Holding Company Ltd

Price: $1.61

Market: ASX
Market Cap: $259.81 m
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