Wagners share price drops 9% on profit downgrade

A profit downgrade from Wagners Holding Company Ltd (ASX:WGN) this morning has sparked a drop in the share price as national sentiment around construction continues to worsen.

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The Wagners Holding Company Ltd (ASX: WGN) share price is 9% lower after a trading update revealed the company has downwardly revised operating profit for FY19.

The new guidance for FY19 operating profit (EBIT) is in the range of $35 million to $38 million. This is down from previous guidance that FY19 performance would approximate FY18 EBIT of $39.5 million.

Wagners says that expected FY19 results will be hit by increased depreciation as a consequence of 'substantial investment in the business in readiness for domestic and international growth'. Additionally, the timing of major projects which haven't yet commenced will weigh on the FY19 result.

Wagners also reported that the result for the first half of FY19 was in line with guidance at $15.9 million EBIT. This is down 33% from the previous corresponding period, and in line with the result for the second half of FY18.

The construction materials and services provider has suffered from a broader malaise in the Australian construction industry, with its share price having dropped almost 40% since the end of October.

Wagners is far from alone. Similar falls have been seen by builders James Hardie Industries plc (ASX: JHX), Lendlease Group (ASX: LLC), Boral Limited (ASX: BLD) and Adelaide Brighton Ltd. (ASX: ABC).

Australian construction activity has seen rapid deterioration in recent months. Residential construction has been hit the worst as the housing downturn takes its toll.

Motley Fool contributor Cale Kalinowski has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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