DGL Group (ASX:DGL) share price falls despite positive announcement

The chemical company’s expansion plans have failed to capture the imagination of investors.

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The DGL Group Ltd (ASX: DGL) share price headed south today despite the company announcing its growth initiatives are underway.

At the end of market trade, the chemical company’s shares were swapping hands for $1.26, down 2.69%.

What did DGL announce?

DGL couldn’t catch a break today, with investors offloading the company’s shares despite its positive release.

According to the statement, the DGL board has approved plans to develop its new chemicals storage warehouse.

DGL will seek to expand commercial operations at its existing Mount Wellington warehousing and distribution facility in Auckland, New Zealand. The cost to develop the warehouse is expected to be around NZ$4.5 million (A$4.2 million).

Construction works have been awarded to Robert Cunningham Construction, which has more than 25 years’ experience in the industry. Furthermore, the project will be managed by New Zealand’s leading independent project management company, MPM Projects.

Construction of the warehouse will begin in July, with completion scheduled for the end of the year.

Management commentary

DGL founder and CEO Simon Henry said of the expansion plans:

Mount Wellington is a large, sought-after and key distribution hub for the Auckland metro region. The new state-of-the-art facility will provide increased storage for current clients and enable new clients to gain access to the precinct. We expect the warehouse to be fully occupied soon after opening.

The new warehouse is the first of a number of site expansions planned across the Trans-Tasman in the next 12 months, to ensure that we are able to provide the capacity the industry requires and to further cement our position as the leading service provider to the chemical industry in Australia and New Zealand.

More on the warehouse

DGL acquired the 1.8-hectare site in 2012, and the company has spent 9 years bringing its specialised chemical storage facility online.

The Mount Wellington site is currently licenced to store up to 6,000 tonnes of chemicals. The new warehouse will provide the company with an additional 2,000 tonnes of capacity. It will take DGL’s total capacity to 128,000 tonnes across all its facilities from Perth, Western Australia to Christchurch.

DGL share price snapshot

Operating across Australia, New Zealand and internationally, DGL offers chemical formulation and manufacturing services, warehousing and distribution, waste management, and environmental solutions.

Since listing on the ASX early last week at a price of $1.00 per share, the DGL share price has gained 26%. Based on the current share price, the company has a market capitalisation of roughly $325 million.

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