Wagners share price plummets 26% as FY22 net profit declines

It's been a tough day on the market for the construction materials company.

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Key points

  • The Wagners share price has shed 26% so far on Wednesday on the back of disappointing FY22 results
  • The company recorded more revenue but higher expenses dragged down the company's net profit
  • However, management flags big opportunities over the long term

The Wagners Holdings Company Ltd (ASX: WGN) share price is in quicksand today, falling 26% on the back of a 24% drop in net profit.

The ASX-listed construction materials supplier released its FY22 results this morning. The Wagners share price opened at $1.07 per share but has fallen 26.29% to its intraday low of 78.5 cents at the time of writing.

What did Wagners report for FY22?

Whilst the Wagners share price is swimming in a bloodbath, let's check out the key financial results for FY22.

  • Revenue increased by 5% to $336.8 million relative to FY21
  • Net profit after tax (NPAT) went backwards by 24% to $7.6 million
  • Net tangible assets per share increased from 59 cents to 63 cents

Both the construction materials & services (CMS) and composite fibre technology (CFT) segments grew revenue by $5.7 million and $10.4 million respectively.

CMS is the biggest revenue segment, recording $294.2 million in FY22. However, it recorded a slightly lower margin due to the timing of large projects.

CFT products are innovative and environmentally sustainable building materials and recorded revenue of $41.9 million. Cost pressures and start-up costs in the US also put downward pressure on margins in this segment.

The company said shipping and fuel costs increased significantly in the second half of FY22. The rise in costs of raw materials also played a key role in the fall in margins as well.

These were the biggest detractors to Wagners' bottom line.

This essentially explains why operating cash flow fell from $53.1 million to $3.9 million. Payments to suppliers for raw materials and wages soaked a lot of the revenue.

Wagners also ramped up investment in plant and equipment, deploying $24 million in FY22 compared to $15.5 million in FY21.

What else happened in FY22?

The most notable event in FY22 was when the Wagners share price rocketed 16% amid the company landing a $140 million contract for the Sydney Metro-Western Sydney Airport Project.

This was a 20-month contract supplying 67,000 precast concrete tunnel segments.

The Cross River Rail tunnel project was completed in the 1H of FY22, which partially offset the increased sales.

Management remains focused on the future

The CFT and EFC segments remain the future pillars of growth as management strives to enter new markets and invest in automation.

Further capital will be used to invest in R&D to identify new markets and products.

Wagners expects strong cement volumes throughout FY23 due to the high level of activity in the southeast Queensland construction sector. As a result, management will continue to expand its concrete plant network.

The aforementioned Sydney Metro-Western Sydney Airport project will commence in October 2022. Management remains positive about the precast segment outlook with projects like Inland Rail and the 2032 Olympic Games presenting big opportunities.

Wagners share price snapshot

In the last year, the Wagners share price has more than halved, falling by 57% and has dropped 32% in the last month.

In comparison, the S&P/ASX 200 Index (ASX: XJO) only fell 7% in the last year and managed to rise by 3% in the last month.

The current market capitalisation for Wagners is around $152 million.

Its price-to-earnings (P/E) multiple is around 10 times. On this basis, the Wagners share price might seem cheap but the FY22 results show how exposed the business is to external factors. I think this is important to consider when evaluating the Wagners share price.

Motley Fool contributor Raymond Jang has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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