Building and housing products supplier, Alesco Corporation saw its shares pounded yesterday after it surprised the market with an after hours profit downgrade on Tuesday evening.
The shares fell more than 31% at one stage, to a day’s low of $3.12, where they closed down $1.44 on the day.
The size of the fall approximated the size of the earnings downgrade of 25% to 30%.
That matched the first half earnings fall.
The company downgraded its earnings guidance after ”a much weaker than expected third quarter performance” that is expected to carry over into the fourth quarter which ends on May 31.
The question is now whether other companies in the sector should also be downgraded (such as GWA International).
Alesco noted in its ASX statement that the previous forecast had been dependent on the ”timing and pace of the recovery in the new housing and renovations markets and the impact of stimulus into the broader construction markets”.
"As a result, earnings per share before amortisation and significant items (EPS) for the full-year is now forecast to be in the range of 24 to 27 cents (down from the previous guidance of between 34 to 36 cents).
"Softer market conditions continued in February across the group, which has led to a much weaker than expected third quarter performance.
"While improved operational efficiencies and cost control measures are evident throughout the group, overall revenue for the third quarter was 9% lower than management had anticipated at the half-year and 6% lower than the same quarter last year.
"The Garage Doors & Openers division’s earnings in the third quarter were higher than expected at the half-year, although revenue was lower than anticipated and lower than the prior corresponding period.
"The Water Products & Services division’s third quarter earnings were well below expectations, despite its improved earnings in the second quarter and the considerable work undertaken by divisional management over the past 12 months to improve the underlying performance of the business.
"While the business will benefit from this work over the longer term, the Alesco board will review the carrying value of the investment in this division following completion of its FY11 budget.
"At the release of the company’s interim results in January 2010, the Alesco board stated that second-half FY10 financial performance would continue to be influenced by the timing and pace of the recovery in the new housing and renovations markets and the impact of government stimulus into the broader construction markets.
"It also noted that while signs of a market recovery were evident in December, the directors remained cautious, as trading in January was softer than expected."
