Some investors have taken a big set against bathroom products company, GWA over its weak sales performance.
So great is the set that the shares are down by almost a quarter in the past two days, while short positions in the stock seem to be on the rise.
Following a 17% plunge on Monday, GWA shares sank 6% on Tuesday to $1.935. During trading the shares hit a 52 week low of $1.88.
On Friday GWA, a leading supplier of household fittings and fixtures, told its annual meeting that sales in its core kitchens and bathrooms business rose by just 3% in the September quarter.
Shareholders were told that the earnings would be weighted towards the second half of the financial year.
"Lags on price increases to recover lower A$ and timing of new product activity means FY16 earnings are expected to be weighted to 2nd half,” the meeting was told.
“(The) Board continues to expect resumption of ordinary dividends with interim FY16 dividend, subject to prevailing market and trading conditions,” the meeting was also told. But investors obviously were not listening yesterday.
In fact while Monday’s drop was spectacular, (when the wider market was down around 1.3%), yesterday’s 6% drop, when the market rose by around 1.4%, was far more telling. That told us the company and its board and management has lost the confidence of the market.
GWA 1Y – Currency burden sinks GWA
The soft sales growth comes amid the home building boom that should be driving sales of GWA products such as sinks, toilets including key Caroma and Fowler brands, two of the better known in the market.
The company said in June that its long-serving managing director Peter Crowley will leave the company on 30 June 2016 and be replaced by Tim Salt.
That change was confirmed at last Friday’s annual meeting, but a growing number of investors say the change is too slow and should happen straight away.
GWA is now a heavy importer of much of its products lines (having gotten out of local manufacturing in key areas when the dollar was closer to parity with the US currency), and the sharp fall in the Australian dollar against the greenback is pressuring its margins, leaving the company struggling to offset rising costs with price increases.
GWA has announced price rises effective on September 1 and November 1, but some analysts question whether these will be enough, especially with such weak sales growth.
GWA shares are down 34% over the past 12 months, so much of that fall has happened on Monday and Tuesday.
