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- Wagners Holding Company (WGN) has updated the market on its cement supply agreement court case with ASX 200-lister Boral (BLD)
- Under the agreement, Boral needs to purchase a minimum amount of cement from Wagners every year until December 2031
- If Boral wishes to change cement supplier, it will have to let Wagners know through Pricing Notices, so Wagners can match or lower its prices
- In March last year, Boral sent Wagners a quote showing it could buy cheaper cement from Cement Australia
- Wagners disputed this and Boral suspended its supply agreement until September that year
- Boral then resumed buying cement from Wagners in October 2019, but at lower prices than previously
- The court has not yet made orders on costs.
- On market close, Wagners is down 4.76 per cent and is selling shares for $1.20 each, while Boral is down 2.79 per cent, trading for $3.49 per share
Wagners Holding Company (WGN) has updated the market on its court case with ASX 200-lister Boral (BLD).
History
Wagners Holding, through its subsidiary, Wagners Cement, took Boral to the Supreme Court due to a dispute over a pricing clause in the Cement Supply Agreement.
The dispute has been going on since March 2019, when Wagners was unhappy with the supply agreement with Boral who claimed it could find cheaper cement from Cement Australia.
Wagners disputed this arguing it was for a future period between May and December 2019 and not a current quote.
According to Wagners, Boral needs to purchase a minimum amount of cement from the company every year. If Boral wants to change cement supplier, the manufacturing company will need to let Wagners know of the third party offering, so it can lower prices.
Boral followed these rules, however, Wagners weren’t so quick to believe it. Boral then suspended the cement supply which would have severely impacted Wagners. Boral is Wagners’ largest cement customer and represents 40 per cent of its cement sales.
The outcome
The Court found that two of the Pricing Notices issued by Boral last year was not valid under the Cement Supply Agreement between the two companies.
However, despite the invalidity of the notices, the Court determined a period of suspension commenced from March 18 to September 18 2019.
Boral then resumed buying cement from Wagners in October 2019, but at lower prices than previously. Boral said in late May that the judgment allowed it to source cement at “competitive rates”.
Wagners chairman Denis Wagner said the company would continue to hold Boral to the terms of its supply agreement until its end date.
This is important as the agreement is long term and binding until December 2031 and requires Boral to purchase a pre-determined volume of cement from Wagners on an annual basis.
The court has not yet made orders on costs.
On market close, Wagners is down 4.76 per cent and is selling shares for $1.20 each, while Boral closed 2.27 per cent in the red, trading for $3.49 per share.
