Leading shareholder class action law firm Maurice Blackburn announced today that it had joined with litigation funder, IMF (Australia) Ltd, to pursue a potential class action against wood chipping company Gunns Limited for failing to disclose material information to the share market.
Maurice Blackburn NSW Principal, Ben Slade, said today:
'There is a good claim for shareholders against Gunns for losses suffered by those who bought and held shares in Gunns between 31 August 2009 and 19 February 2010. Gunns shareholders are only able to make informed decisions regarding their share purchases when the company adheres to its disclosure obligations.'
IMF will fund claims for these shareholders against Gunns for damages relating to alleged misleading or deceptive conduct and breaches of the company's continuous disclosure obligations*.
The claims will centre on the company's forest products segment performance during the 1H2010 period. On 22 February 2010 Gunns released its 1H2010 results, revealing net profit after tax (NPAT) of only $0.4m, down a dramatic 99% from the previous corresponding period ($33.5m) and down 97% on the expected $12.3m NPAT based on reported consensus analyst forecasts. A significant decline in wood fibre EBIT ($6.9m) was the main reason for Gunns' poor result, down from $57.4m in 1H2009 and $33.7m in 2H2009. Notably, wood fibre EBIT margins reduced substantially in 1H2010 to only 4.9%, down from 22.5% in 1H2009 and 25.3% in 2H2009.
In response to the announcement Gunns' share price plunged from $0.88 at the commencement of trading on 22 February 2010 to a close of $0.57 on 26 February 2010, (a 35% decline).
Gunns is Australia's leading woodchip exporter by volume. From late 2008 Gunns' woodchip exports and earnings fell markedly in line with demand from Japanese customers. Throughout 2009 Gunns' margins were further impacted by a strong Australian dollar and an increasing drive by Japanese customers to purchase only wood chips from companies certified by the Forest Stewardship Council (FSC). Gunns has so far been unable to achieve certification by the FSC, an organisation, which promotes environmentally appropriate, socially beneficial, and economically viable management of the world's forests.
On 31 August 2009 Gunns was 'optimistic that the "bottom of cycle" has been reached' and that 'key export markets declined in 3Q09 but stabilised in 4Q09'. The same presentation announced a $145 million capital raising.
On 11 November 2009, as a part of the Chairman's address, Gunns noted that the strength of the AUD had an effect on the operating margins but stated that '…it is now evident that markets are accepting this higher AUD and prices are improving for our products'.
Mr Slade said:
"Gunns is required to advise shareholders and the market of all information of which it was aware, or ought to have been aware, which might materially affect its share price. As a general rule, if a company expects a material variation in excess of 10% to 15% of its forecast, expectation or from its previous corresponding period, (1H2009 in this case), it must immediately disclose such information".
"Gunns was obliged to make a timely disclosure regarding the significant deterioration in its expected 1H2010 performance. It will be alleged that Gunns has failed to do this."
Shareholders who purchased Gunns shares between 31 August 2009 and 22 February
2010 should contact IMF about joining this action. www.imf.com.au
Footnote: The ASX listing rules require listed companies to immediately disclose an expected material difference in anticipated results from the previous corresponding period or from analyst consensus forecasts. ASIC considers that a material difference is 10% to 15% and sometimes less in certain circumstances.