What Happened to ALS Ltd’s Share Price?
Shares in lab testing provider ALS Ltd [ASX:ALQ] fell off a cliff today, plummeting by more than 17% as gloom gripped yet another session on the Aussie stock market.
ALS shares have now dipped to a four-year low, down nearly 60% from the company’s mid-2012 peak.
Why Did This Happen to ALQ Shares?
This morning ALS admitted that it expects underlying net profit for the six month ending 30 September 2014 to come in 36% lower than the same period a year earlier. The new profit forecast of $64 million for the half year is much weaker than the $74 million the company expected less than two months ago.
That earlier forecast rested on an expectation that business conditions would improve in September. That improvement hasn’t come.
Conditions remain tight for ALS’ customers across all sectors, but the company feels a particular impact in its minerals division. Ongoing softness in commodity prices and a slowdown in mining exploration expenditure have seen work dry up for ALS.
The market knew things were tough for companies that serve miners like ALS…but clearly the extent of the malaise has taken investors by surprise. That’s why the share price crashed today.
What Now for ALS Ltd?
ALS investors will be looking for a light at the end of the tunnel for the resources sector’s multi-year soft patch.
ALS alluded to pulling costs out of the business in today’s announcement. That might shore up the company’s bottom line in the short-term.
But for this stock to reward investors over the long-term, it needs to either hope for recovery in the mining sector, or diversify its business away to more attractive industries.
It would take a brave investor to buy this stock today in the face of such strong negative sentiment.
Cheers, Tim Dohrmann
Small-Cap Analyst, Australian Small-Cap Investigator