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A slump in demand for single-use gloves during the pandemic is at the heart of a class action being brought against protective industrial and medical goods manufacturer Ansell (ASX: ANN).
Ansell this morning confirmed that after the market closed yesterday afternoon that it was served with a shareholder class action in the Supreme Court of Victoria by law firm Slater & Gordon on behalf shareholders, with the lead plaintiff being Michael Gary Warner.
The claim alleges that Ansell failed to comply with its continuous disclosure obligations and engaged in misleading and deceptive conduct in relation to an announcement to the ASX on 24 August 2021.
At the time, the company was riding a high on the back of demand for single-use gloves during the pandemic and it had informed the market that its forecast earnings per share (EPS) for the FY22 would be between US$1.75 to US$1.95.
However, with the worst of pandemic over towards the end of that year, Ansell downgraded that forecast on 31 January 2022, telling investors that its FY22 EPS would land between US$1.25 and $1.45, or between 25 and 28 per cent lower than previously forecast.
The company blamed the drop in EPS to operational challenges due to the pandemic and due to softer demand for single-use gloves, which led to a 17 per cent slump in Ansell’s share price between 31 January and 3 February 2022.
Slater & Gordon has brought the class action on behalf of shareholders who bought shares in Ansell between 24 August 2021 and 28 January 2022.
The legal firm’s class actions senior associate, Tom O’Bryan, says the claim alleges that Ansell had no reasonable basis to provide the FY22 EPS guidance.
“Ansell knew or ought to have been aware that its FY22 EPS guidance was unreasonably optimistic and there was a material risk it would not be met,” O’Bryan says.
“It is alleged that the company should have communicated deficiencies in its forecast earnings much earlier than it did.
“Investors are entitled to assume that when they purchase shares in a listed company, all of the material information relevant to that company’s financial position has been disclosed.
“The downgrades by Ansell in January 2022 revealed that was not actually the case. Had the true situation been revealed to the ASX, group members would have acquired shares at a lower price, or they would not have acquired shares at all.”
Ansell has rejected the allegations presented by the class action that it failed to comply with its continuous disclosure obligations and that it engaged in misleading and deceptive conduct prior to the release of its trading update.
“Ansell denies any liability and will vigorously defend the claim,” the company says.
Ansell shares hit highs above $42 in early 2021 at the peak of the pandemic and have traded in a band below $30 for the past 18 months. The shares closed yesterday at $24.24.
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