re: wyl-what is wrong? - brokers lower price (By the way my...

re: wyl-what is wrong? - brokers lower price (By the way my previous post on from foresight has a price of $1.80)

from citigroup Barney...below

Wattyl has officially re-entered turnaround mode, with another profit warning and CEO departure.
NPAT for FY05E is now expected to be $10m-12m (pre-significant items), which implies that Australia will post a breakeven / small loss in H2. This range is well below even the most recent market downgrades.
The earnings drop has been blamed on falling demand and rising raw material costs. But we suspect that the real reason is lost market share and the de-stocking program currently running at Bunnings.
The resignation of the CEO confirms the failure of yet another turnaround strategy. This one was supposed to be about improving branding & market share and lowering the cost structure. Maybe its time to realise that Wattyl is a commodity business, the brand is not as strong as Dulux and Taubmans (in broad wall), and you can’t fight the cycle.
We have made substantial cuts to our forecasts and assumed zero final dividends, as H2 operating earnings will be skinny and retained earnings (and hence ability to pay a special) are likely to be wiped out by costs associated with the expected closure of the Blacktown plant.
There will come a time to buy Wattyl, but not now. Better to wait until a new CEO has been appointed and the usual write-offs/provisions have been made. We have cut our rating from Hold to Sell / High Risk (3H) and lowered our target price to $1.65