Ausgroup

Ausgroup: material event announcement. Customer Karara Mining (KML) has withheld progress payments amounting to approx A$21.7m for structural, mechanical and piping installation works carried out by Ausgroup’s subsidiary, AGC Industries at KML’s Karara Iron Ore Project in Western Australia, related to a 2012 contract. KML intends to call on the A$8.8m performance security that it has provided to AGC. AGC has also received notice from KML of a claim being prepared against AGC for an unfinalized value. AGC believes its Progress Payments are validly due under the contract, and KML has not provided a substantiated basis for refusing payment and its intended call on the Security. AGC is actively liaising with KML mgt to attempt to resolve the current situation. AGC is keeping its bankers informed of these events which may trigger a review event under the co’s banking arrangements. As at 2QFYJun13, Ausgroup had total borrowings of A$5.2m, cash of A$31.1m and equity of $167.8m. The stock is down 3.7% at $0.515, with market likely concerned about the impairment impact from this customer receivable.