Boral faces new class action over US windows strife

Law firm Maurice Blackburn is launching its own class action on behalf of disgruntled Boral shareholders over alleged poor disclosure by the building products company of an accounting scandal in its American windows business.

It marks the second class action in Australia over the issue, following one pursued by Sydney law firm Quinn Emanuel Urquhart & Sullivan on March 24 that alleges shareholders suffered losses because Boral failed to disclose “financial irregularities” in its US windows in a timely manner. Boral said on March 27 it intended to ''vigorously defend this claim''.

The second class action, set to be launched in the Federal Court, comes as Boral's core building products business suffers from a serious downturn in demand as COVID-19 economic fallout causes a slowdown in the ''pipeline'' of new construction projects, prompting temporary factory shutdowns by Boral.

Chief executive Mike Kane is set to leave the company by August at the latest, with a new chief executive widely expected to embark on heavy writedowns and a possible capital raising.

Boral is also dealing with disgruntled institutional shareholders aggrieved over the six profit downgrades that have occurred in the past two years.

The accounting scandal in the US windows business was a complete surprise to investors, and angered analysts and fund managers when it emerged publicly with a Boral announcement to the ASX on December 5.

Continuous disclosure laws are designed to ensure investors know what they are investing in.
— Julian Schimmel, principal lawyer at Maurice Blackburn

Maurice Blackburn's class action alleges potential breaches of market disclosure laws concerning its North American business, and centres on announcements to the ASX on December 5, 2019 and February 10, 2020.

Maurice Blackburn says following these announcements, Boral’s share price fell 6 per cent on December 6, wiping more than $370 million off the company’s market capitalisation, and a further 11 per cent on February 10.

Maurice Blackburn alleges Boral breached its continuous disclosure obligations and made misleading or deceptive statements about its North America windows business, and questions whether it knew or ought to have known about the irregularities from August 30, 2017 onwards.

Financial redress

It says Boral shareholders who bought shares in the company between August 30, 2017 and February 10, 2020 are eligible to join the action to seek financial redress for their losses on paper.

Maurice Blackburn principal lawyer Julian Schimmel said shareholder class actions were an important mechanism to ensure the sharemarket operated transparently and with integrity.

“Continuous disclosure laws are designed to ensure investors know what they are investing in," Mr Schimmel said. "It is incumbent on companies to inform the market of all relevant information relating to the operation of the business as soon as they arise.

“Boral shareholders would naturally have expected a high standard from the company.''