Earnings season brings long-expected good news

New Zealand's main share index edged higher as firms such as Ebos Group, NZX and Fletcher Building reported positive earnings results.

Wednesday, February 17th 2021, 6:05PM

by BusinessDesk

The S&P/NZX 50 Index rose 63.25 points, or 0.5 percent, to 12,673.97. Within the index, 22 stocks rose, 22 fell and six were unchanged. Turnover was $194.6 million.

Grant Williamson, a director at Hamilton Hindin Greene, said earnings season was off to a strong start but it had received a muted response from investors who were anticipating positive reports.

“It’s all about investor expectations and quite often we see strong buying ahead of a result but not a lot of reason to continue to buy once the good news has come out,” he said.

Fletcher Building rose 0.8 percent to $6.50 after it reported first-half net profit up 48 percent.

Net profit for the six months ended Dec. 31 rose to $121 million from $82 million. The company hadn't been able to forecast a full-year result as recently as November, but it now expects ebit between $610 million and $660 million.

While there was only a small market reaction on the day, shares in the construction company are up 10.2 percent this year.

Ebos Group reported a solid first-half result and said robust trading has continued as it rides out the covid-19 storm. Net profit lifted 13.7 percent to $92.9 million in the six months to Dec. 31 while revenue was up 6.3 percent at $4.7 billion, it said.

“No real surprises there, but another extremely good result from a company that is growing quite well - a lot of it through acquisition,” Williamson said.

Shares in the pharmaceutical company declined 0.2 percent to $29.11, although they are up almost 25 percent in the past 12 months.

Stock market operator NZX climbed half a percent to $2 after it beat its own guidance as it lifted operating earnings 9.7 percent to $34.4 million in 2020.

The 12.8 percent lift in revenue to $78.4 million exceeded forecasts. Net profit rose 20.1 percent to $17.6 million, and the board declared a final dividend of 3.1 cents per share, taking the annual return to 6.1 cents, matching what it paid last year.

Williamson said with a share price already close to its highs, the market was expecting a good result and got it.

Meridian Energy led the NZX 50 higher, up 5.5 percent to $6.15, as it mounts a recovery from a sustained period of selling.

Outside of the index, Refining NZ shares jumped 3.2 percent to 49 cents after it agreed in-principle terms with BP for using the company’s proposed import fuel terminal. It plans to convert its oil refinery at Marsden Point to an import-only terminal supplying Auckland and Northland.

Millennium & Copthorne Hotels NZ rose 3.7 percent to $2.25 after it reported a strong headline profit despite business being rocked by the pandemic.

The hotelier and property investor recorded a $46 million profit attributable to the parent company, down only slightly from $49.7 million in 2019.

“Our results are not from our hotel operations, rather they reflect the contribution from our property development operations such as our majority-owned subsidiary CDL Investments and a significant tax credit which was recorded during the year,” said Chair Colin Sim.

Manager director B K Chiu gave a more dire summary of the hotel business: “It has been like owning a shop where over 70 percent of our customers were stopped from entering it”.

The kiwi dollar was trading 71.69 US cents at 5pm in Wellington, barely changed from 72.61 cents yesterday.

The trade-weighted index was at 74.53 at 5pm, from 74.97 yesterday. The kiwi traded at 92.83 Australian cents from 93.04 cents, 76.23 yen from 76.66 yen, 59.53 euro cents from 59.78 cents, 51.81 British pence from 52.05 pence, and 4.6451 Chinese yuan from 4.6864 yuan.

Tags: Market Close