a2 sends NZX 50 to 4-month low

NZ's main share index dropped to a four-month low as A2 Milk plunged another 15% after lowering its full-year earnings guidance for the third time.

Thursday, February 25th 2021, 7:02PM

by BusinessDesk

The S&P/NZX 50 Index fell 141 points, or 1.2%, to 12,140.66. Within the index, 23 stocks fell, 25 rose and two were unchanged. Turnover was $184 million.

Former-market darling A2 Milk was responsible for the bulk of the index’s decline, with investors trading more than $56m worth of stock.

“A2 has tipped us into correction territory today, we’re more than 10% off the high on Jan 8,” said Jeremy Sullivan, an investment advisor at Hamilton Hindin Greene.

The infant formula exporter dropped 16.1% to $9.34 after it lowered its revenue guidance to $1.4 billion. In only November last year, the firm had said revenue could be as high as $2b.

Its key supplier Synlait Milk also took a tumble, dropping 4.9% to $4.07.

These listed exporters will also be displeased with the rampant kiwi dollar, which was trading at a four-year high of 74.30 US cents at 5pm in Wellington, up from 73.65 yesterday.

Fisher & Paykel Healthcare fell 2.5% to $28.76, as the exchange rate will eat into future profits.

The still-rising interest rates prompted Forsyth Barr analysts to hack 8% from Meridian’s target price, down to $5.10, but investors took a different view bidding the share price up 1.1% to $5.56.

Jarden analysts were slightly more upbeat on Meridian, lifting their ‘sell’ rating in reaction to the recent share price fall and improved earnings expectations.

Although long-dated bond yields continued to creep higher, some yield sensitive stocks saw a small comeback today.

Spark New Zealand rose 1.1% to $4.17. Forsyth Barr described yesterday’s earnings report as “another very sound performance” and reiterated an ‘outperform’ rating.

Genesis Energy climbed 1.8% to $3.48 after it raised its full-year earnings guidance due to low national hydro storage and expected demand for generation from its gas and coal-fired plants at Huntly.

Pizza Hut and KFC operator Restaurant Brands were down 0.3% to $12.01 as net profit dropped 3.2% on a like-for-like basis. The fast-food operator said it lost sales during the lockdowns in New Zealand, but its stores in California and Hawaii were faring well.

Vista Group International continued to have a strong run ahead of its earnings result on Monday. The stock climbed another 4.2% to $1.73, today.

Warehouse Group jumped 5% to $3.40 after it upgraded expected earnings in the half-year ended January. The retailer now says adjusted net profit will exceed $110m, rather than the $90m forecast last month.

Moneylender Harmoney rose 2.2% to $2.30 in a small reprieve from its continued slide, the stock listed at $3.68 only last year.

Jarden analysts still have faith in the stock, today reiterating their ‘buy’ rating with an AU$3.30 target price.

In currency markets, the trade-weighted index was at 76.37 at 5pm, from 75.81 yesterday. The kiwi traded at 93.28 Australian cents from 92.28 cents, 78.72 yen from 77.71 yen, 61.04 euro cents from 60.61 cents, 52.51 British pence from 52.02 pence, and 4.7932 Chinese yuan from 4.7556 yuan.

Tags: Market Close