a2 Milk shares push NZX 50 higher

A2 Milk’s improved outlook helped New Zealand’s benchmark equity index eke out a small gain, even as other stocks fell on fears of a possible war in Ukraine.

Monday, February 21st 2022, 6:25PM

by BusinessDesk

The S&P/NZX 50 Index rose 14 points, or 0.1%, to 12,156.34. Turnover was $131 million.

NZ shares were expected to fall today with investors still focused on what appeared to be a growing threat of a Russian invasion of Ukraine over the weekend.

US President Joe Biden said he was convinced Russian President Vladimir Putin had decided to invade Ukraine and other officials suggested it might be in “the coming days”.

Since then, some diplomatic process has been made. The US president has agreed to meet with his Russian counterpart in France, although no firm plans have been made.

While most NZX-listed securities fell today, some positive earnings updates surprised investors and kept the key index from falling.

A2 Milk shares surged 12.3% to $6.31 after the company said its earnings outlook was improving.

This was welcome news to investors who were told today net profit for the six months ended Dec 31 had halved.

Mike Houlahan of Electus Financial said A2 Milk had already warned profit was going to be lower, so today’s result didn’t come out of the blue.

Investors were instead encouraged by management which said revenue outlook had improved further and was expected to be significantly higher in the second half of the year.

“The market is always trying to anticipate the future and reflect that in today's price,” Houlahan said.

Takeover speculation may also have been contributing to the share price boost, with chief executive David Bortolussi refusing to comment on rumours about Saputo and Nestle.

A2’s key supplier, Synlait Milk, gained 2.7% to $3.49 as it followed its customer higher.

Chorus also saw a big bounce – up 8.7% to $7.34 – after the interest infrastructure company reported net profit was up $27 million and raised earnings guidance to a mid-point of $680m from $665m.

Freightways said underlying profit was up 7.4% in the six months ended December with revenue at $442m up from $410.3m.

The logistics firm said activity had slowed significantly during lockdowns in NZ and Australia but rebounded strongly when they lifted. Shares in the company rose 0.4% to $12.35.

On the other hand, Metro Performance Glass – which is not included in the NZX 50 – saw its shares plunge 11.3% to 31.5 cents after it slashed its earnings outlook for 2022.

The company now expects to earn just $6m to $7m in 2022, down from almost $18m the prior year.

Houlahan said the news came as a big shock to investors as Metro Glass hadn’t done enough to warn a substantial downgrade was coming.

“When they don't [give warning] and they just deliver the bad news, well, not surprisingly, then the share price falls dramatically,” he said.

NZX's shares fell 6.3% to $1.62 as it came off a trading halt after raising $16m in an institutional bookbuild at a clearing price of $1.62 – a 3.1% discount to the previous market price of $1.70.

The stock market operator is aiming to raise a total of $44m to fund its joint acquisition of Global Dairy Trade and restock its cash holdings after shelling out $25m for ASB Superannuation Master Trust.

It has now raised a third of that money in an institutional entitlement offer with existing fund managers taking up 68% of their entitlements. The remainder will come from a retail share offer.

The NZ dollar was trading at 66.99 US cents at 3pm in Wellington, up from 66.89 cents yesterday.

Tags: Market Close