Market responds to 'reporting season show and tell'

The New Zealand sharemarket, now well into the reporting season, slipped nearly 1% as stock prices readjusted to earnings value based on their latest financial results.

Tuesday, February 21st 2023, 6:38PM

by BusinessDesk

The S&P/NZX 50 index was trading steadily until a late afternoon fall and closed at 11,801.49, down 94.55 points or 0.79% after reaching an intraday high of 11,929.06.

The index has fallen 2.84% in the past two trading days, wiping out a lot of the recent strong gains. The index has now gained 2.9% for the year, after earlier reaching 6%.

There were 51 gainers and 77 decliners over the whole market on volume of 39.81 million share transactions worth $142.47m.

David McConnochie, investment adviser with Forsyth Barr, said it was a day of consolidation for the local market, as analysts recalculated earnings forecasts. There were few offshore leads with the United States markets closed for the Presidents’ Day holiday.

“The reporting season is a show and tell and some share prices may have got ahead of their valuation. The market is readjusting to the earnings coming through and some stocks are being priced back.

“There has been selling pressure on the likes of Fisher and Paykel, A2 Milk and Mercury – they had risen as much as 15% – and the Ryman capital raise, with the rights trading under way, is weighing on the market,” McConnochie said.

Majors decline

Market leader Fisher and Paykel Healthcare was down 41c to $25.79; a2 Milk declined 39c or 5.43% to $6.79, falling nearly 13% in two trading days; Chorus shed 18c or 2.2% to $7.99; Meridian decreased 8c to $5.26; and Mercury Energy was down 10c to $6.09.

Mercury Energy reported a 46% fall in net profit to $230m on revenue of $1.299 billion, up 49% for the six months ending December. It is paying an increased interim dividend of 8.7c a share on April 3.

Hydro production increased 852GWh to 2735GWh after Lake Taupō experienced its highest ever inflows for the July to December period. Mercury confirmed its full-year operating earnings (Ebitdaf) at $795m with hydro production expected to increase to 4900GWh, from 4500GWh.

McConnochie said Mercury had a pretty solid result, with their new wind turbines coming online and helping their revenue.

Vector was up 1c to $4.01 after reporting a 13.2% fall in net profit to $100.3m on revenue of $616m, up 8.4%, for the six months ending December.

Operating earnings (Ebitda) were $274m, up 3.9%, and Vector is paying an interim dividend of 8.25c a share on April 6. Its full-year Ebitda guidance is $515m-$525m.

Ryman Healthcare was down a further 20c or 3.48% to $5.55 after opening its retail offer following the institutional bookbuild which raised a total of $542m. The offer of one new share for every 2.81 held at $5 a share remains open to March 6, with the intention of raising a further $360m.

Freightways, which is paying an 18c interim dividend, rebounded 20c or 2.13% to $9.61; MHM Automation was up 4c or 4.82% to 87c; Green Cross Health gained 4c or 3.05% to $1.35; and NZ King Salmon Investments collected 1c or 4.44% to 23.5c.

Skellerup Holdings was down 11c or 2.19% to $4.91; Synlait Milk declined 7c or 2.01% to $3.41; Precinct Properties decreased 5c or 3.95% to $1.215; and My Food Bag shed 2c or 7.41% to a new low of 25c.

Retailers Michael Hill gained 2c or 1.89% to $1.08; Hallenstein Glasson was down 16c or 2.75% to $5.66; and Briscoe Group declined 7c to $4.75.

Rural services company PGG Wrightson, down 3c to $4.33, reported a steady half-year result with revenue up 6% to $585.79m and net profit decreasing 6% to $21.15m.

PGG is paying an interim dividend of 12c a share on April 4 and said, “We hold a degree of caution for the remainder of the financial year given the volatility in the macro-operating environment."

Other decliners were AFT Pharmaceuticals, down 9c or 2.47% to $3.55; Eroad, falling 5c or 5.68% to 83c; Scales Corp, decreasing 5c to $3.17; and CDL Investments, shedding 3.5c or 4.46% to 75c.

Sky TV was unchanged at $2.56 after confirming that its technology and content operations will be outsourced to Tata Consultancy Services, impacting 170 jobs, and the call centre will be shared between NZ and Philippines, resulting in 200 new jobs in the latter country and boosting customer service capacity by 40%.

Wine exporter Delegat Group, up 5c to $9.45, told the market its Hawke’s Bay vineyards were not significantly damaged by Cyclone Gabrielle and “we are on track for a successful harvest commencing around the end of February".

Mānuka honey producer Comvita, unchanged at $3.40, said the level of destruction in the Hawke’s Bay area can only be described as catastrophic and its own extraction plant is likely to be written off. It is covered by insurance and will not impact financial results.

Tags: Market Close