NZX flat as major companies issue warnings

Leading stocks Mainfreight and Ryman Healthcare both sounded warnings of a slowing domestic economy and earnings growth, and the New Zealand sharemarket traded flat.

Thursday, July 27th 2023, 6:29PM

by BusinessDesk

The S&P/NZX 50 Index fell to an intraday low of 11,921, then recovered and traded steadily to a close of 11,954.11, up 0.625 points or 0.01%.

There was an even spread of 59 gainers and 59 decliners over the whole market on improved volumes of 24.55 million share transactions worth $91.84m.

Across the Tasman, the S&P/ASX 200 Index had another strong day, rising 0.78% to 7459.8 points at 6pm NZ time.

United States markets were mixed after the Federal Reserve, as expected, increased the interest rate range 25 basis points to 5.25-5.50% – the highest level in 22 years.

But the Dow Jones Industrial Average duly matched the January 1987 record with 13 successive days of rises, after gaining 0.23% to 35,520.12 points. If the index strikes one more day, it will be the longest streak ever, going back to June 1897.

Shane Solly, portfolio manager with Harbour Asset Management, said Mainfreight and Ryman Healthcare provided conservative statements at their annual meetings, indicating domestic activity and the economy were slowing.

“The management theme is that they are being wary and are giving [financial] numbers they should be able to meet or perhaps beat. Winter is here and that’s starting to show in the company results.

“The market was overloaded with information today, with Manawa Energy and Pacific Edge also holding annual meetings, and there was plenty to digest, said Solly.

Global transport and logistics company Mainfreight declined $1.77 or 2.48% to $69.73 on trade worth $10.97m after showing a 19.2% decline in group revenue to $1.18 billion for the June quarter compared with the previous corresponding period. Profit before tax was down 43.3% to $83.6m. Mainfreight has been impacted by reduced volumes globally.

NZ revenue decreased 9.2% to $287.9m and profit before tax 18.4% to $27.8m. The Americas fell 43.5% to $164.76 (revenue) and 80.6% to $6.14m (gross profit), and Asia 53.8% to $24.12m (revenue) and 55.1% to $3.63m (gross profit).

Mainfreight told the shareholders: “We have a sobering year or more ahead of us as we cope with a global recession. We are likely to have to work with ever-increasing effectiveness and disciplines, added to an increased understanding of those less able to cope with declining circumstances.

"We see this as an opportunity to increase market share as competitors struggle in a tougher environment.” Mainfreight has put a freeze on hiring to save costs.

Ryman Healthcare, down 1c to $6.83, told shareholders at the annual meeting that the full-year underlying profit guidance remained at $310m-$330m. The portfolio increase will be towards the lower end of the outlook of 750-800 units, and net investing cash flow will also be at the lower end of the $800m-$1b range. Ryman confirmed it is looking at resuming dividends in the 2024 financial year, and it has opened three further retirement villages in Cambridge, Northwood (Christchurch) and Victoria in Australia.

Pacific Edge was down 1.9c or 10% to 17.1c after reassuring shareholders at the annual meeting that it can manage cash reserves - in the event of an adverse Medicare coverage decision – until it regains coverage, a process it would expect to take about four years.

In the 2023 financial year, the Medicare funding of 13,800 Cxbladder tests generated $15.3m or 77% of the total operating revenue. The funding is now under review.

Fisher and Paykel Healthcare was up 20c to $24.50; Auckland International Airport gained 6c to $8.31; Spark also collected 6c to $5.125; Chorus increased 14c to $8.52; Summerset Group added 6c to $10.22; and Tourism Holdings was up 7c or 1.99% to $3.59.

Winton Land increased 7c or 3.13% to $2.31; Gentrack added 10c or 2.34% to $4.38; AFT Pharmaceuticals gained 7c or 1.96% to $3.65; TradeWindow was up 1.5c or 4.17% to 37.5c; and Blackpearl Group improved 2c or 3.51% to 59c.

MHM Automation, which manufactures production systems for the primary and logistics sectors worldwide, increased 3c or 3.57% to 87c after upgrading its earnings guidance for the year ending June.

Revenue is expected to be about $90m, up from $68m in the previous year, and operating earnings (Ebitda) $9m, up from $4.8m. MHM said it has strong workflows across all parts of the group, and the financial year included two months of trading from Wyma, which makes post-harvest vegetable and fruit handling equipment.

Infratil shed 12.5c to $9.72; Freightways declined 14c to $8.60; Briscoe Group fell 15c or 3.25% to $4.46; Serko decreased 9c or 2.232% to $3.94; and 2 Cheap Cars was down 4c or 5.88% to 64c.

Fonterra Co-operative Group is buying back $50m worth of shares on the market, beginning late next month, as part of its ongoing capital management programme. Fonterra Shareholders’ Fund was up 2c to $3.50.

Tags: Market Close