NZ sharemarket flat as Restaurant Brands' shares plummet

Pizza Hut and KFC operator Restaurant Brands plunged more than 12% after dramatically lowering its profit outlook as the New Zealand sharemarket opened the week on a flat note.

Monday, August 7th 2023, 6:37PM

by BusinessDesk

Following a weak Wall Street over the weekend, the S&P/NZX 50 fell sharply at the opening and trod a rocky pathway to close at 11,934.24, down 8.96 points or 0.08%. The index reached an intraday high of 11,943.2 points.

With a public holiday in New South Wales, trading on the Australian and NZ markets was light. There were 63 gainers and 63 decliners on the NZX with volumes of 19.4 million share transactions worth $69.79m.

Matt Goodson, managing director of Salt Funds Management, said the local market had a slightly negative feel given the moves on Wall Street.

“Restaurant Brands delivered a double whopper of an earnings downgrade (down by nearly 50%). The company is in a classic squeeze – they have been putting through price increases but insufficient to offset rising input costs of ingredients and wages,” he said.

In the United States, the Dow Jones Industrial Average was down 0.43% to 35,065.62 points; the S&P 500 declined 0.53% to 4478.03; and the Nasdaq Composite decreased 0.36% to 13,909.25.

Across the Tasman, the S&P/ASX 20 Index was down 0.21% to 7309.9 points at 6pm NZ time.

Fast food woes

Back home, Restaurant Brands fell 78c or 12.23% to a near six-year low of $5.60 after reducing its full-year net profit guidance to $12m-$16m, down from $32.08m last year and $51.88m in 2021.

The market had pencilled in a $31m profit for the year ending December. The share price of the fast-food operator reached $5.50 on Jan 10 and was trading at $5.67 on May 1, 2017. It has 377 stores in NZ, Australia, Hawaii and California, including 10 new ones this year.

Restaurant Brands, which also operates Carl’s Jr and Taco Bell, said the inflationary pressures continued to evolve, particularly with ingredient and wage costs.

Performance was impacted by continued cost increases in NZ exceeding earlier expectations, and lower-than-expected sales growth in California and Hawaii.

“Given these factors will continue for some time, at a level far greater than anticipated, it has become apparent that recovery in the second half is also going to be weaker than expected,” the company said.

Restaurant Brands reported a 7.1% increase in second-quarter sales to $331.6m, and total year-to-date sales of $640.2m, up 9.4%. NZ sales were up 7.2% to $142.9m in the second quarter, Australia increasing 13% to $78.2m, Hawaii flat at $65.3m, and California down 1.5% to $45.2m.

Goodson said customers appeared to be moving away from the more expensive items on the menu, and this was a reflection that consumers are tightening their belts, as well as an indication of the pressures on the cost of doing business.

Restaurant Brands competitor Burger Fuel increased 2.5c or 10% to 27.5c.

Fisher and Paykel Healthcare was down 19c to $24.07; Ebos Group declined 40c to $36.98; Mainfreight shed 49c to $67.90; Meridian Energy decreased 9c to $5.49; Ryman Healthcare was also down 9c to $6.73 and so was Summerset Group, to $10.12.

T&G Global shed 6c or 2.94% to $1.98; Gentrack fell 14c or 3.18% to $4.26; Marsden Maritime Holdings was down 16c or 3.2% to $4.84; and South Port NZ declined 10c to $7.30.

Mercury Energy increased 10c to $6.60; Chorus gained 11c to $8.515; Fletcher Building was up 6c to $5.61; Vulcan Steel added 18c or 2.23% to $8.24; and Comvita gained 9c or 2.77% to $3.34.

PGG Wrightson was up 10c or 2.37% to $4.32; a2 Milk increased 11c or 2.04% to $5.51; NZME gained 2c or 1.98% to $1.032; My Food Bag collected 1c or 5% to 21c; and Move Logistics added 3c or 3.75% to 83c.

Scott Technology, gained 5c to $3.40. This followed last week’s announcement of a $12m deal with McCain Foods, the world’s largest manufacturer of frozen potato products, to supply an automated materials handling system to the Canadian Alberta processing facility.

The system, featuring two high-speed palletisers, nine buffer tables, conveyors and pallet wrappers, will handle McCain’s production capacity of 130 cases per minute.

Michael Hill was up 3c or 3.09% to $1; Cannasouth increased 2c or 9.3% to 23.5c; MHM Automation rose 6c or 7.14% to 90c; and Marlin Global Fund added 3c or 3.13% to 99c.

Enprise Group was unchanged at 60c after its wholly-owned Kilimanjaro Consulting obtained a court injunction against MYOB which reduced the Exo platform margin amounting to $935,000 a year.

Kilimanjaro supports the largest MYOB Exo install base of any partner in Australia and New Zealand. The Australian court ruled that Kilimanjaro can, in the meantime, continue to utilise the Exo margin as outlined in the 2018 Business Partner Agreement. A trial is set for April next year.

Tags: Market Close