NZ sharemarket dips despite bright start to earnings season

The New Zealand sharemarket slipped slightly but leading gentailer Contact produced “a solid set of numbers” on the first day of the latest company reporting season.

Monday, August 14th 2023, 6:28PM

by BusinessDesk

The S&P/NZX 50 Index was down 10.28 points or 0.09% to 11,826.42 after reaching an intraday low of 11,794.1.

There were 90 decliners and 36 gainers over the whole market on volumes of 25.42 million share transactions worth $99.04m.

Matt Goodson, managing director of Salt Funds Management, said the local market was a touch heavy but not as bad as Australia.

The S&P/ASX 200 Index had fallen 0.76% to 7284.4 points at 6pm NZ time.

Goodson said for the first time in a while, the property sector (down 0.81%) was weaker, and the increase in long-term bond yields is probably starting to exert itself.

The NZ 10 Year Government Bond yield has reached 4.898% – the highest level since 2011. The market is also awaiting this week’s Reserve Bank decision on the official cash rate (OCR), currently at 5.5%. Goodson said the market would be flabbergasted if the bank did anything other than keep the OCR on hold, “but you can’t underestimate the capacity of (governor) Adrian Orr to surprise.”

Contact Energy increased 18c or 2.14% to $8.60 on trade worth $13.3m after reporting an 11.3% reduction in revenue to $2.1118 billion and a 30.5% fall in net profit to $127m for the 12 months ending June. Contact is paying a final dividend of 21c a share on September 26.

Contact said it made a provision of $84m following the estimated available capacity of the Ahuroa Gas Storage facility; otherwise, net profit would have been $211m.

Underlying operating earnings (Ebitdaf) increased $27m to $573m with higher electricity pricing and the gain on the sale of the Te Rapa co-generation plant, partially offset by high gas and carbon unit costs, lower electricity sales volumes and higher fixed operating costs. Operating free cash flow decreased by $48m to $282m.

Goodson said Contact has a few moving parts, and its result was roughly in line with market expectations, and its guidance was slightly ahead. “The market has taken it well, with a large volume of more than 1.5m shares being traded. Despite the lift in bond yields, the energy sector is going well.”

Amongst the other energy stocks, Meridian was up 5.5c to $5.525; Mercury was 13c or 1.95% to $6.52; and Genesis declined 2.5c to $2.52.

Property sector dips

In the property sector, Argosy was down 2c to $1.195; Investore fell 8c or 5.59% to $1.35; Stride declined 3c or 2.07% to $1.42; and Precinct decreased 1.5c to $1.28.

Precinct Properties told the market it had formed a joint venture with Ngati Whatua Orakei to redevelop two commercial buildings in the Auckland downtown Te Toangaroa precinct near Spark Arena. Precinct is investing $10m with global private investors, PAG.

Port company Napier was down 6c or 2.52% to $2.32, and its counterpart Tauranga also declined 6c to a 16-month low of $6.02 as the sector deals with lower container volumes and log exports, with weaker demand in China.

Auckland International Airport was down 8c to $8.29 on trade worth $18.12m; Skellerup Holdings shed 6c to $4.08; Oceania Healthcare declined 3c or 3.8% to 76c; and Michael Hill shed 3c or 3% to 97c.

Seeka was down 7c or 2.72% to $2.50; Rakon decreased 3c or 4% to 72c; and Bremworth declined 2.5c or 5.21% to 45.5c.

SkyCity Entertainment, unchanged at $2.28, is provisioning $49m in its full-year financial statements for a potential fine in the AUSTRAC civil proceedings against the Adelaide casino. The proceedings are at an early stage. SkyCity also allows $49.7m for impairment to the Adelaide casino licence, and group operating earnings (Ebitda) guidance remains at $300m-$310m.

Ryman Healthcare was up 6c to $6.65; Freightways gained 10c to $8.45; Sky TV increased 4c to $2.49; Scott Technology fetched 15c or 4.62% to $3.40; Enprise Group rose 5c or 8.33% to 65c; Tourism Holdings added 6c to $3.43; and Green Cross Health improved 3c or 2.29% to $1.34.

WasteCo gained 0.007c or 10.77% to 7.2c after telling the market it is buying Bond Contracts for $8.77m and making a $3m capital raise – $2.5m in a fully-underwritten share purchase plan and a $500,000 private placement with directors Shane Edmond and James Redmayne.

Bond operates the waste collection services and transfer stations for Invercargill City Council, Southland District Council and Gore District Council.

In Australia, JB Hi-Fi was up 3.11% to A$48.68 (NZ$52.85) after group annual sales increased 4.3% to A$9.63b (NZ$10.45b). New Zealand sales were up 11.3% to NZ$292.1m, but its margin was down 140 basis points to 16%.

JB said it would open three to five new stores a year in NZ. Goodson said JB lacked scale here (there are 14 stores at present), and the expansion would provide issues for The Warehouse and Noel Leeming.

Tags: Market Close