NZX 50 dips as Fletcher Building shares slumps

Fletcher Building plunged more than 8% after cutting its dividend, and the Reserve Bank of New Zealand kept the official cash rate unchanged as the NZ sharemarket shed half a percent.

Wednesday, August 16th 2023, 6:32PM

by BusinessDesk

Following a sell-down on the major United States markets overnight, the S&P/NZX Index fell sharply at the opening and never recovered, though trading was steady thereon.

The index closed at 11,763.11 points, down 57.63 points or 0.49%. There were 84 decliners and 39 gainers on the main board, with 25.35 million shares worth $115.35m changing hands.

The Reserve Bank of NZ (RBNZ) kept the official cash rate (OCR) at 5.5% but indicated it would need to remain restrictive for the foreseeable future, with the likelihood of a rate cut stretching into early 2025. There may be a further rate hike.

The bank said in the near term, there is a risk that activity and inflation measures do not slow as much as expected. Over the medium term, a greater slowdown in global economic demand, particularly in China, could weigh more on commodity prices and overall NZ export revenue.

Greg Smith, head of retail with Devon Funds Management, said the RBNZ played a steady hand as expected.

“A surprise was the headwinds facing the economy and dairying prices continuing to fall.”

There was nervousness in the US markets, with the Fitch agency warning it may downgrade the credit ratings of up to 70 banks and the Chinese economy continuing to slow.

Industrial production and retail sales grew less than expected, and the People’s Bank of China lowered interest rates by 15 basis points to 2.5% from 2.65%. There is also increased concern about China’s struggling property market.

Dow Jones Industrial Average was down 1.02% to 34,946.39 points; S&P 500 fell 1.16% to 4437.86; and Nasdaq Composite declined 1.14% to 13,631.05.

Across the Tasman, the S&P/ASX Index had fallen 1.49% to 7196.5 points at 6pm NZ time.

Back in NZ

At home, Fletcher Building plunged 46c or 8.38% to $5.03 on trade worth $26.7m after recording significant costs of $301m, up 457%, including $255m from the NZ International Convention Centre (NZICC), and cutting the dividend by 15% in its annual result.

The country’s largest construction company reported steady revenue of $8.469 billion and a 45.6% fall in net profit to $235m for the 12 months ending June. Operating earnings (Ebit) were up 6% to $798m, and the margin increased from 8.9% to 9.4%.

Fletcher is paying a final dividend of 18c a share on Oct 5 for a full-year payout of 34c a share, down from 40c in the previous year.

Smith said Fletcher’s share price fall looked to be an overreaction. “They put out (latest) guidance only last week, flagged the NZICC provision and hit their numbers in the annual result.

“I wouldn’t say it was a horrible result, but the share price reaction suggested otherwise. Maybe the commentary wasn’t as bullish as some people wanted – James Hardie put out an upbeat outlook last week – but that’s no reason for the share price to be sold off. It has had a good run since March,” Smith said.

Synlait Milk declined 1c to $1.56, and a2 Milk was down 8c to $5.32 as dairy prices fell a further 7.4% in the latest global trade auction.

Whole milk powder slumped 10.9% to a near five-year low of US$2,548 (NZ$4,258) a tonne, and skim milk powder declined 5.2% to US$2,333 a tonne. Cheddar was the only dairy product to increase, up 5.8% to US$2,875 a tonne.

Fisher and Paykel Healthcare was down 33c to $23.15, nearing its lowest level this year; Chorus declined 13.5c to $8.435; and the banks ANZ decreased 34c to $26.96, and Westpac shed 36c to $23.55.

Meridian Energy, declining 3.5c to $5.50, reported a 0.6% increase in July retail sales volumes compared with the same month last year, and national hydro storage at Aug 11 decreased from 121% to 106% of the historical average.

Comvita was down 10c 2.94% to $3.30; Delegat Group declined 19c or 2.14% to $8.70; Foley Wines decreased 3c or 2.31% to $1.27; and Restaurant Brands fell 22c or 4.38% to $4.80.

PGG Wrightson declined 9c or 2.14% to $4.11; Smartpay Holdings was down 3c or 1.88% to $1.57; and ikeGPS fell 3c or 4.11% to 70c.

Stride Property gained 6c or 4.26% to $1.47; Argosy Property was up 2.5c or 2.14% to $1.195; Tourism Holdings increased 13c or 3.86% to $3.50; Skellerup collected 10c or 2.45% to $4.18; Scott Technology added 7c or 2.03% to $3.52; and Rakon improved 2c or 2.74% to 75c.

Auckland International Airport was up 5c to $8.33 after reporting a 27% increase in total passenger volumes to 1.479m in July compared with the same month last year, helped by the FIFA Women’s World Cup.

Tags: Market Close