NZX50 continues to slump despite some upbeat results

The New Zealand sharemarket wasn’t in a sympathetic mood, falling more than one percent despite four of the leading stocks producing solid financial results.

Monday, August 21st 2023, 6:31PM

by BusinessDesk

The S&P/NZX 50 Index was on a slide all day and closed at 11,458.69, down 152.5 points or 1.31%, the third biggest single-day fall this year. The index is at its lowest level this year, and the gain over the past eight months has been wiped out.

There were 42 gainers and 80 decliners over the whole market on volumes of 42.62 million share transactions worth $117.39m.

Greg Smith, head of retail with Devon Funds Management, said there is an underlying nervousness about the local market.

“The company results, even if they are solid, are coming out in an environment where there is anxiety around the Chinese economy and concern about rising bond yields. This has manifested into skittish markets, here and overseas,” he said.

Global marketer a2 Milk plunged 67c or 12.52% to $4.68, Chorus declined 24c or 2.86% to $8.15, and Mercury Energy was down 24c or 3.64% to $6.35 even though their earnings were in line with market expectations – and, in a2 Milk’s case, slightly above.

Freightways, talking growth in Australia, fared better by gaining 1c to $8.29.

For the year ending June, a2 Milk’s revenue increased 10% to $1.59 billion, operating earnings (Ebitda) were up 11.8% to $219.3m, and net profit rose 26.9% to $155.64m.

Infant milk formula sales were more than $1.1b, with a 27.8% gain in China label sales surpassing the English label for the first time. The infant milk formula market has declined 14%, making a2 Milk a top-three gainer.

Smith said there was disappointment over a2 Milk’s forecast of low single-digit growth and the fact it wasn’t paying a dividend or making a share buy-back despite having $800m in cash.

“They are still bullish about the opportunity in China and gaining market share, but the market is declining,” Smith said. “A2 is at the coalface of the Chinese economy, and there are some cracks appearing. This reinforces the amount of uncertainty around China,” Smith said.

Solid results do not impress

Chorus, intent on becoming an all-fibre digital infrastructure company, reported steady revenue of $980m and a 60.9% fall in net profit to $25m for the year ending June.

Operating earnings (Ebitda) were $682m, up $22m, and guidance for the 2024 financial year is $680m-$700m. Chorus is paying a final dividend of 25.5c a share on Oct 10.

Mercury had a 24.8% increase in annual revenue to $2.73b and a 78% fall in net profit to $103m, though last year’s included the gain made on selling its Tilt Renewables shareholding.

Operating earnings (Ebitdaf) increased $260m to $841m, and 2024 financial year guidance is $835m. Mercury is paying a final dividend of 13.1c a share on Sept 29. Mercury’s annual generation increased by 21% (wind was up 16%) because of record hydro inflows.

Freightways reported a 28.5% increase in revenue to $1.12 billion and net profit of $75.29m, up 7.3% for the year ending June. Operating earnings (Ebitda) were $214.9m, up 14.8%, and Freightways is paying a final dividend of 26c a share on Oct 2.

Freightways’ earnings included nine months of trading from courier business Allied Express, and revenue surged 143% in Australia compared with NZ’s 6%.

Freightways is planning a dual listing on the ASX, saying Australia is a larger and growing part of its activity, and it is likely that the pace of growth there will surpass that of NZ.

Skellerup Holdings and Spark both announced solid results last week and were down 25c or 5.59% to $4.22 and 6c to $5.02, respectively.

Auckland International Airport was down 13c to $8.12; Contact Energy decreased 16c or 1.91% to $8.22; Ebos Group shed 49c to $34.10; KMD Brands declined 3c or 3.49% to 83c; and Vulcan Steel was down 15c or 1.79% to $8.22.

In the property sector, Argosy shed 4c or 3.42% to $1.13; Precinct declined 2.5c or 1.95% to $1.255; Property for Industry was down 3c to $2.34; and Vital Healthcare Trust declined 4c or 1.7883% to $2.27. However, Goodman Trust was up 4c or 1.78% to $2.21, and Investore rose 5c or 3.79% to $1.37.

SkyCity was down 5c or 2.2% to $2.22; Restaurant Brands declined 21c or 4.4% to $4.56; and Pacific Edge slipped 1.9c or 14.62% to 11.1c.

Amongst the gainers, Fisher and Paykel Healthcare was up 11c to $22.49; Genesis Energy increased 7.5c or 3.04% to $2.545; AFT Pharmaceuticals added 8c or 2.32% to $3.53; Gentrack collected 10c or 2.34% to $4.38; Carbon Fund improved 4c or 2.26% to $1.81; and Millennium & Copthorne Hotels NZ rose 8c or 4.35% to $1.92.

Tags: Market Close