High flying Air NZ does not lift the sharemarket

Uncertainty crept back into the New Zealand sharemarket, down more than half a percent, despite solid financial results from high-flying Air NZ and Auckland International Airport.

Thursday, August 24th 2023, 6:24PM

by BusinessDesk

The S&P/NZX 50 Index dipped in the early afternoon and closed at 11,502.13, declining 69.8 points or 0.6%.

There were 68 gainers and 66 decliners on the main board, with 28.33 million shares worth $96.31m changing hands.

Jeremy Sullivan, an investment advisor with Hamilton Hindin Greene, said the general election was approaching quickly and business confidence was low.

“The short-term uncertainty was not helping a choppy market even though we’ve had some reasonably robust results, such as Ebos and Auckland airport. But investors are sitting on their hands until the election is out of the way,” he said.

Air NZ gained 1c to 77.5c after completing a $1 billion turnaround in net profit for the year ending June. Profit was $412m compared with a loss of $591m in the previous year, and revenue climbed 134.7% to $6.45b. Air NZ is paying a special dividend of 6c a share on Sept 21.

The national airline recorded its second-highest gross earnings of $585m, with almost a $1b reduction in net debt. Customer demand remained strong in the first half of the 2024 financial year, but because of the economic uncertainty, Air NZ was not providing full-year guidance.

Auckland International Airport, down 15c or 1.83% to $8.03, doubled its annual revenue to $625.9m, and net profit was down 77% to $43.2m while operating earnings (Ebitdafi) was up 175% to $397.1m. The airport is paying a final dividend of 4.7c a share on Oct 6.

Passenger numbers during the year increased 183% to 15.9m, with 8.1m domestic and 7.8m international. Auckland airport provided 2024 guidance of $260m-$280m underlying profit and capital expenditure of $1b-$1.4b as it starts its most significant upgrade in history.

Sullivan said Auckland airport beat its own underlying earnings guidance by $48m, $148m instead of $100m, but it has a large amount of capital expenditure, creating uncertainty.

“They do have a clear roadmap of what they want to do.”

Energy sector dips

The energy sector was weaker. Genesis was down 9c or 3.47% to $2.50 after reporting an 11.8% fall in annual net profit of $195.7m on revenue of $2.374b, down 16.5%, mainly because of record low thermal generation.

The favourable hydro conditions led to 65% of Genesis’ generation coming from renewable sources, leading to a 45% reduction in carbon emissions compared with the previous year. Genesis is paying a final dividend of 8.8c a share on October 6.

Mercury fell 19.5c or 3.02% to $6.255; Meridian declined 12.5c or 2.31% to $5.29; and Contact was down 14c to $8.25.

Ebos Group was down 21c to $35.89 following its strong rally the day before. Brokers have updated Ebos’ target share price to between $38 and $42.

On losing the Australian Chemist Warehouse supply contract, worth $2b in revenue, next year, Ebos said: “We always recognised the contract renewal was a risk, and we are confident in the group’s alternative growth strategies that are well established and diverse.”

Fletcher Building was down 7c to $4.83; Mainfreight shed 72c to $65.79; Winton Land declined 5c or 2% to $2.45; Turners Automotive decreased 6c to $3.65; Michael Hill was down 2c or 2.04% to 96c; and Investore gave up 5c or 3.65% to $1.32.

Private Land and Property was down 1.6c to $1.34 after reducing the value of its avocado orchards by $883,000. PGG Wrightson declined 7c to $3.98, and Ventia Services was down 7c or 2.3% to $2.98.

Sky TV, now having 1.015m customers, was up 3c to $2.55 after reporting revenue of $754.1m, up 2.4%, and an 18.3% reduction in net profit to $50.75m for the year ending June.

The television network is paying a dividend of 9c a share on Sept 22 and provided 2024 guidance of $765m-$795m revenue, operating earnings (Ebitda) $150m-$165m, $45m-$55m net profit, and capital expenditure of $75m-$90m.

SkyCity gained 8c or 3.56% to $2.33; Restaurant Brands collected 15c or 3.36% to $4.62; Serko was up 11c or 2.96% to $3.83; and BlackPearl Group improved 3c or 5.66% to 56c.

Sanford, up 4c to $4.13, told the market that pricing for wildcatch, salmon and mussels remained strong, but sales volumes were down for the three months ending June – with mussel sales falling 20%.

Summerset Group was up 2c to $9.91 after earlier reporting a 5.7% increase in first-half underlying profit to $87.15m and a strong rise in development margin to 33.5%, from 28.1%.

Channel Infrastructure was down 3c or 1.89% to $1.56 after earlier reporting a 10% increase in revenue to $64.42m and net profit of $20.1m for the six months ending June. It is paying an interim dividend of 4.2c a share on Sept 20.

Tags: Market Close