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NZX CLOSE: NZ shares fall; Contact, Steel & Tube, Cavalier decline

Thursday 11th February 2010

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New Zealand shares fell as the earnings season kicked off. Steel & Tube Holdings fell after saying weaker demand and steel prices cut first-half profit by 85%. Contact Energy sank to a 7-month low after announcing price increases for most customers.

The NZX 50 Index fell 20.22, or 0.7%, to 3065.27, the lowest since Aug. 21. Within the index, 30 stocks fell, nine rose and 10 were unchanged. Turnover was $48.9 million.

Steel & Tube (NZX: STU ) fell 2.5% to $2.69 after the distributor of steel building supplies such as reinforcing rods said first-half profit tumbled to $3.17 million from $20.8 million a year earlier. Profit missed some estimates and chief executive Dave Taylor said the sustainability of any pickup in activity “is still uncertain.”

“The market in general is not in the mood to give anyone the benefit of the doubt,” said Paul Harrison, who oversees $300 million at BT Funds Management.

Contact (NZX: CEN ), the biggest utility on the NZX 50, fell 2.4% to $5.66 after disclosure that the company is raising tariffs for around 75% of its 479,000 customers by around 5%. Customer losses and unprecedented retail market competition since late 2008 may have reduced investors' confidence that Contact can execute price increases ahead of the market without sustaining further customer losses, said Andrew Harvey-Green, an analyst at Forsyth Barr.

Cavalier (NZX: CAV ), fell 3.6% to $2.65. The company may post a 23% decline in first-half earnings when it reports on Feb. 19, according to John Cairns, an analyst at Forsyth Barr. While residential carpet demand has started to stabilize it’s about 20% below normal levels.

ING Property Trust (NZX: ING ) fell 2.6% to 75 cents and AMP NZ Office Trust declined 1.4% to 73 cents, extending their slide since the Tax Working Group released proposals to reform taxes, tightening the noose on property investors. Details of any changes will be in the government’s budget though Prime Minister John Key has already ruled out a land tax.

“Whether it’s a land tax or depreciation, it was still negative for the property sector,” BT’s Harrison said.  Also weighing on the sector, office vacancies “are becoming more of an issue now,” he said.

Australia & New Zealand Banking Group (NZX: ANZ ) rose 2.2% to $26.27, leading gains in shares of Australian stocks that trade on the NZX after government figures showed companies across the Tasman added three times as many workers as expected last month and the jobless rate fell to 5.3%.

Foodmaker Goodman Fielder (NZX: GFF ) rose 2.1% to $1.95 and Westpac Banking (NZX: WBC ) climbed 1.9% to $29.21.

Telecom (NZX: TEL ), which is scheduled to report its earnings tomorrow, rose 0.9% to $2.31. First-half earnings before one-time items probably fell 18%, according to telecommunications analyst Guy Hallwright.

Telstra (NZX: TLS ) dropped 2.6% to $4.17 after Australia’s largest phone company said first-half profit fell 3.3% to A$1.85 billion and lowered its forecast for annual sales.

Pan Pacific Petroleum (NZX: PPP )  rose 2.5% to 41 cents, leading gainers on the index today. Tower (NZX: TWR ) fell 3.1% to $1.91 and NZX (NZX: NZX ) dropped 2.7% to $2.15.


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