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MARKET CLOSE: NZ shares sink as investors punish A2 over margins

Thursday 22nd August 2019

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(Aug. 21, 5:56 PM) New Zealand shares dropped in one of the reporting season's busiest days as A2 Milk fell to a six-week low when its margins disappointed investors. Fletcher Building and Spark New Zealand both gained on their results. 

The S&P/NZX 50 Index decreased 94.52 points, or 0.9 percent, to 10,709.32. Within the index, 14 stocks fell, 26 rose and 10 were unchanged. Turnover was $254.1 million, of which A2 and Spark accounted for $152.8 million. 

Index heavyweight A2 sank 12 percent to $14.81, the lowest close since July 4, despite reporting 40 percent-plus gains in earnings and revenue. Investors traded 5.5 million shares of the stock, well up on its 90-day average of 718,000. 

Matt Goodson, managing director at Salt Funds Management, said the result was in line with expectations, but margins were lower than expected as the firm lifts its marketing spend to pursue more growth. 

"It's a stock that doesn't have many people who are neutral - it's either supporters or detractors," he said. That means it typically gets violent reactions in both directions, he said. 

New Zealand Refining fell 4.2 percent to $2.05 after trimming its interim dividend payment to 2 cents per share, reflecting a widening first-half loss due to higher power costs and reduced gas supplies due to lower production from the Pohokura gas field. 

Z Energy fell for a second day in the wake of the Commerce Commission's draft report into the national fuels market. The stock was down 2.2 percent at $6.28 on a volume of 1.3 million.

Spark posted the day's biggest gain, up 4.5 percent at $4.19. The 17.1 million shares traded - almost six-times the average - meant it was also the most traded stock. An 11 percent increase in annual operating earnings was in line with expectations, however, investors were buoyed by its guidance to maintain annual dividends at 25 cents per share for the current year. 

Goodson said there had been some speculation about the future of Spark's dividend, but those fears were allayed by the company's forecast. 

Fletcher Building climbed 3.3 percent to $4.72 on a volume of 2.9 million shares. It reported a return to profit and confirmed a resumption of dividend payments, continuing a five-year transformation plan paring back the business to a New Zealand and Australian focus. Goodson said the gain was something of a relief rally as earnings met expectations. 

Outside the benchmark index, telecommunications minnow Vital, formerly TeamTalk, climbed 8.6 percent to 88 cents after resuming dividend payments which were suspended while it strengthened the balance sheet. 

Napier Port Holdings rose 1 percent to $2.98 on a volume of 1.9 million shares in its second day of trading. The latest addition to the stock market was in hot demand, with the initial public offering oversubscribed at $2.60 a share. 

Goodson questioned whether some investors were aware of the level of debt-funded capital spending the port operator is preparing to embark on, but said globally low interest rates continue to support demand for infrastructure stocks. 

Kiwi Property Group fell 0.6 percent to $1.63 on a volume of 6.2 million shares, more than its 1.6 million average. Of other stocks trading on volumes of more than a million shares, Contact Energy increased 0.4 percent to $8.41, SkyCity Entertainment Group rose 0.5 percent to 3.91, and Arvida Group was unchanged at $1.39. 

Air New Zealand was unchanged at $2.73 after announcing chief financial officer Jeff McDowall will fill in as acting chief executive when Christopher Luxon departs next month. The airline is among companies reporting tomorrow. 

Ebos Group, also reporting tomorrow, rose 1.2 percent to $24.50 after announcing long-serving chair Mark Waller will step down at this year's annual meeting. 

Of other firms reporting tomorrow, Auckland International Airport increased 1 percent to $9.80 and Sky Network Television advanced 0.8 percent to $1.23. 

Tilt Renewables rose 1.1 percent to $2.73 and Serko gained 2.1 percent after the firms reaffirmed earnings guidance at their respective annual meetings today. Infratil rose 1.5 percent to $4.75 ahead of tomorrow's annual meeting. 

Trustpower's listed bond that matures next month was the most traded debt security on a volume of 669,000. The notes closed at a yield of 3.1 percent, up 10 basis points. Trustpower shares rose 0.5 percent to $7.69. 


Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond

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