MARKET CLOSE: Shares fall as earnings looms; Rakon drops

Monday 9th February 2009

New Zealand shares fell as investors prepare for an earnings season likely to be punctuated by weakening profits and a deteriorating outlook for companies on the exchange.

The NZX 50 Index fell 6.935, or 0.3%, to 2766.56. Within the index, 20 stocks fell, 16 rose and 14 were unchanged. Turnover was NZ$129 million, making it one of the busiest days this year.

APN News & Media, publisher of the New Zealand Herald, fell 12% to NZ$2. The stock has dropped about 24% since Independent News & Media Plc abandoned efforts to sell its 39% stake as potential buyers struggled to secure finance. Last week APN sold its online business directory unit which includes FindA.co.nz, Wises maps and UBD for an undisclosed sum.

Tourism Holdings slid 4.5% to 64 cents. In November, the company told shareholders at their AGM that the nation's biggest campervan operator would report "a small operating loss" for the first half, though assets sales would result in a small net profit.

This week, companies scheduled to report earnings include Telecom, the biggest phone company, and Fletcher Building, the nation's largest construction company.

Telecom, which has twice cut its full-year profit forecast, is expected to post a decline in second-quarter earnings from the NZ$172 million it made in the year-earlier period on rising costs and loss of fixed-line customers to mobile phones. The shares fell 0.4% to NZ$2.69.

"While reported profits might well frame the
underlying squeeze, the big question is how cash-flow
is looking for the coming year - not that good at all,
in our view," said Stephen Toplis, head of research at Bank of New Zealand.

"Recent business surveys say the same - shrinking profits are exactly why companies are restructuring, trimming staff and becoming more conservative around capital expenditure," he said.

Fletcher Building was unchanged at NZ$5.52. The shares have slipped 8% in the past month, amid signs of an enduring slump in U.S. housing and dwindling demand in New Zealand and Australia. The company may post a 20% decline in first-half earnings to about NZ$190 million.

Contact Energy fell 1.5% to NZ$6.68. In a presentation to retail investors in Christchurch today, the biggest utility on the NZX 50 said its growth would be constrained until pole 2 on the Cook Strait cable is replaced, giving it more flexibility to shift power north and south as needed. Last month the company said full-year profit may fall as much as 23% as hydro dams in the South Island spill water, the Tiwai Point aluminium smelter reduces output and gas costs rise.

New Zealand Oil & Gas rose about 3% to NZ$1.38 after
Australian Worldwide Exploration, operator of the Tui oilfield, said it would drill two new oil prospects close by as part of its exploration program this year. NZOG owns 12.5% of Tui and exposure to another 10% through its recently acquired 15% stake in Pan Pacific Petroleum. AWE owns 42.5%.

Northland Port, which owns 50% of port operator Northport, was unchanged at NZ$2.69 after reporting first half profit fell to NZ$1.79 million from NZ$8.8 million a year earlier, which included a one-time gain of NZ$7.6 million from the sale of shares in Marsden Cove.

In Australia, the S&P/ASX 200 Index rose 1.1% to 3508.6 led by miners and banks as prices of metals rallied and optimism grew about the U.S. rescue package for its financial sector.

Rio Tinto rose 5.7% to A$49.40 and BHP Billiton rose 3.4% to A$33.34 amid speculation growth and demand will revive in China for raw materials. Rio's stock gained even after Jim Leng had resigned from the board instead of stepping into the chairman's role as planned.

National Bank of Australia rose 2.2% to A$18.90 and Australia & New Zealand Banking Group climbed 1.3% to A$12.46.

Insurers Suncorp-Metway and Insurance Australia Group fell on concern about mounting claims from bush fires in Victoria state that killed at least 130 people and destroyed 750 homes. Suncorp fell 21% to A$5.31 after selling new shares at a discount. IAG dropped 9.6% to A$3.24.

Coca-Cola Amatil fell 11% to A$8.30 after Lion Nathan abandoned a A$7.3 billion takeover offer.

In Japan, the Nikkei 225 Index fell 1.3% to 7969.03. Nomura Holdings dropped 14.3% after announcing it would sell new shares to boost its capital.

Nissan Motor fell 5.8% after announcing plans to cut 20,000 jobs and forecasting a net loss of 265 billion yen for the year ending March 31

(Businesswire.co.nz)

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