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MARKET CLOSE: NZ shares rise, lead by ANZ, CBL; Fletcher Building gains despite profit plunge

Wednesday 16th August 2017

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New Zealand shares gained, with a positive start to earnings season bolstering confidence, and Fletcher Building rising after its expected profit downgrade.

The S&P/NZX50 Index rose 39.6 points, or 0.5 percent, to 7,853.34. Within the index, 30 stocks rose, 14 fell and six were unchanged. Turnover was $137 million.

"The market keeps doing its thing, and really that's on the back of generally speaking some good results - or, in the case of Fletcher, not as bad as people suspected," said Grant Davies, investment advisor at Hamilton Hindin Greene. "The market has had a pretty good performance so far this week, there's a bit of momentum now behind some of the stocks after their results. Most of the outlooks have been fairly optimistic which has given investors hope."

Fletcher Building gained 1.2 percent to $8.30. It reported a 23 percent drop in full-year operating earnings to $525 million, in line with its profit warning last month when the building products and construction company fired its chief executive, and said operating cash flows will improve in 2018 as will returns from construction.

The company said it expects "a significantly improved performance" at its construction business because of a turnaround at its buildings + interiors unit. It will pay a final dividend of 19 cents a share, down from 20 cents in the previous year.

"It was really just airing all the dirty laundry, they maintained the dividend which has pleased the market," Davies said. "Hopefully it is all out in the open now and they can get on with business. There were never going to be any major surprises given the timing of the last profit warning was after balance date."

Australia & New Zealand Banking Group led the index, up 2.7 percent to $32.90. Yesterday, the Melbourne-based group reported cash earnings were up 5.9 percent to A$1.79 billion for the third quarter, in what chief executive Shayne Elliott said was a period of further progress rebalancing the business to improve returns.

Since taking over the lender, Elliott embarked on restructuring the business to exit less profitable businesses, the latest being ANZ's wealth management division, and introducing more agile working styles to cut down on bureaucratic waste. 

"It could very well be a few brokers upgrading their valuations, if that's refocused across the board then it's probably enough to push it around on a day by day basis," Davies said.

CBL Corp rose 2.5 percent to $3.75, Auckland International Airport gained 2 percent to $6.99 and New Zealand Refining Co advanced 2 percent to $2.52.

Freightways was the worst performer, down 1.4 percent to $7.70, while Comvita dropped 1 percent to $5.98.

Outside the benchmark index, Synlait Milk gained 2.2 percent to $4.75. The milk processor will triple its infant formula supply with Sichuan-based New Hope Nutritionals over the next five years in a new deal with the Chinese company. 

It has long-standing links with China through its cornerstone shareholder Bright Dairy and has benefited from its successful supply deal with a2 Milk Co, which is a big seller of infant formula into the world's most populous nation. 

Colonial Motor Co rose 4 percent to $7.80. The motor vehicle distributor, which listed on the NZ stock exchange in 1962, lifted annual profit 4.2 percent to $22.2 million as it continued to enjoy the nation's car sales boom. 

Revenue fell 1.4 percent to $854.8 million due to the sale of its short-lived franchise agreement with the Jeff Gray BMW dealership. Still, sales volumes were up 14 percent, underpinning the company's improved profitability. 

"Obviously car sales have been pretty strong, it's a pretty impressive performance. They've increased the dividend as well so they seem to be in a strong position for the most part," Davies said.

(BusinessDesk)



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