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MARKET CLOSE: Market nervous ahead of big company earnings reports

Tuesday 17th August 2010

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New Zealand stocks snapped two days of gains, as apprehension ahead of earnings announcement from heavy-weights stocks Fletcher Building, Contact Energy and Telecom weighed on the market. 

The NZX 50 Index fell 16.9 points, or 0.6%, to 3006.5. Within the index, 22 stocks fell, 11 rose and 17 were unchanged. Turnover was $90.4 million.

Fletcher Building (NZX: FBU ) fell 0.7% to $7.18. The company is expected to announce its full-year earnings tomorrow, which are to come in weaker due to the deteriorating outlook for non-residential construction market in New Zealand, according to Forsyth Barr.

Contact Energy (NZX: CEN ) fell 1.4% to $5.74. Earnings, which are released on Friday, are expected to come under pressure due to lower wholesale electricity prices.

“We are just getting into the thick of reporting season, and with weaker results coming through we are starting to see some real anger from the market,” Mint Asset Management portfolio manager Shane Solly says. “If you look at what happened in the Australian reporting season, there were more reductions in earnings forecast rather than increases, and I think we can expect to see the same here.”

Sky City (NZX: SKC ) fell 2.3% to $2.89, leading decliners. The company posted a 12% drop in profit on weaker returns from its main Auckland base and the impact of tax changes.

The company, whose stock is rated ‘outperform’ based on the consensus of recommendations compiled by Reuters, said its Auckland casino and hotel complex continues to be in “a challenging economic environment,” with slot machine revenue falling 2.4% and sales from its main floor tables unchanged from the previous year. Earnings from Auckland fell 5.5% to $193.8 million, the biggest single impact on its operating returns.

Fisher & Paykel Healthcare (NZX: FPH ) fell 2.4% to $2.80. NZX (NZX: NZX ) fell 2.1% to $1.41 and food ingredient maker Goodman Fielder (NZX: GFF ) fell 1.9% to $1.56.

Telecom (NZX: TEL ) was unchanged at $2.07.

Windflow Technology (NZX: WFT )was unchanged at $1.10 after announcing that it has appointed a UK distributor for its 500 kW wind turbines. Scotland-based Ventus Green Energy won the distribution rights. Winflow said demand in the UK for the Windflow 500 has "dramatically increased" because of government policy that provides incentives for small scale renewable generation projects.

Leading gainers on the day, New Zealand Refining (NZX: NZR ) rose 6% to $3.18.

The company had earlier announced a 45% decline in interim net profit to $29 million, as the country's only fuel refinery booked a significant fall in revenue. The results, while lower that the year previous, came in ahead of forecasts.

Westpac (NZX: WBC ) rose 5.2% to $29.99, and Freightways (NZX: FRE ) rose 5.2% to $2.81.

ANZ (NZX: ANZ ) rose 1.8% to $28.50 after the company announced that it is participating in a due diligence process in relation to the potential sale of a 57.27% shareholding in Korea Exchange Bank (KEB). The bank said in a statement it is looking to buy into KEB as it explores strategic growth opportunities, though cautioned that the process is still subject to considerable uncertainties.

Takeover target, NZ Farming Systems Uruguay (NZX: NZS ) rose 1.6% to 64 cents. The company today announced that it has bought its management contract for $4 million from outgoing shareholder, PGG Wrightson.

The deal, which is subject to bank and bondholder agreement and any shareholder approval, will leave Wrightson as preferred supplier until at least 2019 and the rural services company will provide Farming Systems with advice and consultation until 2015.

Shares in Wrightson (NZX: PGW )were unchanged at 54 cents.

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