CLOSE: Shares snap 11-day rally; top three dip

Wednesday 29th July 2009

New Zealand shares snapped an 11-day rally that pushed the NZX 50 Index to a nine-month high amid concern prices may have risen more than warranted given the outlook for earnings. Telecom Corp., Contact Energy and Fletcher Building, the three biggest companies on the bourse, fell.

The NZX 50 slipped 28 points, or 0.9%, to 2990.46, having reached 3,000 yesterday for the first time since October. Within the index, 21 stocks fell, 16 rose and 12 were unchanged. Turnover was a lower-than-average $59 million.

Telecom (NZX: TEL ) dipped 2.4% to $2.81. The company has offered to cut mobile termination rates as it negotiates with the Commerce Commission over the charges. It offered to cut rates starting at 15 cents per minute for voice calls to seven cents by 2015, with a flat rate of 3.5 cents for text messages.

Fletcher Building (NZX: FBU ) fell 2.8% to $7.07 as figures showed home-building consents tumbled in June, reflecting a drop-off in apartments, while commercial building consents fell to $307 million, the lowest since 2007, partly reflecting large one-off projects in prior months, including development at Christchurch Airport.

Companies are set to post an average 21% decline in earnings for the 12 months ended June 30, according to Forsyth Barr, with the reporting season kicking off in earnest in the second week of August. Business have become more upbeat about the outlook for the next 12 months, with the National Bank Business Outlook showing business confidence rose to the highest since March 2002 this month.

“It may still yet be premature to focus on recovery when the economy is yet to officially exit recession and has to negotiate rising unemployment and a persistently strong exchange rate,” said Robin Clements, chief economist at UBS New Zealand. “A self-sustaining healthy recovery could be several quarters, maybe a year, away yet.”

Contact Energy (NZX: CEN ), the biggest utility on the NZX 50, fell 1.1% to $6.22. Insurer Tower Ltd (NZX: TWR ) fell 3.8% to $1.77, leading the index lower. New Zealand Refining (NZX: NZR ) dropped 2% to $7.25, extending its decline since saying it was unaware of any party looking to make a takeover or part takeover that had been mooted in media reports.

Fisher & Paykel Appliances (NZX: FPA ) fell 3.4% to 85 cents. The appliance manufacturer will resume paying workers at its Auckland fridge plant for a 40 hour week, up from 35 hours after exiting the government employment subsidy scheme.

New Zealand Oil & Gas (NZX: NZO ) fell 1.2% to $1.60 after saying full production from the Kupe field is now unlikely before the first quarter of 2010, about six months later than originally planned. The oil company said it will introduce a dividend reinvestment plan.

Abano Healthcare (NZX: ABA ) jumped 2.8% to $5.50 after the health-care clinic investor yesterday reported that net profit jumped 24% to $9.7 million in the 12 months through May.

NZ Farming Systems Uruguay (NZX: NZS ) rose 4.4% to 47 cents after announcing it had sold US$30 million of bonds to investors in the South American country, allowing it to continue with its dairy farm developments. It had to abandon a capital raising late last year as financial markets weakened.

Air New Zealand (NZX: AIR ) jumped 2.9% to $1.07. The company is the cheapest profitable airline in the world in its peer group apart from Air France-KLM, Goldman Sachs JB Were analyst Marcus Curley said in a report, according to the Dominion Post. He predicted its shares would rise to $1.35 in the next 12 months.

Tapmaker Methven (NZX: MVN ) gained 6.9% to $1.40, clawing back much of its 7.8% drop yesterday, when the company forecast a drop in 2010 profit of as much as 20% because of worsening trading conditions in the UK.

Businesswire.co.nz

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