Fletcher, US CPI cast shadow over NZ sharemarket
Fletcher Building’s $120 million half-year loss and executive resignations sent the New Zealand sharemarket into a spin, posting a fall of more than a half percent.
Wednesday, February 14th 2024, 6:15PM
by BusinessDesk
The S&P/NZX 50 Index was saved by a late rise after earlier falling more than 1.1% and closed at 11,661.32, down 78.35 points or 0.67%.
The index has fallen 1.7% in three trading days. There were 95 decliners and 42 gainers over the whole market on volumes of 34.16 million share transactions worth $109.71m. Fletcher Building dominated the trading with 8.26m shares worth $29.43m changing hands.
Greg Smith, head of retail with Devon Funds Management, said the market was affected by the Fletcher drama and blow-back from a hotter-than-expected consumer price index (CPI) in the United States.
The US January CPI increased 0.3% for annual inflation of 3.1% against economists’ forecasts of 0.2% and 2.9%. Rent rises drove the CPI increase, which more than likely dashed hopes of an early interest rate cut by the Federal Reserve.
The Dow Jones Industrial Average declined 1.35% to 38,272.75 points, its worst session since March last year; S&P 500 was down 1.37% to 4953.17; and Nasdaq Composite fell 1.8% to 15,655.6.
At home, Fletcher Building plunged 55c or 13.22% to a 20-year low of $3.61 after reporting a 0.8% decline in revenue to $4.248 billion for the six months ending December and a $120m net loss compared with a profit of $92m in the previous corresponding period.
Fletcher’s share price sat at $3.51 on June 1, 2003, and reached a high of $12.42 on May 1, 2007.
The construction company’s bottom line was hit by $180m provisions for NZ International Convention Centre and Wellington airport carpark and a $122m write-down on plumbing supplies business Tradelink in Australia.
Fletcher is selling Tradelink. Fletcher’s earnings before interest (Ebit) were down 27% to $264m and expected full-year Ebit to be $540m-$640m. It is not paying an interim dividend after declaring 18c a share in the previous period.
Amongst all this, chief executive Ross Taylor gave six months’ notice of his resignation and chairman Bruce Hassall is stepping down at the annual meeting in October.
Smith said Fletcher’s half-year result was “pretty awful, and the provisions already announced weren’t enough to prepare investors for the devil in the details. The Tradelink write-down was something new, and the consequence is that it’s being sold.
“It looks like Fletcher has been putting out fires in a few different places, and we still have the uncertainty of the Iplex pipe situation. They continue to say the leaks were caused by installation.
The potential financial implication of a recall would be significant. It’s a large unknown. “There’s no interim dividend; instead, they are shoring up their balance sheet, and investors are continuing to lose patience. Heads had to roll, and there’s a question mark now over the entire board,” Smith said.
Other shares mixed
Insurer Tower rose 4.5c or 7.38% to 65.5c after upgrading its full-year earnings guidance following strong trading in the first four months, including growth in gross written premium.
Tower now expects net profit for the year ending September will be at the upper end or exceed the previous guidance of $22m-$27m, utilising the large events allowance of $45m.
The Warehouse, falling out of the MSCI Small Cap Index, was down a further 3c or 2.21% to $1.33, a 24-year low. It has fallen 48% during the past 12 months, from $2.65 on Feb 28 last year, and its peak was $8.75 on May 1, 2000.
Restaurant Brands hit a nine-year low after falling 8c or 2.27% to $3.45; it sat at $3.56 on October 1, 2014.
Infratil declined 20c or 1.91% to $10.25; Spark shed 8c to $5.12; Comvita decreased 4c or 2.27% to $1.72; and Winton Land was down 5c or 2.01% to $2.44. In the property sector, Investore fell 4c or 3.42% to $1.13, and Vital Healthcare Trust declined 6c or 2.73% to $2.14.
NZ King Salmon Investments gave back 3c or 10.34% to 26c following its strong run; NZME was down 2c or 2% to 98c; Allied Farmers declined 3c or 3.85% to 75c; and Vulcan Steel decreased 11c to $7.75.
Mercury Energy was up 7c to $6.77; Meridian gained 4.5c to $5.66; Ebos Group added 46c to $36.91; and Briscoe climbed 9c or 1.97% to $4.65.
| « NZ sharemarket bounces around as earnings season begins | Continuing surprises drive NZ sharemarket down for sixth day » |
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