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The Markets

Sharemarket drama as reporting season resumes

Global marketer a2 Milk surged, and leading retirement village operator Ryman Healthcare tumbled on contrasting earnings updates as the company reporting season heated up.

Monday, February 19th 2024, 6:44PM

by BusinessDesk

The New Zealand sharemarket, down more than half a per cent, had plenty to chew on – improved half-year results from a2 Milk and Contact Energy, a resilient performance from Freightways, sharp earnings downgrades from Ryman and Air NZ, and a possible credit rating cut for Fletcher Building.

Among all the drama, the S&P/NZX 50 Index picked itself up after an early-morning fall and traded steadily in the afternoon until a late dip to close at 11,653.27 – down 71.21 points or 0.61%.

There were 48 gainers and 91 decliners over the whole market, with 29.78 million shares worth $102.28m changing hands.

Matt Goodson, managing director of Salt Funds Management, said the market tends to shoot first and ask questions later.

“We saw two starkly contrasting movements from a2 Milk and Ryman," Goodson said.

“The reaction to a2 Milk was quite remarkable. Its half-year result was a touch better than expected, and it is doing well in a tough market [China].”

Goodson said Air NZ was going to make very little profit in the second half of its financial year, and it wasn’t the harshest reaction to its downgrade.

“People understand that airlines can be volatile in terms of earnings.”

a2 Milk rose 74c or 13.7% to a 10-month high of $6.14 after reporting a 3.7% increase in revenue to $812.1m and a 15.6% increase in net profit to $85.26m for the six months ending December.

It is not paying an interim dividend.

In China, which makes up 80% of its revenue, a2 Milk grew sales by 1.5 % despite a double-digit decline in that infant milk formula market. The China label milk formula achieved a record market share – 3.5% in mother and baby stores and 3.6% in online retail channels.

Ryman Healthcare fell 63c or 11.43% to a near 12-year low of $4.88 on trade worth $16.67m after downgrading its full-year underlying profit to $265m-$285m from the previous guidance of about $330m. Last year’s profit was $301.9m.

Ryman told the market that new sales were lower than expected and is now forecasting 218 occupation right agreements instead of 273 for the second half.

Goodson said Ryman is affected by a weakness in demand for serviced apartments and competition from other retirement village options. The market is focusing on how Ryman’s balance sheet looks.

The Ryman downgrade unsettled the retirement village sector, with Summerset Group down 18c to $11.02, Arvida Group declining 4c or 3.81% to $1.01, and Oceania Healthcare decreasing 3c or 4.48% to a near four-year low of 64c.

Air NZ declined 2c or 3.13% to 62c after sharply downgrading its full-year pre-tax earnings to $200m-$240m, from $585m in the 2023 financial year.

The national airline, reporting on Thursday, was sticking to first-half earnings of $180m-$230m and said the second half is expected to be increasingly challenging because of increased competition from US carriers, softening domestic demand, engine maintenance costs, and economic and inflation risks.

Fletcher Building was down 4c to $3.48 after Moody’s Investors Service said the company’s credit rating of Baa2 was on review for a downgrade from an outlook of stable.

Freightways rose 30c or 3.73% to $8.35 after reporting a 12.4% increase in first-half revenue to $620.69m, thanks to the Australian Allied Express business, and a 9.5 % reduction in net profit to $40.88m.

Revenue for the express package division grew 15%, and Freightways is paying an interim dividend of 18c a share on April 2.

Contact Energy gained 3c to $8.15 after reporting a 31.4% rise in revenue for the six months ending December and net profit of $153.46m. It is paying an interim dividend of 14c a share on March 18.

Contact told the market it expects to deliver full-year underlying operating earnings (Ebitdaf) of $620m, and it believed the Tiwai Pt aluminium smelter near Bluff would likely stay.

Among other leading energy stocks, Meridian declined 10c to $5.62, and Mercury was down 9.5c to $6.685.

PGG Wrightson, having board trouble, fell 11c or 3.44% to $3.09; Tourism Holdings was also down 11c or 2.99% to $3.57; and SkyCity shed 5c or 2.55% to $1.91.

Chorus gained 23c or 2.9 % to $8.15; Skellerup rebounded 10c or 2.26 % to $4.52; Restaurant Brands was up 13c or 3.66% to $3.68; and Winton Land collected 7c or 2.92% to $2.47.

ABOUT THE AUTHOR
Graham Skellern
Journalist
Graham, Skellern is a journalist for the NZ Herald.
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Tags: Market Close

« NZ sharemarket bounces back after Fletcher Building recoveryInvestors hard on soft earnings as NZ sharemarket continues to slide »

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