A2 Milk leads New Zealand sharemarket down

Geoff Babidge, managing director and CEO of a2 Milk. Photo / File

New Zealand shares fell on the last day of the quarter, led lower by A2 Milk Co on continued selling from increased competition and further weakening from Fletcher Building.

The S&P/NZX 50 Index dropped 69 points, or 0.8 per cent, to 8,319.07. Within the index, 24 stocks fell, 18 rose and eight were unchanged. Turnover was $207 million. That included $44m of trading in A2 and $24m in Fletcher.

"Now that A2 is our biggest stock, a 4 per cent down day on that is going to have a big impact on our overall index result," said Greg Easton, investment adviser at Craigs Investment Partners.

"Fletcher's still pretty big in the index as well, so that 3 per cent there is significant, and there's nothing really on the other side to counter it on any scale - there's no bounding positivity within the 50."

In the quarter, the index has dropped 1.3 per cent, the first time it has booked a loss for a quarter since the fourth quarter of 2016.

A2 led the index lower, down 4.2 per cent to $12.40. That marks a 9.7 per cent loss for the stock this week, with most of that coming over the past two days since it was first reported that Nestle has started selling an A2-branded infant formula in China.

"They don't have it to themselves anymore and that news is just filtering through the market. It's a dose of reality, really," Easton said.

Synlait Milk, which supplies A2, dropped 3.3 per cent to $8.39.

Fletcher Building fell 2.1 per cent to $6.03. It has gained a two-month extension to waivers from its US noteholders and bank syndicate that were granted after it breached lending covenants, suggesting the company wasn't able to negotiate new terms by its March 31 deadline.

The waivers were initially put in place until the end of this month and Fletcher had previously set that as the deadline to agree on amendments to its lending terms. Fletcher has been in talks with the bank syndicate and US private placement market noteholders since obtaining the waivers and chief executive Ross Taylor expects the new terms will nudge up the interest rates on the debt.

"Obviously there will be a cost to that, the waivers are only in place until May 31 which is not a very long time," Easton said.

Sky Network Television bounced 2.7 per cent to $2.29. The stock dropped 8 per cent yesterday after the company said it may miss out on the broadcast rights for next year's Rugby World Cup, as it isn't the preferred bidder.

Pushpay Holdings gained 2.1 per cent to $4.30 and SkyCity Entertainment Group rose 1.6 per cent to $3.90.

Outside the benchmark index, Hallenstein Glasson Holdings gained 1.4 per cent to $5.05. It has lifted its first-half dividend and says its two core brands, Glassons and Hallenstein Brothers, are in a strong position going into winter trading. Net profit in the first half was $15.1m, and the gross margin was up 3.4 percentage points to 61.5 per cent. It declared a 20 cent first-half dividend, up from 14.5 cents in the 2017 first half.

"They reported a very strong trading result and a strong dividend," Easton said. "It has been quite a stunning turnaround from six months ago, they have bucked the trend for a bricks-and-mortar retailer."