Market close: Fletcher Building shares plunge as it racks up significant costs

Fletcher Building plunged 46c or 8.38 per cent to $5.03. Photo / NZME

Fletcher Building plunged more than 8 per cent after cutting its dividend and the Reserve Bank kept the official cash rate unchanged as the New Zealand sharemarket shed half a per cent.

Following a sell-down on the major United States markets overnight, the S&P/NZX Index fell sharply at the opening and never recovered, though trading was steady thereon.

The index closed at 11,763.11 points, down 57.63 points or 0.49 per cent. There were 84 decliners and 39 gainers on the main board with 25.35 million shares worth $115.35 million changing hands.

The Reserve Bank kept the OCR at 5.5 per cent but indicated it would need to remain restrictive for the foreseeable future, with the likelihood of a rate cut stretching into early 2025. There may be a further rate hike in the fourth quarter.

The bank said in the near term, there is a risk that activity and inflation measures do not slow as much as expected. Over the medium term, a greater slowdown in global economic demand, particularly in China, could weigh more on commodity prices and overall New Zealand export revenue.

Greg Smith, head of retail with Devon Funds Management, said the Reserve Bank played a steady hand as expected. “A surprise was the headwinds facing the economy, and dairying prices continuing to fall,” Smith said.

There was nervousness on the US markets with the Fitch agency warning it may downgrade the credit ratings of up to 70 banks, and the Chinese economy continuing to slow.

Industrial production and retail sales grew less than expected and the People’s Bank of China lowered interest rates by 15 basis points to 2.5 per cent, from 2.65 per cent. There is also increased concern about China’s struggling property market.

The Dow Jones Industrial Average was down 1.02 per cent to 34,946.39 points; the S&P 500 fell 1.16 per cent to 4437.86; and the Nasdaq Composite declined 1.14 per cent to 13,631.05.

Across the Tasman, the S&P/ASX Index had fallen 1.49 per cent to 7196.5 points at 6pm New Zealand time.

At home, Fletcher Building plunged 46 cents or 8.38 per cent to $5.03 on trade worth $26.7m after recording significant costs of $301m, up 457 per cent, including $255m from the New Zealand International Convention Centre (NZICC), and cutting the dividend by 15 per cent in its annual result.

The country’s largest construction company reported steady revenue of $8.469 billion and a 45.6 per cent fall in net profit to $235m for the 12 months ending June. Operating earnings (ebit) were up 6 per cent to $798m and the margin increased from 8.9 per cent to 9.4 per cent.

Fletcher is paying a final dividend of 18c a share on October 5 for a full-year payout of 34c a share, down from 40c in the previous year.

Smith said Fletcher’s share price fall looked to be an over-reaction. “They put out [latest] guidance only last week, flagged the NZICC provision and hit their numbers in the annual result.

“I wouldn’t say it was a horrible result but the share price reaction suggested otherwise. Maybe the commentary wasn’t as bullish as some people wanted - James Hardie put out an upbeat outlook last week - but that’s no reason for the share price to be sold off. It has had a good run since March.”

Synlait Milk declined 1c to $1.56 and a2 Milk was down 8c to $5.32 as dairy prices fell a further 7.4 per cent in the latest global trade auction.

Whole milk powder slumped 10.9 per cent to a near five-year low of US$2548 a tonne and skim milk powder declined 5.2 per cent to US$2333 a tonne. Cheddar was the only dairy product to increase, up 5.8 per cent to US$2875 a tonne.

Fisher and Paykel Healthcare was down 33c to $23.15, nearing its lowest level this year; Chorus declined 13.5c to $8.435; and in the banking sector, ANZ decreased 34c to $26.96 and Westpac shed 36c to $23.55.

Meridian Energy, declining 3.5c to $5.50, reported a 0.6 per cent increase in July retail sales volumes compared with the same month last year, as national hydro storage at August 11 decreased from 121 per cent to 106 per cent of its historical average.

Comvita was down 10c 2.94 per cent to $3.30; Delegat Group declined 19c or 2.14 per cent to $8.70; Foley Wines decreased 3c or 2.31 per cent to $1.27; and Restaurant Brands fell 22c or 4.38 per cent to $4.80.

PGG Wrightson declined 9c or 2.14 per cent to $4.11; Smartpay Holdings was down 3c or 1.88 per cent to $1.57; and ikeGPS fell 3c or 4.11 per cent to 70c.

Stride Property gained 6c or 4.26 per cent to $1.47; Argosy Property was up 2.5c or 2.14 per cent to $1.195; Tourism Holdings increased 13c or 3.86 per cent to $3.50; Skellerup collected 10c or 2.45 per cent to $4.18; Scott Technology added 7c or 2.03 per cent to $3.52; and Rakon improved 2c or 2.74 per cent to 75c.

Auckland International Airport was up 5c to $8.33 after reporting a 27 per cent increase in total passenger volumes to 1.479 million in July compared with the same month last year, helped by the Fifa Women’s World Cup.