NZ shares: Warehouse plunge drags market down

12.00pm

Expectations of a loss by New Zealand's largest retailer the Warehouse on its Australian operations prompted a dramatic plunge in its share price in early trading on the New Zealand stock exchange today.

By shortly after 10am this morning Warehouse shares had lost about 30 per cent of their value, dropping to 400c, after opening at 551c. By midday, however, the stock had recovered slightly and was at 408.

The Warehouse's drop dragged the entire market down and virtually wiped the gains of the past week.

At 12pm the NZ50 gross index was down more than 41 points to 1958.143 after opening at 1999.436 losing 2.065 per cent of its value, while the NZSE-40 was down 34.201 points or 1.73 per cent at 1943.250.

The Warehouse said the expected loss by its Australian businesses and higher electricity prices meant it now forecast after-tax earnings for the year to July to clock in at between $73 million and $80 million.

ABN Amro Craigs retail equities adviser Nigel Scott said anecdotal evidence suggested the retailer was finding the going difficult in Australia, traditionally a tough market for New Zealand businesses.

"People will continue to look hard at earnings numbers where they're (NZ companies) involved in Australia at this point in time," Mr Scott said.

Nevertheless, although "under fire", the Warehouse was " undeniably still is a very solid company" and had indicated in the past that it didn't expect to see profit from its Australian businesses until 2004.

Other New Zealand companies with Australian interests also fell this morning.

By midday Telecom was down 7c to 465, Michael Hill fell 6c to 444, Fletcher Building was down 6c to 325 and Lion Nathan was down 5c at 625.

Elsewhere on the market, troubled rail operator Tranz Rail's shares were up despite the company despite saying its year-to-date operating profit from nine months of trading was $30.3 million, 18 per cent below forecast.

At midday Tranz Rail shares were up 4c at 44c.

"Maybe the big sell is finished," Mr Scott said.

"The market has taken a bit of a relief from the pounding that that sell order has given it during this period where every day we've had some information on Tranz Rail."

Contact Energy, which announced a healthy $34 million half year profit yesterday, was down 1c to 429.

Also falling this morning were Briscoe down 5c to 185, Carter Holt Harvey down 2c to 162 and Sky City down 6c to 819.

Making ground were Air New Zealand up 2c to 47, Fisher & Paykel Healthcare up 5c to 1080 and Sky TV up 1c to 405.

By 11am turnover was moderate with a little over $32 million worth of shares changing hands.

- NZPA