Market close: Wild ride for NZX as a2, hit and Contact, Meridian, Mercury rise

The sign at New Zealand's aluminium smelter site at Tiwai Point. Photo / Gregor Richardson

The New Zealand sharemarket had a wild ride on the back of contrasting developments involving the milk and energy companies – but in the end the market staged a big afternoon turnaround.

The S&P/NZX 50 Index fell as much as 2 per cent after a2 Milk announced a slowing in sales and Synlait Milk a worse-than-expected full-year result. But by lunchtime the market was focusing on the positive when Prime Minister Jacinda Ardern said the Government was working towards keeping the Tiwai Point aluminium smelter operating.

The index closed with a small gain of 5.20 points or 0.04 per cent to 11,802.29, after reaching an intraday low of 11,564.34. There were 71 gainers and 63 decliners over the whole market and trading was solid with 51.7 million shares worth $182.31m changing hands.

The a2 Milk Company, the second biggest stock on market capitalisation (outside the dual-listed), slumped $1.79 or 9.71 per cent to $16.55 on trade worth $35m. After only being used to growth for so long, a2 said a contraction in the secondary daigou market will impact sales through this channel during the first half of the 2021 financial year.

The company said performance in all other areas of its business is strong, including its liquid milk businesses in Australia and the United States. It provided group revenue guidance of $725m-775m for the six months, and $1.8b-$1.9b for the full year.

Synlait Milk fell 45c or 7.44 per cent to $5.60 after reporting a 27 per cent increase in revenue from $1.02b to $1.3b for the year ending July and a 9 per cent decline in net profit to $75.2m.

Synlait said there is a lower demand for consumer-packaged infant formula in the first six months of the 2021 financial year because of higher than normal stock levels, and it expects to return to growth in second half once stocks have cleared. The milk company is finalising a long-term supply deal with a new multi-national customer for packaged products.

Shane Solly, portfolio manager at Harbour Asset Management, said the market was real choppy. It pulled back on the slowing daigou sales for a2 Milk but when the news around the gentailers came through, the market bounced back.

"The market started to think that Rio Tinto would stay, and we still need to see the details of any deal," Solly said. "And when people digested an a2 presentation to investors and brokers, they could see one part of the distribution channel was impacted and another was growing such as the Mother and Baby Stores in China."

The energy sector, and Southport near Invercargill, received a boost when Labour said if re-elected, it would work with owner Rio Tinto to reduce the amount of money the Tiwai Point aluminium smelter pays for electricity. If Rio Tinto wanted cheaper power prices, it needed to maintain current employment at the site, agree to work on remediation and consult with the Government when it comes to the future use of the plant.

Meridian rose 30.5c or 6.56 per cent to $4.955; Contact gained 38c or 6.06 per cent to $6.65; Mercury was up 35c or 7.38 per cent to $5.09; and Southport climbed 40c or 6.13 per cent to $6.92.

Port of Tauranga gained 14c to $7.40, Mainfreight was up 16c to $46.91, and Auckland International Airport climbed 12.5c to $7.18 on the prospect of a transtasman travel bubble.

Cavalier was down 1c to 37c after reporting a 13 per cent fall in revenue to $117.98m and a net loss of $21.45m for the year ending June. Cavalier, which is concentrating on woollen carpets and rugs, is not paying a dividend.