Some saw a2 Milk's 47 per cent lift in net profit to $287.7m as a disappointment. Photo / File
Some saw a2 Milk's 47 per cent lift in net profit to $287.7m as a disappointment. Photo / File
New Zealand corporate earnings, while generally solid, are pointing to a gradual economic slowdown, fund managers said.
Most results from those NZX-listed companies with June 30 balance dates have reflected solid earnings, some dividend growth and strong balance sheets.
But fund managers said that when it came to companies' "outlook"statements, the future was clouded with uncertainty, particularly on the international front.
"I think that we are on a glide path and that we seem to be heading towards a soft landing," Shane Solly, portfolio manager at Harbour Asset Management, said.
"Global issues might push back some companies over the next six to 12 months," he said.
Solly said that while there was earnings growth, companies were looking at global trends, such has worsening trade relations, and what they might mean for the economy.
As expected, Fletcher Building returned to the black, but Solly said the company still had some work to do.
"And the quality of the result was not as good as it could have been."
The big power generators - Meridian, Mercury and Genesis - dominated the reporting season and did not disappoint. Photo / File
A key measure for a2 Milk — its ebitda to sales margin — came to 31.7 per cent in the year but supporting slides pointed to that figure dropping to 28 per cent for the year ahead, which caught the market by surprise.
The country's biggest power generator, Meridian Energy, reported record full-year earnings of $339m, up 68 per cent, driven by a record level of hydro generation and higher wholesale prices.
On the flipside, Air New Zealand's net profit dropped by 31 per cent to $270m as higher fuel costs and weaker demand started to bite.
New Zealand equity manager at JB Were, Rickey Ward, noted that a number of businesses were finding it difficult to pass on increased costs and that margins were under pressure.
However he said capital management was "generally solid" and that dividends were either maintained or improved.
Analysts said companies generally were showing more sensitivity to global pressures and were more inclined to be influenced by global macro trends rather than micro trends.
Solly says despite returning to the black, Fletcher Building still had some work to do. Photo / Bloomberg
Earnings generally came ahead of consensus earnings expectations but there were more negative "outlook" statements than positive ones.
Harbour Asset's Solly said retirement village operators delivered better results than many had expected.
"The power generators were solid with a number noting increased investment potential, which may slow future dividend growth but sustain long-term earnings," he said.
Real estate stocks also delivered solid results, with fundamentals continuing to support dividends, he said.
Milford senior analyst Frances Sweetman said company earnings were in line with expectations while outlook statements were subdued, particularly in the more cyclical stocks such as Freightways, Fletcher Building, Steel and Tube and Air New Zealand.
"In the building sector, the risks seem to be skewed to the downside in that we are at peak construction volumes while business confidence has really dropped away."
In tourism Air NZ and Auckland International Airport are calling out softer growth.
"If you put all that together, the outlook for the New Zealand economy is one of continued gradual slowing of economic growth," Sweetman said.
