New Zealand's upcoming financial reporting season is expected to see strong mid to high single digit profit growth from most companies bar a select group which remain severely affected by border restrictions and Covid-19 driven disruptions.
Precinct Properties and Vital Healthcare are the first cabs off the rank to report on Thursday before the first of the large cap stocks - Contact Energy - reports its full year result on Monday August 16.
Analysts at Forsyth Bar expect seven companies to make a loss for the six month period of December 2020 to June 2021 versus the prior corresponding period: Auckland Airport, Air New Zealand and Tourism Holdings as well as A2 Milk, Refining NZ, PGG Wrightson and Synlait Milk.
"A lack of clarity about the path out of New Zealand's bubble (wrapped) Covid-19 status has left New Zealand's capital markets one of the worst performing globally year to date. An unpleasant deviation from what we have got used to as of late."
The analysts believe three issues will set the tone for the reporting season: the interplay between cost inflation and price increases, labour shortages and any updates on how the economy is recovering.
"The macro picture is unusually fluid, with pockets of the economy doing extremely well, but the fact that we are looking for largely flat earnings on an aggregate level from the Covid-19 half year of 2020 is a reminder that some parts of the economy are still suffering."
Jarden equity research director Adrian Allbon said he expected domestically focused companies to produce reasonable solid to strong results.
"Anything that has got border exposure or Covid exposure if going to be really weak and with very limited guidance."
Allbon is picking Fletcher Building, Freightways and Summerset to produce strong results and said Mercury was his pick of the gentailers.
"Probably the key one that has got the most amount of change from one year to the next is Mercury. On its forward settings the base year has been depressed by lack of water but the forward year is one of cost initiatives they think they can capture, the potential Trustpower retail acquisition and then they have got the built and purchased wind investment coming through."
Its forecasts for A2 Milk were at the low end of a wide range of analyst expectations, Allbon said.
He said analysts would be looking to see if the company had stabilised its daigou channel and whether it had been able to work through its excess inventory on its Chinese labelled product.
"I think the big thing people are looking for is can they provide some indication on the brand health and how much marketing intensity ... do they have to commit to their new model?
Allbon said Auckland Airport's lack of forward visibility was likely to see further downgrades to analyst expectations and no dividends until its 2021 financial year.
"I think the key focus on Air New Zealand is just whether they are going to be in a position to provide an update on their capital raise intentions."
He said previous guidance was they would complete it by September.
"That feels like it has some risk of delay because they delayed it because they wanted more certainty on the transtasman, they got more certainty and now it has disappeared again."
Allbon said Chorus also had some potential to disappoint the market with a regulatory update due just days before its result.
"If that is slightly lower than expectation ... that has got scope to disappoint the market because the market is expecting quite a step up in dividend from Chorus."
Allbon said on the macroeconomic level, inflation had been the key debate.
"While there has been signs of an accelerating CPI [consumer price index] some of the long-dated bonds rates have been going down as people have been worried about global growth now with Covid resurfacing.
"I think the inflation debate is going to be one that is going to be a moving calibration but not a huge impact on what we are going to opine on in this reporting season.
He said most company's balance sheets were in good shape - with the exception of the border stocks.
"The question for them is just how long does it take for earnings to return?"
Ones to watch out for
• Fletcher Building, Freightways and Summerset for strong results.
• Auckland Airport - dividends on hold until FY2023.
• Air New Zealand and its capital raising timing.
• A2Milk - is it back on track?
• Chorus - will it disappoint a market that is expecting a strong dividend?
Results season - what's coming up
Thursday August 12
Monday August 16
Tuesday August 17
Wednesday August 18
Thursday August 19
Friday August 20
Property for Industry
Monday August 23
Michael Hill International
Tuesday August 24
Steel & Tube Holdings
Heartland Group Holdings
Wednesday August 25
Thursday August 26
Air New Zealand
Friday August 27
New Zealand King Salmon
Port of Tauranga