Fletcher Building shares fall to 21-year low on earnings downgrade - Market close

Fletcher Building was down 34c or 9.69 per cent to a 21-year-low of $3.17. Photo / NZME

The New Zealand sharemarket tumbled to its lowest level in 15 weeks following another earnings downgrade – this time from Fletcher Building which fell nearly 10 per cent.

The S&P/NZX 50 Index fell sharply at the opening and couldn’t recover, declining 103.01 points or 0.88 per cent to 11,652.16. The index sat at 11,653.27 on February 19.

There were 81 decliners and 56 gainers over the whole market on volumes of 24.95 million share transactions worth $84.4 million.

Greg Smith, head of retail with Devon Funds Management, said the market was weighed down by some profit-taking in Fisher and Paykel, and Meridian which have had a good run lately.

He said the Reserve Bank quarterly survey of expectations provided some glimmer of hope. Inflation was expected to be 2.73 per cent in a year’s time and 2.33 per cent in two years’ time, down from 2.5 per cent and 3.22 per cent respectively in the previous survey.

“This is very significant as the near-term inflation expectation is decelerating,” Smith said. “The Reserve Bank, which meets next week, has in the past paid a lot of attention to the survey results.

“It’s the first time since September 2021 that the inflation numbers, for one, two, five and 10 years out, have come under 3 per cent. Investors will be looking for the Reserve Bank to provide a ray of sunshine next week.”

Smith said many sectors were under the pump, consumer sentiment was fragile and the housing market is not in great place. “There’s plenty of reasons for the Reserve Bank to think about an interest rate cut not so far in the future.”

Fisher and Paykel Healthcare and Meridian Energy, the two largest stocks on market capitalisation, were down 18c to $28.67 and 8c to $6.09 respectively.

Fletcher Building was down 34c or 9.69 per cent to a 21-year-low of $3.17 after downgrading its full-year operating earnings (ebit) guidance to $500m-$530m, from $540m-$640m, because of weakening trading conditions.

Fletcher said volumes in the materials and distribution divisions have fallen 5 per cent in New Zealand and 10 per cent in Australia during the second half, and there is a notable slowdown in house sales and prices in New Zealand.

The concrete division has been resilient, but the building products division has seen weaker revenues and gross margin pressure. Fletcher forecasts year-end debt of $1.9 billion to $2b, with $2.8b of debt facilities in place.

Smith said the struggling New Zealand housing market was no surprise but what was surprising was the fall in Australia.

Rakon fell 21c or 20 per cent to 84c after telling the market there was a hold-up in considering the $400m takeover bid at $1.70 a share, received in December.

The bidder, understood to be Nasdaq-listed chipmaker Skyworks, has raised potential complexities that are material to its assessment, including the timing for the proposal.

Rakon said it was currently working to better understand these matters, including the potential for any resolution that would allow the proposal to continue to be progressed.

The Warehouse Group, which listed in November 1994 at $2.50, is now more than half that price 30 years later, after falling 8c or 6.25 per cent to $1.20. Fellow retailer Briscoe Group declined 19c or 4.37 per cent to $4.16.

Infratil was down 8c to $10.57; Ebos Group declined 65c or 1.87 per cent to $34.20; Mainfreight shed $1 to $67.50; and Auckland International Airport decreased 7c to $7.72.

In the energy sector Contact eased 7c to $8.79; Manawa declined 5c to $4.15; and Genesis was down 3.5c to $2.23.

Serko was down 8c or 2.54 per cent to $3.07; Seeka declined 7c or 2.8 per cent to $2.43; Sky TV shed 5c or 1.83 per cent to $2.68; SkyCity fell 5c or 2.87 per cent to $1.69; Air New Zealand decreased 1c or 1.8 per cent to 54.5c; and Heartland Group shed 2c or 2 per cent to 98c.

Stride Property declined 3c or 2.44 per cent to $1.20; Oceania Healthcare was down 2c or 3.57 per cent to 54c; AFT Pharmaceuticals fell 8c or 2.86 per cent to $2.72; Green Cross Health decreased 2c or 1.94 per cent to $1.01; and Eroad was down 2c per 2.27 per cent to 86c.

Freightways collected 10c to $8.30; Comvita increased 4c or 2.34 per cent to $1.75; PGG Wrightson improved 3c or 1.8 per cent to $1.70; Scales Corp was up 8c or 2.58 per cent to $3.18; and CDL Investments gained 1.5c or 2.19 per cent to 70c.