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The country’s biggest construction company, Fletcher Building, plunging more than 5 per cent, picked a stormy day to rattle the New Zealand sharemarket with a soft trading outlook and earnings downgrade.
Fletcher Building, down 29c or 5.35 per cent to $5.13 on trade worth $18.81 million, surprised the market withits new full-year earnings before interest (ebit) forecast of $800m-$855m, after earlier confidently predicting $855m or better.
And Fletcher’s 2024 earnings will be held back by the continuing soft residential market in New Zealand and Australia.
The S&P/NZX 50 Index fell 103.58 points or 0.85 per cent to 12,075.18 – with two more heavyweights Fisher and Paykel Healthcare, down 60c or 2.32 per cent to $25.25, and Ebos Group, declining 95c or 2.14 per cent to $43.50, dragging the market down. Spark was down 8c to $5.24.
There were 54 gainers and 84 decliners on the main board and trading on the day Cyclone Gabrielle struck was light, with 30.55 million shares worth $91.37m changing hands.
Greg Smith, head of retail with Devon Funds Management, said the market was soggy just like the weather.
“There will be concerns about storm damage and business disruption adding another lever to inflation. But on the other hand, economic activity will pick up with the restoration work.”
He said Fletcher Building had a significant downgrade – it did blame some of it on the weather – and even more concerning was its outlook for the 2024 financial year.
“Fletcher is talking about a 10-15 per cent fall in volumes in their materials and distribution businesses, with the residential market weakening on both sides of the Tasman.
“It’s a cyclical stock and we still don’t know how far interest rates are going to rise. This is weighing on the housing market and could inflict further pain for Fletcher,” said Smith.
Fletcher said while the underlying performance of its business was strong, trading in New Zealand in January and February was heavily affected by the adverse weather events.
Fletcher Building gave a concerning outlook for its 2024 financial year. Photo / Supplied
Fletcher announced its expected half-year result two days early and reported a 5 per cent increase in revenue to $4.28 billion and a 46 per cent fall in net profit to $92m that included a $150m construction provision. Ebit was up 8 per cent to $360m, and Fletcher intends to pay an interim dividend.
Fletcher’s performance was led by the materials and distribution divisions with ebit improving $83m to $339m, while the residential and development division ebit fell to $49m, compared with $112m in the previous corresponding period, because of lower New Zealand house sales. The industrial development earnings were down at $16m from the previous $47m.
Contact Energy was up 4c to $7.82 despite reporting a 12.9 per cent decline in revenue to $994m and a $7m net loss after recognising an onerous provision of $120m following a review of the estimated available capacity of the Ahuroa gas storage facility. Without this, the underlying profit was $79m, down 41 per cent, for the six months ending December. The result was in line with market expectation.
Contact, which had 20,000 new connections in the half year, is paying an interim dividend of 14c a share on March 30. The energy company was hampered by lower wholesale prices, lower renewable and thermal generation, increased operating costs to deliver on strategic growth, and inflationary conditions.
Contact told the market that Rio Tinto is looking to continue operating the low-carbon smelter at Tiwai Point, Bluff, beyond 2024 and new commercial arrangements were being discussed.
In other energy stocks, Meridian was down 6c to $5.33; Manawa declined 9c to $5.42; and Mercury gained 4.5c to $6.33.
Retailers Briscoe Group was up 5c to $4.80, Michael Hill International gained 2c or 1.83 per cent to $1.11; and KMD Brands also increased, by 2c or 1.9 per cent to $1.07.
Of retirement village operators, Ryman Healthcare increased 20c or 3.16 per cent to $6.53, and Summerset Group was down 28c or 2.81 per cent to $9.70.
For property companies, Goodman Trust was up 3c to $2.12; Precinct was down 2.5c or 1.89 per cent to $1.295; and Stride declined 2c to $1.46.
Developer Winton Land increased 6c or 3 per cent to $2.06; Seeka was up 9c or 2.78 per cent to $3.16; NZME gained 3c or 2.59 per cent to $1.19; and South Port NZ collected 10c to $8.30 on the suggestion that the Tiwai Point aluminium smelter will remain open.
Rakon added 2c or 1.89 per cent to $1.08; Pacific Edge rose 2.5c or 5.32 per cent to 49.5c; MHM Automation increased 2c or 2.27 per cent to 90c; Solution Dynamics added 4c or 1.86 per cent to $2.19; NZ Automotive Investments collected 2c or 6.67 per cent to 32c; and PaySauce was up 1.5c or 5.26 per cent to 30c.
Seeka was down 9c or 2.78 per cent to $3.15; Napier Port shed 8c or 2.63 per cent to $2.96; Vulcan Steel declined 15c to $9.56; Scales Corp lost 9c or 2.34 per cent to $3.76; Bremworth decreased 2c or 3.85 per cent to 50c; and Accordant Group was down 3c or 1.78 per cent to $1.66.
