Mercury left high and dry, Synlait Milk unveils recapitalisation plans - Market close

Synlait Milk declined 1.3% to 39.5c. The milk processor announced plans to raise $217.8m after trading ended. Photo / NZME

New Zealand shares fell for a second day in a broad selloff, with power companies among the hardest hit after Mercury NZ warned earnings would come under the pump in the current financial year. Synlait Milk unveiled plans to recapitalise the business after the trading ended.

The S&P/NZX50 Index fell for a second day, declining 104.03 points, or 0.8%, to 12,558.08. Across the main board, 80 stocks were lower, 57 rose and 42 were unchanged. Turnover was $120.2 million.

Mercury dropped 2.9% to $6.60 on a volume of 1 million shares after saying the current energy crunch would slice $90m from the June 2025 earnings before interest, tax, depreciation, amortisation and fair value adjustments (ebitdaf). The North Island electricity generator-retailer reported annual earnings rose 4% to $887m in the June 2024 year and hiked its dividend, while also flagging new renewable generation was expected to come on stream.

“They gave ebitda guidance a wee bit lower than the market expected due to the lower hydro conditions,” said Peter McIntyre, an investment adviser at Craigs Investment Partners. “You’ve got to put that in perspective because they have delivered a net profit of $290m from large moves in their unhedged financial instruments and 16 years of ordinary dividend growth.”

Contact Energy, which reported a 16% increase in operating earnings on Monday, fell 0.7% to $8.84, while Genesis Energy, due to report on Thursday, declined 0.7% to $2.28. Manawa Energy dropped 2.7% to $4 and Meridian Energy was down 1.7% at $6.50 on a volume of 1.1 million.

Manufacturers felt the energy squeeze the most, with a number of factories mothballing production in the face of surging wholesale electricity prices. Winstone Pulp International today said those costs were unsustainable and it was considering whether to shutter its NZ operations permanently.

Napier Port said Winstone was a significant customer and accounted for 7%-8% of its earnings, but reaffirmed guidance for the September year. Its shares dropped 3.8% to $2.31. Port of Tauranga rose 0.4% to $5.40, South Port NZ was unchanged at $5.85 while Northport co-owner Marsden Maritime Holdings gained 3% to $3.49.

Fletcher Building, which has been investing in wood manufacturing in recent years, led the benchmark index lower, falling 3.4% to $3.40 on a volume of 3.1 million, the biggest on the day.

The building materials firm said it’s hired former executive Andrew Reding as its new chief executive and managing director, effective from Thursday, and upsetting some investors who said they’d prefer to see a new chair appointed first. The company was scheduled to report its annual result tomorrow.

McIntyre said Fletcher had a strong run ahead of its earnings, and that it would need to clear problematic projects, such as the SkyCity convention centre, before starting a major reset.

SkyCity Entertainment Group rose 0.6% to $1.59.

The a2 Milk Co fell for a second day, down 2.6% at $6.11 on a volume of 1.2 million. The milk marketing firm yesterday reported sales growth in a shrinking Chinese market, but its growth outlook was slower than analysts predicted.

Synlait Milk declined 1.3% to 39.5c. The milk processor announced plans to raise $217.8m after trading ended, with cornerstone shareholder Bright Dairy committing to pay 60c per share for $185m of stock to lift its stake to 65.3% from 39%, while a2 Milk will increase its holding to 19.8% buying $32.8m of shares at 43c apiece.

A special meeting was scheduled to vote on the capital raising on September 18 in Rakaia.

Fonterra Shareholders’ Fund units climbed 3.2% to $4.50.

KMD Brands posted the biggest gain on the benchmark index, up 6.1% at 52c. The retailer, whose brands include Kathmandu and Rip Curl, said sales were improving and it reaffirmed earnings guidance.

Sky Network Television, also scheduled to report on Wednesday, rose 1.4% to $2.86.

Heartland Group Holdings fell 0.9% to $1.14 after the Government said it would accept Commerce Commission recommendations to improve competition in the banking sector, including directing the Treasury to work with Kiwibank’s parent to discuss options on raising new capital.

Stock market operator NZX was unchanged at $1.38 on larger than usual volume of 1.7 million.

Carbon Fund units climbed 5% to $1.67 after the Government said it would more than halve the number of units available at carbon auctions from next year to boost the price.