NZ shares continue to fall as Sky subs dwindle, Fletcher sees grim outlook - Market close

Fletcher Building shares fell 2.7% to $3.31 after the company posted a loss of $227 million. Photo / NZME

New Zealand shares fell for a third day as earnings season laid bare the tough economic climate, with Sky Network Television shedding customers and Fletcher Building warning of a subdued outlook for the coming year.

The S&P/NZX 50 Index declined 55.11 points, or 0.4%, to 12,502.97. Across the main board, 81 stocks fell, 57 rose and 41 were unchanged. Turnover was $74.9 million, less than the $137m daily average in July, with six companies trading on volumes of more than a million shares.

Company earnings brought investors back to reality as they highlighted the deteriorating economic climate that triggered the Reserve Bank to cut the official cash rate last week.

Sky TV led the benchmark index lower, falling 4.9% to $2.72 as investors looked through the increases in revenue and earnings to the lost customer numbers and pared back expectations for revenue growth in the future. Still, the lost customers were largely from the Neon entertainment service, due in part to the Hollywood writers’ strike, while the more expensive Sky Sport Now boosted its subscribers.

“Effectively it was an earnings downgrade and a bit below what the market was expecting,” said Greg Smith, head of retail at Devon Funds Management. “It’s obviously disappointing with the headline subscriber numbers going backwards, but it is understandable with the explanation reasonable.”

Fletcher was also weaker, falling 2.7% to $3.31 on a volume of 2.6 million shares after posting a loss of $227m as it wrote down the value of its Higgins business and registered a loss on the sale of its Tradelink business in Australia. The building materials firm also warned of a 10-15% drop in materials and distribution business volumes in the current financial year, sapping optimism that interest rate cuts would stoke construction activity.

Devon’s Smith said it was a bit short of expectations and investors were trying to determine whether this was the bottom.

“There’s cyclical weakness and you’ve got to ask whether we are at or near the trough,” he said.

Metro Performance Glass dropped 5.6%, or 0.5 of a cent, to 8.4c, while Steel & Tube Holdings declined 0.9% to $1.05 and Vulcan Steel was down 1.4% at $7.76.

Ebos Group was the other major earnings announcement of the day, reporting record revenue and underlying earnings growth of 7.7%. Still, the stock fell 1.4% to $36.90 despite what Smith said was a “solid result”.

Synlait Milk jumped 16.5% to 46c on a volume of 1.6 million shares after yesterday saying its cornerstone shareholders Bright Dairy and The a2 Milk Co would inject almost $218m of new equity to shore up the milk processor’s balance sheet. Nevertheless, retail investors would be diluted down to 15% ownership from 41%. A vote on the capital raising was scheduled for next month.

Devon’s Smith said retail investors would “rightly feel aggrieved” but at least Synlait would still be “alive and kicking”.

A2 Milk rose 1.5% to $6.20.

ANZ Group Holdings posted the biggest gain on the benchmark index, up 2.3% at $32.80, while fellow dual-listed lender Westpac Banking Corp increased 0.1% to $33.20.

KMD Holdings extended its rally for a fourth day, rising 1.9% to 52c. Yesterday it said sales were improving and it reaffirmed earnings guidance. The stock is up 19% so far this month.

Carbon Fund units rose 1.8% to $1.70 and are up 6.9% so far this week. The Government this week said it would limit the number of units available at auction from next year to boost the carbon price.

Among companies reporting on Thursday, Auckland International Airport fell 1.1% to $7.56, SkyCity Entertainment Group was unchanged at $1.59, Genesis Energy declined 0.7% to $2.265 and Seeka decreased 1.2% to $2.50.

Fletcher and Synlait were the most heavily traded stocks, followed by Spark NZ on a volume of 1.3 million as it rose 0.9% to $4.34, and Kiwi Property Group with 1.3 million shares changing hands as it gained 1.6% to 96c. Arvida Group, which is under a takeover offer at $1.70 a share, was unchanged at $1.64 on a volume of 1.3 million, while Eroad dropped 3.7% to $1.31 with 1 million shares changing hands.