The Commerce Commission has said Auckland International Airport's projected airline charges would have been too high. Photo / NZME
The New Zealand sharemarket’s performance over the first quarter was the worst in almost three years, mostly reflecting lower corporate earnings but also turmoil on world markets.
The key benchmark S&P/NZX50 Gross index - which includes dividends - fell by 6.4% over the quarter, but the local market was not the only one to fare badly.
United States shares were also down on fears that President Donald Trump’s tariffs will work against the world’s biggest economy.
America’s S&P 500 index dropped 4.6% in the first three months of 2025, the worst performance since the third quarter of 2022.
Across the Tasman, the ASX200 index suffered a 3.9% loss over the quarter – its worst start to the year since 2020.
But the declines were not universal - Britain’s FTSE100 gained 5% and European markets also fared better.
Locally, a2 Milk - with China its main market for infant formula - was the top performer, achieving a near 40% gain over the quarter.
“The Chinese market has been performing well and the sector is in good shape,” Craigs Investment Partners investment director Mark Lister says.
For Fonterra’s units (up 12.85%), it was a similar story.
“Dairy prices are performing very well, and the $10/kg milk price is the highest of all time,” Lister noted.
“That’s a cost to Fonterra, but it reflects a relatively good backdrop across the global economy in terms of demand,” he said.
Elsewhere, the bargain hunters were out for Fletcher Building (up 15.09%) and Vulcan (up 13.99%) after both stocks came under selling pressure last year.
Stock exchange operator NZX also had a strong quarter, up 11.13% despite a weaker market.
“Investors like what they see in terms of the NZX’s funds management businesses - Smartshares and Quay Street,” Lister said.
Cinema software company Vista Group, the subject of an abortive boardroom coup attempt last year, gained 21.61%.
Lister said the quarter was not all bad, but at the other end of the spectrum, some big names registered substantial falls.
Respiratory product maker Fisher & Paykel Healthcare - the NZX’s biggest stock by market capitalisation - just missed out on making the top 10 losers list, with a 12.8% decline for the quarter.
“When your biggest stock is down by that extent, the rest of the market is going to come down too,” Lister said.
“Unsurprisingly, it is one of the stocks that will be impacted more by US tariffs, with its manufacturing in Mexico and with North America being a key market,” he said.
Another heavyweight, infrastructure investor Infratil, lost 17.6% over the quarter.
Its fall was in line with declines in the “Magnificent Seven″ tech stocks, some of which are linked to one of Infratil’s key investments, data centres.
Telco Spark had also fallen from favour after a string of earnings downgrades.
“Spark has been a terrible performer - poorly managed and poorly governed - down 26% in the quarter,” Lister said.
Another big name to fall by the wayside was retirement village operator Ryman Healthcare, which held a $1 billion capital raise in February.
“It was always going to be tough for the market overall to absorb and digest [the capital raise], especially when we had that weak backdrop internationally and when sentiment turned,” Lister said.
February was the “epicentre” of the quarter’s weakness, which Lister said reflected a weak reporting season.
“Our performance over the quarter was driven by some poor results and some soft outlook commentaries in that February period rather than us necessarily following international markets lower.”
Harbour Asset Management said shares in retirement village operators - including Oceania Healthcare, Ryman Healthcare, and Summerset - had delivered diverse return outcomes over the year.
The fund manager said the retirement village sector has had to navigate a sharp increase in costs and slower residential property markets.
The cyclical slowdown in residential property activity had constrained industry cash flows and stretched balance sheets.
Harbour posed the question: Following Ryman’s recapitalisation is the listed retirement village industry refreshed?
“With demographic driven resident demand for retirement living units set to potentially outpace unit supply as the retirement village industry moderates new development and build rates to improve returns, and with debt levels across the listed industry back to more reasonable levels, the answer - maybe yes.”
Demographic-driven demand is set to potentially underpin a step up in demand for retirement village living in New Zealand, Harbour says.
Many New Zealanders consider retirement village living as they get to a later point of their retirement, often from the age of 75, when they begin to value the social and care benefits of living in a village.
Over the medium term a ‘silver tsunami’ of over 75-year-olds is building in New Zealand.
Stats NZ national population projections indicate that the number of New Zealanders in that group will increase from just over 400,000 in 2024 to just under 570,000 in 2033.
Given new retirement villages can take seven to 10 years to complete, the retirement industry needs to be building in advance of this increase in demand, Harbour said.
The Commerce Commission’s final report into aeronautical pricing said Auckland Airport’s charges would have been too high, prompting the airport to cut the pricing.
The airport is now targeting a return of about 7.8%, down from 8.7%, Morningstar said.
As expected, aeronautical charges are set to drop from fiscal 2026.
“The new target return is at the top of the range the commission considers reasonable but is worse than we anticipated.
“We previously expected an adjusted target return of about 8% following the final report.
“Regulated income is about half of Auckland Airport’s earnings, and the new target return is about 20 basis points lower than our prior forecast.
“The upshot is a 3% reduction in our fiscal 2026 and 2027 net profit forecasts.
“We assume the commission’s findings will flow into lower charges for the next price- setting event, beginning July 1, 2027.
“Our net profit forecasts reduce by about 3% on average from fiscal 2028, reflecting equivalent reductions in forecast regulated returns of about 20 basis points.”
Morningstar lowered its “fair value” estimate for Auckland Airport by 2% to $9.30.
AIA shares last traded at around $8.13 - which Morningstar says undervalues the company.
“We think the market is pricing either lower returns on regulated expenditure, or weakness in unregulated businesses, like retail and carparks.”
Shares in market minnow New Talisman hit 9.4c last week - a near four-fold increase since the start of the year.
At its current price of around 8.3c, the gold explorer has a market cap of $53 million.
New Talisman holds a mining permit and an exploration permit over the Talisman Gold mine project in the Hauraki Gold Field.
It has completed all necessary permits for development of the bulk sampling project at the mine and holds a resource consent.
General manager John Upperton said a record gold price of over US$3000 per troy ounce had given the stock a leg up.
“I think we have got a perfect set of tailwinds.
“We have the support of Government through the fast-track legislation and we have the gold price, which continues to reach new highs.
“Fast-track has the potential to offer a major leg up for us because it simplifies the process of going to full mining,” he said.
Terra Firma - New Talisman’s contractor - last year injected $300,000 in equity into New Talisman, which Upperton said was a “huge vote of confidence” in the company.
1 - A2Milk (39.8%)
2 - Turners Automotive (25.27%)
3 - Vista (21.61%)
4 - Sanford (19.06%)
5 - Fletcher Building (15.09%)
6 - Vulcan Steel (13.99%)
7 - Fonterra (12.85%)
8 - NZX (11.1%)
9 - Scales - (7.64%)
10 - Channel (7.25%)
1 - Ryman (36.84%)
2 - Spark (26.08%)
3 - Heartland (20.35%)
4 - Infratil (17.62%)
5 - KMD Brands (16.85%)
6 - Oceania Health (16.44%)
7 - Mainfreight (16.08%)
8 - The Warehouse (14.42%)
9 - Summerset (13.20%)
10 - Stride (13.14%)
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.
Fisher and Paykel Healthcare will be the main event when it reports on May 28.