The Warehouse Group falls to 24-year low - Market close

The Warehouse Group fell 3c or 2.21 per cent to $1.33, a 24-year low. Photo / Alex Cairns

Fletcher Building’s $120 million half-year loss and executive resignations sent the New Zealand sharemarket into a spin, posting a fall of more than half a per cent.

The S&P/NZX 50 Index was saved by a late rise after earlier falling more than 1.1 per cent, and closed at 11,661.32, down 78.35 points or 0.67 per cent. The index has fallen 1.7 per cent in three trading days.

There were 95 decliners and 42 gainers over the whole market on volumes of 34.16 million share transactions worth $109.71 million. Fletcher Building dominated the trading with 8.26 million shares worth $29.43m changing hands.

Greg Smith, head of retail with Devon Funds Management, said the market was affected by the Fletcher drama and blowback from a hotter-than-expected consumer price index (CPI) in the United States.

The US January CPI increased 0.3 per cent for annual inflation of 3.1 per cent against economists’ forecasts of 0.2 per cent and 2.9 per cent. Rent rises drove the CPI increase, which more than likely dashed hopes of an early interest rate cut by the Federal Reserve.

The Dow Jones Industrial Average declined 1.35 per cent to 38,272.75 points, its worst session since March last year; the S&P 500 was down 1.37 per cent to 4953.17; and the Nasdaq Composite fell 1.8 per cent to 15,655.6.

At home, Fletcher Building plunged 55c or 13.22 per cent to a 20-year low of $3.61 after reporting a 0.8 per cent decline in revenue to $4.248 billion for the six months ending December, and a $120m net loss compared with a profit of $92m in the previous corresponding period.

Fletcher’s share price sat at $3.51 on June 1, 2003 and reached a high of $12.42 on May 1, 2007.

The construction company’s bottom line was hit by $180m provisions for NZ International Convention Centre and Wellington airport car park, and a $122m write-down on plumbing supplies business Tradelink in Australia. Fletcher is selling Tradelink.

Fletcher’s earnings before interest (ebit) were down 27 per cent to $264m and full-year ebit to be is expected to be $540m-$640m. It is not paying an interim dividend after declaring 18c a share in the previous period.

Amongst all this, chief executive Ross Taylor gave six months’ notice of his resignation and chairman Bruce Hassall is stepping down at the annual meeting in October.

Smith said Fletcher’s half-year result was “pretty awful and the provisions already announced weren’t enough to prepare investors for the devil in the details. The Tradelink write-down was something new and the consequence is that it’s being sold.

“It looks like Fletcher has been putting out fires in a few different places and we still have the uncertainty of the Iplex pipe situation. They continue to say the leaks were caused by installation. The potential financial implication of a recall would be significant. It’s a large unknown.

“There’s no interim dividend, instead they are shoring up their balance sheet, and investors are continuing to lose patience. Heads had to roll and there’s a question mark now over the entire board,” Smith said.

Insurer Tower rose 4.5c or 7.38 per cent to 65.5c after upgrading its full-year earnings guidance following strong trading in the first four months including growth in gross written premium.

Tower now expects net profit for the year ending September will be at the upper end or exceed the previous guidance of $22m-$27m, utilising the large events allowance of $45m.

The Warehouse Group, falling out of the MSCI Small Cap Index, was down a further 3c or 2.21 per cent to $1.33, a 24-year low. It has fallen 48 per cent during the past 12 months, from $2.65 on February 28 last year, and its peak was $8.75 on May 1, 2000.

Restaurant Brands hit a nine-year low after falling 8c or 2.27 per cent to $3.45; it sat at $3.56 on October 1, 2014.

Infratil declined 20c or 1.91 per cent to $10.25; Spark shed 8c to $5.12; Comvita decreased 4c or 2.27 per cent to $1.72; and Winton Land was down 5c or 2.01 per cent to $2.44.

In the property sector, Investore fell 4c or 3.42 per cent to $1.13, and Vital Healthcare Trust declined 6c or 2.73 per cent to $2.14.

NZ King Salmon Investments gave back 3c or 10.34 per cent to 26c following its strong run; NZME was down 2c or 2 per cent to 98c; Allied Farmers declined 3c or 3.85 per cent to 75c; and Vulcan Steel decreased 11c to $7.75.

Mercury Energy was up 7c to $6.77; Meridian gained 4.5c to $5.66; Ebos Group added 46c to $36.91; and Briscoe climbed 9c or 1.97 per cent to $4.65.