New Zealand shares fell for a second day, led lower by Synlait Milk after the dairy company reported weaker earnings, disappointing investors who had anticipated another strong result.
The S&P/NZX 50 Index declined 61.57 points, or 0.7 percent, to 9,435.7. Within the index, 31 stocks fell, 15 gained, and four were unchanged. Turnover was $111.8 million.
Synlait fell as low as $9.30, ending the day at $9.75, down 14 percent. The milk processor reported a 9.7 percent decline in first-half profit as a new pricing arrangement with A2 Milk and restrictions on Chinese imports squeezed margins.
"When expectations get too high you've got to meet them, and they didn't quite do that," said Grant Davies, an investment adviser at Hamilton Hindin Greene.
Synlait supplies A2 Milk, and its share price has followed the milk marketing firm higher over the past year. However, Davies questions the close link: "The value-add and margin comes in the A2 branding." A2 declined 0.6 percent to $13.62.
The dairy sector was the major news today with Synlait and Fonterra Cooperative both reporting first-half earnings. A Global Dairy Trade auction overnight posted another increase in dairy prices.
Fonterra returned to profit, with its New Zealand ingredients business and Oceania consumer and food service units delivering most of the earnings. The country's biggest company is undergoing a strategic review, saying there needs to be a fundamental change in the business. It's selling assets to shore up its balance sheet, and also hopes to staunch losses in Latin America after exiting its Venezuelan business.
Fonterra Shareholders' Fund units fell 2.5 percent to $4.27, and Fonterra shares, which can only be held by its farmer suppliers, were down 2.5 percent at $4.27.
Contact Energy was the most traded stock on the NZX50 with 2.8 million shares changing hands, compared to its 90-day average of 1.5 million. The stock fell 0.6 percent to $6.46 after shedding rights to a 16 cent dividend.
Of other stocks trading on volumes of more than a million shares, Meridian Energy fell 2.2 percent to $3.845, Spark New Zealand decreased 1.8 percent to $3.56, Auckland International Airport slipped 0.3 percent to $7.955, Property For Industry rose 1 percent to $1.94, and Fletcher Building edged up 0.2 percent to $4.75. Air New Zealand was unchanged at $2.305.
Outside the benchmark index, Michael Hill International fell 3.9 percent to 74 cents on a volume of 41.4 million - 11 percent of the shares on issue. The jewellery chain has climbed from 57 cents since reporting a stronger first-half result than investors were expecting.
The Hill family's interests held about 43 percent in late September and substantial shareholder notices since then show ACC's investment fund owns 6.4 percent and Fisher Funds Management holds about 9.9 percent.
Also outside the NZX50, Oceania Healthcare rose 1 percent to $1.02 on volume of 2.5 million, its biggest one-day volume since May 2017.
New Zealand Refining posted the biggest increase on the benchmark index, up 3.1 percent at $2.03. The country's only refinery operator yesterday noted a recovery in regional margins, which had been negative for much of January and February.
On the soon-to-be-disestablished NXT market, Snakk Media's liquidators said they were reviewing whether the company's listing could be sold, but weren't optimistic about whether the business can be sold as a going concern.
Marlborough Wine Estates migrated to the main board yesterday and rose 4.1 percent to 24 cents today. That effectively spells the end of the junior board.
Davies said a big problem hindering those small-cap markets was the lack of research on those stocks, making it difficult for brokers to recommend them to customers. He acknowledged that the NZX was working to address that, but pointed to Morningstar Research, which last week withdrew coverage of Infratil - a top 50 company.
"If they can't get coverage, what are the chances that a NXT stock can get coverage?"
Infratil rose 0.5 percent to $3.95 today. It announced the appointment of Kirsty Mactaggart to the board, citing her "considerable experience advising fund managers and issuers on capital markets transactions".