Surprising bright notes amid the gloom

Tourism Holdings, which rents out holiday vehicles, has increased its profit more than 80 per cent. Photo / NZME.

Opinion

Companies post upbeat outlooks despite collapse in dairy prices and hit to consumer confidence.

The August corporate reporting season is now largely complete, aside from a few stragglers that have slightly different balance dates. Overall, I would say the reporting season deserves a solid six out of 10, which isn't too bad at all given what many were expecting.

The big surprise seemed to come in the form of more upbeat outlook statements, which weren't nearly as cautious as they could have been. Given the way we have seen dairy prices collapse, and the impact this has had on business and consumer confidence, one could be forgiven for expecting a resoundingly downbeat tone from many of our top chief executives.

But we didn't get that. In fact, we actually heard some fairly bullish comments from many of our biggest companies.

Air New Zealand was one of the more positive about the outlook, after reporting a record result and increasing its dividend 60 per cent over the previous year. The company said it was increasing capacity and improving operating efficiencies, while the added bonus of lower fuel prices was likely to see further significant earnings growth in the coming year.

The tourism sector is clearly in good shape, with other companies painting a similar picture. Auckland Airport benefited from rising passenger movements, beating its own profit guidance and pointing to further growth in the coming financial year.

Tourism Holdings, which rents out holiday vehicles and operates the Kiwi Experience tours, increased its profit more than 80 per cent and said that it could increase profitability a further 50 per cent over the coming four years. The company's divisions in Australia and the United States were doing well, no doubt partly benefiting from the lower currency.

Dairy farmers may be suffering, but it clearly isn't all bad news on the commodity front, with Scales and Delegat Group both posting very strong results. Scales, the country's largest grower and marketer of apples, listed on the NZX last year and stated that earnings are likely to be 25 to 35 per cent higher than the forecasts provided in its listing prospectus.

Delegat sold a record 2.2 million cases and posted a $34 million net profit, another record. North American case sales were up 16 per cent and the company said it would invest more than $100 million in 2016. This would support plans to grow sales by another 40 per cent between now and 2020.

Even those closely tied to the domestic economy held up okay. Market heavyweight Fletcher Building, a perennial disappointer during earnings season, reported a decent result driven by the strong New Zealand business. Fletcher benefited from increasing construction activity and strong demand for housing, particularly in Auckland.

The reliable dividend payers didn't disappoint, with Spark and the electricity companies providing a healthy lift in cash returns to shareholders. Meridian Energy reported a bottom-line profit ahead of last year, increased its dividend 17 per cent and paid a special dividend. Genesis increased dividends more than 20 per cent and, not to be outdone by its peers, Mighty River Power increased its dividend and also announced a special dividend.

Economic conditions are always changing, and just because the outlook appears solid at the moment doesn't guarantee it will be in six months. The economy is undoubtedly slowing and the only question is the quantum of that slowdown. We'll await the annual meeting season in a few months to gauge how much the mood has changed.

But it was certainly comforting to hear that many of our listed companies still see opportunities for growth, they're making enough profit to keep their workers employed, and corporate New Zealand is in relatively good health.

Maybe a six isn't generous enough, it may deserve a seven.