A heavier reliance on the dairy industry is helping the South Island to ride out tougher economic conditions, according to an index produced by accounting firm Deloitte.
The Deloitte South Island Index measures the market capitalisation of 33 companies with head offices or the majority of their businessin the South Island and puts them into an index relative to their size.
For the first six months of this year, the index was down by 8.5 per cent, beating New Zealand's benchmark NZX-50 index which fell 21 per cent. Over the last quarter (April to June) it has risen into positive territory, growing 3 per cent versus the NZX-50's drop of 8 per cent.
Deloitte partner Paul Munro said his firm decided to put together the index at the start of the year because of growing sentiment in the market that the further north you went in New Zealand the worse you were hit by the current economic climate. He said the firm wanted an empirical way to measure it but said the results were not as simple as just taking the overall figure.
"At a headline level it shows South Island companies are doing better than the rest of the country, but we need to balance that out with the fact that of the 33 companies measured 61 per cent saw a drop in their market capitalisation."
Munro said the strong performance over the last quarter had been boosted by larger companies like PGG Wrightson and NZ Farming Systems Uruguay.
PGG Wrightson, the second largest company on the index, grew its market cap by $127 million, boosted by a higher share price and $5 million in bonus shares being issued, while NZ Farming Systems Uruguay saw its market cap increase by $83 million on the back of a rising share price driven by predicted increased earnings. Munro said their strength followed the boom in the dairy sector with record milk solid payouts.
He said this sector was having a positive impact on other businesses and because a greater proportion of business in the South Island was linked to dairying it was helping to hold up the economy.
But the South Island's biggest listed company, Ryman Healthcare, had suffered one of the largest declines over the last quarter as its business was hit by the down-turn in the property market. Its market cap dropped by 7 per cent, or $60 million, falling to $795 million.
JUNE QUARTER * South Island index up 3 per cent
* NZX-50 down 8 per cent
