Results show strong growth for most NZ companies
AUCKLAND: The reporting season has drawn to a close with most listed Kiwi companies having posted solid increases in earnings, but the question of what happens next is cloudier than usual, given the raft of uncertainties that lie ahead.
While the economy faced high inflation, supply chain constraints and Covidrelated disruption, there have been some standout, record performances from the listed corporates.
As expected, construction and building materials stocks did well in the June year, reflecting the building boom.
At the top of the list was Steel and Tube’s net profit, which leapt by 96% to $30.2 million.
Newlylisted Vulcan Steel’s profit lift wasn’t far behind — up 91% to $124 million, while Fletcher Building’s profit jumped by 42% to $432 million.
The big power generators put in some strong performances, helped along by favourable hydro generation conditions and firm wholesale power prices.
A newly transformed Mercury NZ reported a 25% increase in its earnings before interest, tax, depreciation and financial instruments (ebitdaf) followed by Genesis Energy with a 24% lift.
Meridian’s ebitdaf rose by 2.5% while Contact’s eased a touch — down 3%.
The wellunderstood Coviddriven problems continued to have an impact on aviation and travel, although Auckland International Airport’s loss narrowed substantially to $11.6 million.
At Air New Zealand, losses continued to mount, the shortfall doubling to $591 million.
Tourism Holdings’ loss narrowed substantially to $5.4 million.
Once again, there were strong performances by Ebos, Skellerup, Port of Tauranga and Freightways.
The highly acquisitive medical products supplier Ebos reported a $A228 million ($NZ254.1 million) net profit — up 21.3% and another record.
Analysts highlighted Skellerup’s 19% gain to $47.8 million, continuing the specialised manufacturer’s long record of annual earnings increases.
Port of Tauranga’s 8.7% increase in net profit to $111.33 million was also singled out for honourable mention, as was Freightways, which lifted its earnings by 4.1% to $73.9 million.
Craigs Investment Partners’ head of private wealth research, Mark Lister, said company earnings were generally solid.
‘‘Maybe that’s because expectations had come back to a more reasonable level earlier in the year, when the sharemarket was a bit softer,’’ he said.
‘‘The companies in our market are in good shape, and most of them posted reasonable gains.’’
Where there was weakness — such as Air New Zealand’s loss — it was in the ‘‘rearvision mirror’’, Mr Lister said.
The season showed that company balance sheets, for the most part, were strong.
And those companies that had been dealt a sharp blow from Covid19 — such as a2 Milk — looked to be back on track.
As always, the market focused on earnings outlook statements, but this time round companies were circumspect on prospects.
‘‘There was an uncertain, cautious tone to their commentaries, but I don’t necessarily interpret that as meaning that we need to panic or worry that there is major trouble ahead,’’ Mr Lister said.
‘‘If you were a business, a CEO or a management team, you would be mad to go out on the limb with any strong conviction in your earnings guidance because there are so many unknowns out there,’’ he said.
Still, there were those who were prepared to be bold.
Ebos said it was pleased with the strong earnings growth in 2023 and that it expected another year of profitable growth.
Inflation made its presence felt on fast food company Restaurant Brands, which reported a net profit for the six months to June of $15.3 million — down by $19.2 million on the previous comparable period.
‘‘The company continues to face cost inflation pressures across all markets but is mitigating the impact of these by implementing cost savings and taking price increases where possible,’’ it said.
‘‘However the extent of cost inflation has meant that the opportunity to pass input costs on in the short term has been limited, with consequent shortterm adverse profit impacts.’’
Looking ahead, businesses are facing higher inflation, higher interest rates, supply chain problems, staff shortages and geopolitical issues.
‘‘You name it — there are question marks right, left and centre. Most management teams would rather underpromise and overdeliver than get anything wrong,’’ Mr Lister said.
While Air NZ, Sky TV and a2 Milk had all had a rough ride, they looked like they were getting their ‘‘ducks in line’’ for the future, Mr Lister said.
Jarden equity research director Adrian Allbon said Jarden had lifted its revenue forecasts on the strength of the latest reporting season.
‘‘Roughly half the companies in our coverage which reported fullyear results achieved higher revenue than expected, while the other half were either in line or missed,’’ Mr Allbon said in a research note.
‘‘However, we saw more misses than beats on ebitda margins and dividends,’’ he said.
He said an encouraging 14 (40%) of companies provided earnings guidance with six providing longerterm targets.
‘‘PostAugust reporting season, we have revised revenues up for roughly twothirds of our coverage that reported but, on balance, are taking a more balanced stance on 2023 estimated ebitda and ebitda margins,’’ he said.
‘‘Meanwhile, we have revised dividend per share estimates down for a number of companies postcapital management programmes, as well as due to lower net profit margin forecasts.’’
Jarden said a2 Milk’s turnaround was tracking to plan and Sky City’s earnings recovery was on track.
On Air New Zealand, Jarden said the scale of the year’s loss reflected the material operational disruption from lockdowns and border restrictions.
‘‘One of the highlights of the results is the ongoing strength of cargo, which saw revenue rise by 32% to $1 billion, albeit supported by $403 million from governmentsupported flights.’’
Air NZ noted that it does not expect cargo revenue to remain at this level in 2023.
With Sky TV, Jarden said the company’s capital management and dividend approach was reflective of the environment.
Freightways’ acquisition of Australia’s Allied Express would deliver a new growth platform for the company.
‘‘We view this transaction as strategically sound,’’ Jarden said.
On Skellerup, Jarden said growth from new and existing products, pricing changes and productivity gains meant the company was largely able to offset increased raw material and freight costs.