A2 Milk’s spectacular rise boosts market
Fletcher Building the worst performer after result, down 7 per cent to $6.39
New Zealand shares rose as a2 Milk Co surged on its tieup with Fonterra Cooperative Group, while Synlait Milk, Fletcher Building and Spark New Zealand dropped.
The S&P/NZX 50 Index rose 102 points, or 1.3 per cent, to 8200.27. Within the index, 22 stocks rose, 21 fell and seven were unchanged. Turnover was $272.9 million.
A2 shot up 26.5 per cent to a record $11.75 yesterday, dragging the index with it after reporting a record firsthalf result and a new deal with Fonterra. The company announced it had more than doubled first-half profit to $98.5m on strong infant formula sales as sales climbed 70 per cent to $434.6m.
“The result was clearly a lot ahead of market expectations, winning market share in China and diversification of supply with Fonterra is also positive,” said Craig Stent, head of equities at Harbour Asset Management. “The earnings growth is supporting the share price appreciation, from any multiple it’s growing into it. People are a bit conservative about what they forecast, and this company seems to deliver ahead of those expectations.”
Synlait, which exclusively supplies a2 with its infant formula in China, Australia and New Zealand and has seen its shares rally with a2’s, dropped 5.7 per cent to $6.65. In a media release yesterday afternoon, a2 and Synlait stressed the Fonterra deal will not affect their arrangements and said the companies will have an ongoing relationship. Stent said investors were thinking Synlait might not benefit from all of the growth a2 experiences going forward.
Fonterra Shareholders Fund units gained 0.5 per cent to $6.03.
Fletcher Building was the worst performer, down 7 per cent to $6.39. The company’s first-half results were clouded by losses at its Building + Interiors unit but also showed weak demand at its most profitable businesses over the next 12 months.
Building products, Fletcher’s biggest business, lifted revenue by 13 per cent to $1.25 billion although operating earnings fell 9 per cent to $118m. Distribution, which includes the Placemakers chain, lifted revenue by 7 per cent to $1.6b and earnings before interest, tax, depreciation and amortisation rose 8 per cent to $104m.
“There’s a bit more unbundling of things under the bonnet with regards to other divisions, the market hasn’t gained too much confidence from the result,” Stent said. “There have been no announcements on their USPP debt financing, that’s still in progress.”
Spark New Zealand dropped 3.9 per cent to $3.32.
First-half profit fell 3.4 per cent to $172m as it ramped up spending on a new transformation programme aimed at making it the nation’s lowest cost operator.
“It was okay, the signalling they’re bringing through cost-out to support earnings growth may have upset some investors,” Stent said. “In terms of the dividend stability for the company, it’s okay.”
Ebos Group rose 1.2 per cent to $17.35. The pharmaceutical and animal health products maker said its first-half profit lifted 12 per cent to a record $76.7m.
Meridian Energy cent to $2.87.
The electricity generator and retailer posted a 7 per cent fall in firsthalf earnings to $329m as low inflows into its South Island hydro catchments reduced its electricity output. — BusinessDesk gained 0.9 per