MARKET CLOSE: NZX 50 falls for second day as earnings loom

Tuesday 10th February 2009

New Zealand shares fell, pushing the NZX 50 Index lower for a second day, amid expectations the looming earnings season will provide a gloomy outlook for 2009. NZ Farming Systems Uruguay Ltd. led the decline.

The NZX 50 fell 16.51, or 0.6%, to 2750.05. Within the index, 25 stocks fell, 14 rose and 11 were unchanged. Turnover was NZ$89.8 million. NZ Farming Systems fell 13% to 60 cents. The developer of dairy farms in South America has forecast a pre-tax earnings loss of as much as US$11 million this year, reflecting a drop in global milk prices.

Fisher & Paykel Appliances, the nation's biggest manufacturer of driers, fridges and washers, fell 2.6% to a record low NZ$1.12 and has dropped 16% in the past month. The company's distribution and technology partner Whirlpool Corp. yesterday reported a slump in profit as the global economic slump eroded returns for the world's biggest appliance maker.

Appliances are "one step down from the auto industry for the household wallet," said Paul Richardson, who helps oversee NZ$150 million at BT Funds Management. "It's not an easy industry to work in, selling quite expensive consumer products."

Telecom declined 2.2% to NZ$2.63. The biggest company on the NZX 50 by market value is this week expected to report a drop in second-quarter earnings from last year's NZ$172 million on higher costs and loss of customers from its fixed-line network. Separately, Telecom's 10% holding in Hutchison Communications in Australia is expected to shrink to 5% if the merger between Hutchison and Vodafone Australia proceeds.

Mainfreight fell 2.5% to NZ$3.86. The transport company's trading in the third quarter "has been encouraging" and it has "grown market shares as competitors have struggled," said Carmel Fisher, managing director of Fisher Funds Management, in a commentary for the Kingfish fund.

The net asset value of Kingfish, which invests in New Zealand small cap stocks, dropped 18% to 98 cents in the final three months of 2008, mainly reflecting a decline in the shares of Metlifecare, it said in a statement today. The fund's units declined 4% to 72 cents on the NZX today.

Sealegs, the maker of amphibious boats, slumped 38% to 8 cents, the lowest in at least a decade, after abandoning plans for a rights issue because of the global economic slump.

Fletcher Building kicks of earnings results for major companies, reporting its first-half earnings tomorrow. Shares of New Zealand's biggest construction company were unchanged at NZ$5.52 today and have fallen 8% in the past month on waning demand for housing in the U.S., Australia and New Zealand. The company may post a 20% decline in first-half earnings to about NZ$190 million.

Company results "are probably going to be reasonably negative but the outlook commentary will be clouded or even zero," BT Funds' Richardson said.

Businesswire.co.nz

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