Hikes in earnings belie business doom, gloom

By Nick Stride

Friday 18th August 2000

Amid the universal gloom of business confidence surveys, corporate New Zealand has enjoyed a vintage profit year.

Companies reporting so far for the June year have almost without exception posted higher net earnings.

Even the exceptions - notably, Telecom, Sky Network Television, and Tranz Rail - did little to worry investors.

Telecom's $783 million net profit fell $49 million short of last year's $832 million in a year of major change. But, as chairman Rod Deane pointed out, it was paying the price of future growth, specifically its expansion into Australia through AAPT.

Without AAPT the profit would have been a respectable but unexciting $846 million, up 1.7%.

On the day the shares shed 35c as a well-telegraphed dividend cut was confirmed. Some investors appeared to have misinterpreted the adage "buy the rumour, sell the fact."

Sky TV's loss widened to $29 million from $4.4 million a year ago as it counted the one-off costs of a 31,000 net subscriber gain, more than tripling digital service customers. The market understood and chalked the shares up 3c after the announcement.

Tranz Rail's operating earnings crept up from $68.5 million to $70.8 million on record freight volumes. The bottom line fall from $70.2 million to $46.9 million reflected the inclusion in 1999 of a hefty tax rebate.

Despite the pessimism generated by the Employment Relations Bill and other changes to the business environment a number of factors are going companies' way.

The rural sector, other than some perennial problem patches, is enjoying the fruits of a favourable growing season and rising international commodity prices. Among listed companies, Tasman Agriculture boosted profit by 37% to $12.6 million.

Tourism is booming. Arrivals hit 1.7 million for the June year and visitor expenditure was up 22% to $4.5 billion.

And the New Zealand dollar was weak all year, boosting both tourism and exports, although some companies such as Fisher & Paykel have reported offsetting rises in the cost of raw material and component imports.

Another crop of positive results is expected over the coming weeks.

Ports of Auckland reports on August 22, Baycorp on August 24, Air New Zealand on August 29, Fletcher Challenge on August 30 and Auckland International Airport on September 1.

The low exchange rate and strong corporate performances have not translated into a strong sharemarket, however.

According to Merrill Lynch data, the market has performed second worst among 32 countries surveyed.

In the year to August 2 the NZSE40 index fell 17%, second only to China's 22% decline. In the last 12 months it has shed 20%, outperforming a 22% loss for the Singapore exchange.

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