MARKET CLOSE: NZ shares fall; MRP, Genesis, Fletcher decline

Monday 27th July 2015

New Zealand shares fell in lighter than usual trading, led by MightyRiverPower, as investors wait on a decision over the future of the Tiwai Point aluminium smelter. Fletcher Building and Ebos Group declined.

The S&P/NZX 50 Index declined 22.12 points, or 0.4 percent, to 5872.06. Within the index, 26 stocks fell, 16 rose and eight were unchanged. Turnover was $69.7 million.

Investors are weighing up the outlook for power companies as they await the decision on whether New Zealand Aluminium Smelters will keep open its Tiwai Point operation, which accounts for about a seventh of the country's electricity use. Australia's Origin Energy is said to be interested in selling its 53 percent stake in NZX listed Contact Energy, with the smelter's future a factor in delaying its decision.

The ongoing uncertainty weighed on utility stocks. MRP led the benchmark index lower, down 3.2 percent to $2.70. Genesis Energy declined 2.3 percent to $1.72. Contact fell 0.2 percent to $5.04. Meridian Energy gained 0.2 percent to $2.135.

"That will be very important both in itself and for any possible intentions with Origin with their stake in Contact Energy," said Matthew Goodson, managing director at Salt Funds Management. "There has been considerable speculation as to the fate of Contact."

Investors have a mixed outlook for listed exporters ahead of the upcoming earnings season, weighing up the prospects for companies expected to deliver stronger earnings on the back of a weaker dollar and lower interest rates, against a slowdown in the dairy sector and a mixed outlook for an Australian economic recovery.

Fletcher, the building supplies and construction firm, dropped 1.9 percent to $7.90. Ebos, the health and animal care products maker, declined 1.4 percent to $10.84. Heartland New Zealand, the bank, fell 1.7 percent to $1.17. Spark New Zealand, formerly Telecom Corp, slipped 0.5 percent to $2.875.

"It's going to be too early for any real economic downturn to be evident in the result numbers, although it could be interesting in current trading and outlook trading comments - that might be where that's felt a bit more," Goodson said. "Expectations are going to be a little bit all over the place, as we've seen some very sharp movements in currency which for a number of listed companies is a key earning determinant."

Kathmandu Holdings, the outdoor goods retailer, fell 1.7 percent to $1.73. On Friday, Briscoe Group, the retailer controlled by managing director Rod Duke, detailed its takeover offer to Kathmandu shareholders, offering a mixture of cash and scrip. It said it was waiting on a trading update before forecasting future earnings growth. Briscoe rose 1.1 percent to $2.83.

"I think we're going to wait and see how Kathmandu has traded in what has been one of its critical trading periods - there is considerable hype for it, given it has been colder than usual on both sides of the Tasman," Goodson said. "By the same token, this is a business which has seen continued competitive inroads into its offer."

A2 Milk Co, the milk marketing firm, was the best performer on the day, up 3.7 percent to 84 cents.

Outside the benchmark index, Bethunes Investments was unchanged at 20 cents after announcing plans to raise up to $2.87 million at a 93 percent discount to try and keep its ailing auction business afloat.

BusinessDesk.co.nz

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