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MARKET CLOSE: NZ shares fall, led by Fonterra fund, on lower dividend guidance

New Zealand shares fell, led by Fonterra Shareholders' Fund, after the world's biggest dairy exporter lowered its guidance for dividends. Spark New Zealand and Fletcher Building paced the decline after shedding rights to their dividends.

The NZX 50 Index fell 12.757 points, or 0.2 percent, to 5857.782. Within the index was mixed, 18 stocks fell, 18 rose and 14 were unchanged. Turnover was $128 million.

Units of the Fonterra fund, which are entitled to the dividends from the ordinary shares of Fonterra Cooperative Group, dropped 7.2 percent to $5.56. The dairy company posted a 16 percent drop in first-half profit to $183 million in the six months to Jan. 31, which it said reflected tough conditions in dairy. It also confirmed its forecast payout for the current season of $4.70 kg/MS, down from a record $8.40 kg/MS last season, with guidance for dividends trimmed to a range of 20 cents to 30 cents, from a previous 25 cents to 35 cents.

"Pretty disappointing result all round from Fonterra, the price is down some 6 percent and it probably deserves to be," said Mark Lister, head of private wealth research at Craigs Investment Partners. "The profit was much lower than market expectations, the dividend guidance was downgraded from where people expected it to be, it looks like full-year profits will be lower than where market's expected them to be, costs look to be higher, capital expenditure look to be higher, so it was a pretty poor result all round."

Spark, formerly Telecom Corp, fell 5.3 percent, or 16.5 cents, to $2.975 as it shed rights to its 9 cents per share interim dividend. Fletcher Building, the country's second largest listed company, declined 2.8 percent, or 25 cents, to $8.65 as it gave up rights to its 18 cents per share dividend.

"It's a bit of a red herring with those two, as all they've done is fallen to reflect the dividend they've been paid," Lister said.

Kathmandu Holdings was the best performer on the benchmark index today climbing 2.9 percent to $1.44, after being smacked down some 13 percent yesterday when the outdoor goods retailer posted loss of $1.8 million in the six months ended Jan. 31, from a profit of $11.4 million the previous period. Retailers, particularly those in the rag trade, are squeezing margins to offer discount after discount in a bid to lure shopper back to stores and away from bargain offering online retailers.

"It got pounded yesterday," Lister said. "It rallied going into the result and it was obviously weaker than expected, or it just didn't have the good news people were looking for so today's reaction is probably a bit of a bounce from having fallen so much earlier in the week."

Contact Energy was unchanged at $5.90. The energy generator and retailer has fallen some 6 percent since the start of the year, after it kept its first-half dividend unchanged and said it would look offshore for better returns after first-half earnings fell in what it called an oversupply in the New Zealand electricity market.

"The jury is out on Contact it's out of favour because we're all a bit unsure on what management is doing in terms of the expansion strategy," Lister said. "There's good reason why it's been languishing lately but it does look reasonable value at these levels so it is probably attracting some bargain hunters."

Freightways, the courier and logistics company, rose 1.8 percent to $6.19. Xero, the cloud-based accounting software firm, increased 1.2 percent to $24.50.

A2 Milk Company, the milk marketing company, fell 3.9 percent to 50 cents. Pacific Edge, the Dunedin-based biotech company, slipped 2.8 percent to 69 cents.