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MARKET CLOSE: NZ shares fall, led by MetroGlass, A2, NZOG

11 Mar 2015

New Zealand shares fell, led by Metro Performance Glass and paced by New Zealand Oil and Gas as investors digested earnings season. A2 Milk Co and Fonterra Shareholders' Fund declined after threats to contaminate infant formula and other dairy powder.

The NZX 50 Index fell 25.765 points, or 0.4 percent, to 5861.982. Within the index, 32 stocks fell, 11 rose and seven were unchanged. Turnover was $164 million.

Investors are assessing the most recent earnings season, which needed to show earnings growth to justify the benchmark index's 5.8 percent gain since the start of the year. The local market has been pushed higher by offshore investors seeking better returns than are on offer from fixed-income assets in a world of low interest rates. Companies across a range of sectors fell, as investor look to find fair value.

MetroGlass, the glass manufacturer, fell 4 percent to $1.70. NZOG, the oil and gas explorer, declined 3.3 percent to 59 cents. Spark New Zealand, formerly Telecom Corp, retreated 1.9 percent to $3.18. Air New Zealand, the national carrier, dropped 3.2 percent to $2.875.

"It's a general weaker tone right across the market today," said Rickey Ward, NZ equity manager at JB Were New Zealand equities. "The market that has had a pretty strong run that's trading on historically high multiples and needs to take a breather given the rest of the result season we've come through was not fantastic - it wasn't bad, but it wasn't fantastic."

A2 Milk, the milk marketer, fell 3.7 percent to 52 cent. Units in Fonterra Shareholders' Fund, which give investors access to Fonterra Cooperative Group's dividend stream, were unchanged at $5.80. Yesterday the government revealed the police were investigating threats to contaminate baby formula and other dairy powder products with pest killing poison 1080, although testing has not shown any traces yet. Dairy is New Zealand's largest export, and yesterday's news saw the kiwi dollar drop to a month low against the US greenback.

"At a stock level, the focus is on Fonterra, and trying to grapple with that," Ward said. "The dollar is reflecting a little bit of nervousness as well, because that one company (Fonterra), is linked to a very important, probably the most important, component of New Zealand, being primary."

Restaurant Brands, the country's largest fast food chain operator, declined 0.3 percent to $3.89. The owner of Carl's Jr, Starbucks, Pizza Hut and KFC said fourth quarter sales rose 19 percent to $92.8 million in the 13 weeks ended March 2.

"It had a pretty good run, when you look at Carl's Jr, which is what people are pinning the next growth phase of the business on, that was weaker," JB Were's Ward said. "They're a year older now so they're back to more normalised trading which is probably a little less than people forecast."

Genesis Energy, the partially privatised energy generator and retailer, declined 1.5 percent to $2.28. Solid Energy, the state owned coal miner, may be forced into liquidation, which some in the market are speculating will have a knock on effect and see Genesis move to close its coal-powered Huntly generator, Ward said.

Outside the benchmark index, Trilogy International jumped 6.1 percent to 87 cents. The skincare products and scented candle maker says annual profit will more than treble to more than $4 million with improved earnings at its Australian unit and as its Ecoya candle division makes money for the first time.

On the New Zealand Alternative Index, Foley Family Wines was unchanged at $1.45. The wine and spirits company, majority owned by American businessman and vineyard owner Bill Foley, said first half underlying profit, which strips out fair valuation changes for harvested grapes, was $661,000, from a loss of $96,000 a year earlier as sales increased 14 percent to $15.6 million.

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