Amazingly during Covid-19, exports rose to a record high in March because gold kiwifruit sales more than doubled. Z Energy may apply for wage subsidy, but should it get it? Google has a US$119b cash pile, but refuses to pay for news snippets

Surprise, surprise: Despite the impact of Covid-19, exports hit a new high in the month of March, driven by sales of gold kiwifruit, dairy, and meat. Stats NZ reported the total value of exported goods rose 3.8 percent to $5.8 billion in March from a year earlier. This was a record for any month – the previous high was in May 2019.

Even imports rose: Dairy export values rose 7.6 percent while meat export values rose 11 percent. Goods imports in March lifted 7.7 percent to $5.1 billion, largely due to purchases of crude oil. The monthly trade balance was a surplus of $672 million.

Ooops: The NZ Bankers Association apologised for providing incorrect information on its website relating to bank loans to businesses. It seems a rogue billion dollars was somehow added to the total value of loans so that rather than banks having lent $6.9 billion to businesses since the lockdown began, the total was in fact $5.9 billion. The NZBA said the error came about due to issues with data classification.

‘We’ve got this’: “We are confident that future reporting will reflect an accurate picture across the sector,” said NZBA chief executive Roger Beaumont.

Capital Raise #5: Another week, another capital raise and this week it was the turn of Investore Property announcing a $100 million capital raising for potential acquisitions. The commercial property owner plans to raise $85 million in a fully underwritten placement to institutional investors and another $15 million through a share purchase plan at $1.59 a share; a 10.2 percent discount to yesterday’s closing price of $1.77.

Headroom required: The funds raised will repay bank debt, taking Investore’s loan-to-value ratio down to 30.9 percent from 41.8 percent. That will give it more headroom to make any acquisitions that crop up as property values fall. To date, the five capital raises announced since the start of the month total $1.754 billion.

Should we or shouldn’t we: Fuel retailer Z Energy is considering applying for a Government wage subsidy. Despite qualifying for the subsidy, given its sharp fall in fuel sales, CEO Mike Bennetts said the business had its reputation to consider, given the criticism that has been levelled at some large corporates applying for the funding. Bennetts said a final decision would be made next week.

Us too? The Government has so far paid out more than $10 billion under the 12-week wage subsidy scheme to help protect the jobs of about 1.6 million workers. Z Energy, which also includes Caltex, employs about 500 staff directly and another 2,200 at 200 franchised sites.

Not so lazy balance sheet: Z Energy cancelled its final dividend on April 3, but had already paid out an interim dividend of 16.5 cents per share or $66m in December. Over the last three years, Z Energy has paid out $446.8m in dividends, and over the last reported year increased its long term and short term borrowings by $177m to $1.115b. For two years from 2017 to 2019 Z Energy had a dividend policy of paying out 80-100 percent of its underlying free cashflow in dividends. It changed that last year to paying out 70-85 percent of operating cashflow.

Begging the question: Should the Government bail out a company that paid lots of dividends and built up debt in the good times to avoid having a ‘lazy balance sheet’, but now needs Government help when a crisis hits? Isn’t that is what a balance sheet for? Some fat to cope during the lean times? Z Energy may argue the Covid-19 crisis was unprecedented and unexpected, but Z Energy itself had an excellent pandemic preparedness plan for its operations. But maybe not for its balance sheet…

Not prepared: The fragile state of the country’s personal finances has been exposed as a result of the Covid-19 pandemic. A record number of requests for KiwiSaver hardship withdrawals and mortgage holidays have been made with many Kiwis struggling to deal with the financial situation they now face.

Speaking to Parliament’s Finance and Expenditure Committee, retirement commissioner Jane Wrightson said the recent turn of events had shown that New Zealanders’ financial resilience was “very weak ” and that something was “badly wrong” with financial education.

Poor financial planning: Wrightson said that many young people were finding themselves further away from home ownership, many in the middle of their lives had troublesome levels of debt and those heading into retirement had seen their financial plan run off course, she said.

Final term: Summerset Group chair Rob Campbell told shareholders yesterday this will be his final term on the board having held the role since the company listed in October 2011. He said the board was working through the appropriate succession planning and a replacement chair would be announced in the next 12 months.

Staff costs higher: Shareholders were also told Summerset had incurring additional costs resulting from Covid-19 due to increased staffing and having to pay staff increased weekend allowances and higher wages through the Level 4 lockdown.

‘Some fat in our balance sheet’ : “However, the business has sufficient reserves and will survive through this crisis. In particular, we have access to $400 million of unutilised debt facilities and we have substantial headroom within our banking and bond financial covenants,” Campbell said.

Downbeat: American consumer confidence deteriorated further in April after taking an initial hit in March, according to new data from the U.S. Conference Board. The consumer confidence index stood at 86.9 in April, down from 118.8 in March. It was the lowest reading since June 2014.

Worried: US consumers’ assessment of current business and labour market conditions dived to 76.4 from 166.7, marking the largest drop on record. The US jobs market has been hit hard since lockdown measures took hold across the country which has resulted in 26.5 million people filing unemployment claims since mid-March.

We’re sweet: Despite taking a hit to its advertising sales in March, Google parent Alphabet reported better-than-expected revenue for the first three months of 2020. The company posted US$41.2 billion in quarterly revenue, up 13 percent from the same period last year. The result was slightly ahead of analysts’ expectations.

Woohoo: Alphabet posted $24.5 billion in ad sales on Google, up nearly 9 percent from the prior year, though the segment’s growth rate was slower than in the previous quarter. Advertising sales make up around 80 percent of the company’s total revenue.

‘It’s ours. Not yours’: Google’s cash pile rose to US$119.7b by March 31 from US$117.3b from a year ago, but is continuing to refuse to pay news organisations for the right to republish headlines, first paragraphs and pictures. It claimed them copyright free under US rules on ‘fair use’, and has built its business by copying and indexing the internet.

Australia is pushing Google and Facebook to pay a fair ‘clip of the ticket’ to news companies and New Zealand is looking at following that lead.

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

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