Big news in the rural sector, with A2 Milk bidding for 75 percent of Mataura Valley Milk and Skellerup boosted by strong rubber goods demand in the US
A2 Milk confirms plans to acquire majority stake in troubled Southland dairy co-op
A2 Milk has finally confirmed what many in the dairy sector had already expected….that it plans to acquire 75.1 percent of Mataura Valley Milk, near Gore, for approximately $270 million. The deal is backed by Mataura Valley majority shareholder, China Animal Husbandry Group, which would retain a 24.9 percent interest in the company.
Mataura Milk chief executive Bernard May said A2 Milk would bring significant expertise and resources to the heavily indebted co-op which recently warned it was in breach of its banking covenants and would require a financial lifeline by the end of the year.
A2 Milk’s offer will effectively pay off all Mataura Valley’s bank debt following completion of the deal, expected next year. A2 said it would carry out due diligence to confirm the plant can produce the highest quality nutritional products, is located in a good area of milk supply and has a capable management team in place.
A2 Milk last week reported a 33 percent jump in full-year revenue to $1.73 billion and a closing cash position of $854.2 million while Mataura Valley Milk has been struggling. It reported a $47 million loss in FY19 and is facing a funding shortfall in the order of $26 million this year.
A2 Milk shares closed on Friday up 1.8 percent at $20.27.
Skellerup shares hit all time high
Growth in sales to the US helped rubber goods manufacturer Skellerup Holdings match last year’s record profit, despite the pandemic knocking its industrial unit.
The company’s shares jumped 6.4 percent on the news, to close at a new high of $2.65 on Friday, valuing the company at $512 million.
Skellerup reported a net profit of $29.1 million in the 12 months ended June 30, largely unchanged from a year earlier. Earnings before interest and tax increased 1.7 percent to $42.5 million.
The board declared a final dividend of 7.5 cents per share, taking the annual payment to 13 cents.
The company said its agricultural division was the standout performer as increased demand in the US helped to lift ebit to $25.4 million from $22.8 million a year earlier. Increased sales of dairy consumables and specialist rubber footwear to the US in recent years had boosted its share of agri division revenue to 30 percent.
By comparison, its industrial division had been heavily impacted by Covid with earnings dropping to $20.9 million from a record $22.9 million in the prior year, due to reduced demand for infrastructure and oil and gas applications.
Skellerup also announced the appointment of former Fisher & Paykel Healthcare executive Paul Shearer to its board as an independent director.
Eroad to seek ASX secondary listing
Eroad has announced it will proceed with a secondary listing on the ASX next month but plans to continue to be based in New Zealand.
The transport technology and services company signalled its plan in October last year to pursue a foreign exempt listing on the ASX to cater to growing investor interest from Australian and international investors. Provided the Australian Securities Exchange accepts it, Eroad will list across the Tasman in September.
“While it is Eroad’s intention to remain a New Zealand domiciled-business, committed to our New Zealand investor base, the board believes that listing on the ASX is a natural progression for the company and a way of accessing a broader pool of institutional and retail investors who wish to share in Eroad’s success” chair Graham Stuart said in a statement on Friday.
“The board is confident and excited about the company’s future prospects and regards an ASX listing as a further means to facilitate greater access to capital to fund future growth opportunities.”
Eroad shares closed up 6.6 percent to close at $4.02 having doubled in value since late March.
F&P Healthcare to open additional manufacturing facility in Mexico
F&P Healthcare has announced plans to open a third manufacturing facility in Mexico within the next two years.
At its AGM on Friday, chief executive Lewis Gradon said the company planned to grow its manufacturing capacity to ensure a further increase in supply of respiratory products is available if required.
Upgrading its guidance last week, F&P Healthcare said it now expects full-year operating revenue for the 2021 financial year to be approximately $1.61 billion, and net profit after tax of $365 million to $385 million. That’s up from previous guidance of around $1.48 billion and net profit of $325 million to $340 million.
The company completed its second Mexico facility in January last year and its fourth New Zealand facility in May this year. The three facilities combined will provide an additional 17,000 square-metres of cleanroom manufacturing space.
Gradon admitted it had been a challenging year for the company requiring manufacturing capacity to be scaled up much faster than it had originally anticipated. Around 1500 additional staff had been added to its manufacturing sites across New Zealand and Mexico.
F&P Healthcare shares closed up 1.5 percent on Friday to close at $35.30, though off its high for the week at $37.34.
NZ sharemarket pushes higher
Investors responded positively to the first full week of company earnings, with better than expected results from market heavyweights A2 Milk and F&P Healthcare helping to buoy market sentiment. Clothing retailer Hallensteins Glassons also surprised investors with a significant lift in online sales that saw its shares surge more than 20 percent last week. The NZX50 will start the week at 11,836 after gaining 3.4 percent last week and edging ever closer to eclipsing its pre-covid closing high of 12,073 on February 21. A further 15 listed companies will report either full or half year results this week including Air New Zealand, Port of Tauranga, Freightways, Chorus and Vector.
Across the Tasman, the ASX200 finished the week barely changed at 6111. Westpac disappointed investors saying it would not be paying a dividend this year.
In the US the S&P500 closed on Friday at a new high for the year of 3397, up 0.7 percent for the week. Gold lost ground for a second consecutive week falling 0.1 percent to close at US$1938.40/oz having been as high as $US2015/oz earlier in the week. The NZ dollar will start the week at 65.4 US cents, barely changed on last week’s close, but did trade as low as 64.88 US cents last week.
US bankruptcies continue to rise
While US equity markets continue to hit new highs for the year, the state of corporate distress in the country has never been worse, according to new data. Large US corporate bankruptcy filings are now running at a record pace and are set to surpass levels reached during the height of the global financial crisis in 2009.
As of last week, a record 45 companies, each with assets of more than US$1 billion, have filed for Chapter 11 bankruptcy — a common way for businesses in financial distress to reorganise themselves — according to BankruptcyData.com, a division of analytics group New Generation Research. This compares with 38 for the same period in 2009 during the depths of the financial crisis and is more than double last year’s figure of 18 over the same period. The numbers only account for lead case bankruptcy filings, which exclude the filings of major corporate subsidiaries.
In total, 157 companies with liabilities of more than $50m have filed for Chapter 11 bankruptcy this year and many analysts are expecting more will follow.
The spike in bankruptcies comes despite trillions of dollars in government aid and Federal Reserve support being pumped into the US economy to mitigate the fallout of the coronavirus pandemic on businesses.
Tesla stock price continues to surge ever higher
As electric vehicle maker Tesla’s stock price continues to make new highs, it is once again attracting short sellers who are betting the stock will fall in value.
The company is about to split its shares making them more affordable for average investors – though founder Elon Musk must be wondering if he may need to split them yet again. Tesla shares have continued to skyrocket surging another 50 percent since announcing its stock split on August 11. They now trade at US$2,050 a share compared to US$316 just six months ago, a gain of more than 550 percent in only five months.
Once the split goes into effect next week, current Tesla investors will receive five shares for each one they own. Theoretically, that will cut the price to almost $420 a share. However, the market value of Tesla, now hovering around US$390 billion, will remain the same.
While Tesla has become the undisputed market leader in the development of electric vehicle technology, many analysts are once again questioning the company’s valuation based on its forecast revenues of US$30 billion this year. Competitor Fiat Chrysler is expected to report US$100 billion in sales for 2020 while GM and Ford are both forecast to post annual revenue of more than US$110 billion. Yet Tesla’s market value is now more than four times the combined market caps of Detroit’s Big 3 – Chrysler, Ford and GM.