BUSINESS & INVESTING WRAP:
* Synlait revises guidance in the wake of a2 downgrade
* Warehouse Group reports sales lift
* Second US stimulus package finally agreed
* British pound takes a hammering
New Zealand Rural Land Co (NZL) made its sharemarket debut yesterday becoming the latest and final listing for 2020.
Its shares initially opened almost 5 percent higher at $1.31 but closed at its offer price of $1.25. A total of 235,000 shares changed hands.
The company sold 60.5 million shares in the IPO, raising $75.6 million, including $750,000 from NZX-listed rural services provider Allied Farmers, which bought half NZ Rural Land Co’s management contract.
NZ Rural Land Co plans to potentially raise as much as $150 million in the next 12 months and has identified 21 South Island dairy farms to begin building its portfolio.
The company gives investors exposure to rural land as an asset class without direct exposure to agricultural operations and commodity price volatility. Initially it plans to focus on acquiring land in the dairy sector but, in the long-term, it said it will also consider holdings in the sheep and beef, horticulture, viticulture and forestry sectors.
While NZ Rural Land doesn’t plan to pay dividends in the 2021 financial year during its land acquisition phase, it intends to pay-out 90-to-95 percent of adjusted funds from operations in due course.
The company has two cornerstone shareholders. ANZ New Zealand Investments and Clyde and Rena Holland both bought almost 6 million shares, and each has a 9.9 percent stake along with investments by several other funds.
Synlait revises guidance in the wake of a2 downgrade
Synlait Milk is now expecting its FY21 full year net profit to fall by about 50 percent as a result of a2 milk dramatically downgrading its outlook last week due to Covid-19.
It now expects total consumer-packaged infant formula volumes to be approximately 35 percent lower than FY20.
It said it will provide a further update on its FY21 outlook at its half year result on 29 March 2021, or as material information becomes available.
The company said its Board and Management continue to actively pursue opportunities to mitigate the impact of this development including focusing on the execution of its diversification strategy, asset optimisation and prudently managing costs.
It said there has been no disruption to manufacturing or demand for Synlait’s ingredient, lactoferrin or consumer-goods businesses, and it remains confident that it can deliver on its medium to long term objectives.
a2 Milk currently owns almost 20 percent of Synlait. The two companies have an exclusive manufacturing and supply deal under which Synlait produces a2 infant formula.
Synlait shares closed unchanged yesterday at $4.85 after trading as low as $4.50 intraday while a2 Milk shares closed down 0.55 percent at $10.94 after an intraday low of $10.46.
Warehouse Group reports sales lift
The Warehouse Group yesterday reported a 6.3 percent lift in first quarter sales (6.6 percent year to date) compared to the same period last year and said it intends to fully repay the wage subsidy it received in April.
As a result, adjusted after tax net profit for the half year is expected to exceed $70m, before the impact of the wage subsidy repayment, compared to $46.2m in FY20.
Group CEO, Nick Grayston said sales performance to date had exceeded expectations resulting in the decision to repay the subsidy.
He said the group’s financial position had continued to improve from year-end and it now expects its half-year’s net cash balance to be better than the FY20 year-end position of $168m.
Warehouse Group shares closed up 1.2 percent at $2.55.
Second US stimulus package finally agreed
Following marathon last minute negotiations, US congressional leaders have finally settled on a deal for a sweeping US$900 billion rescue package to deliver much-needed relief for small businesses, unemployed Americans and health care workers while also bolstering vaccine distribution.
After days of tense negotiations and months of partisan bickering, Senate Majority Leader Mitch McConnell announced Sunday evening that leadership from both chambers had finalised an agreement on a second round of stimulus measures.
There had been doubts that a deal would be reached before lawmakers depart Washington for the holidays and ahead of the 116th Congress nearing its conclusion as President-elect Joe Biden gets set to assume office in less than a month.
In a joint statement on the deal, House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer said, “We are going to crush the virus and put money in the pockets of the American people.”
The full details of what will be in the relief package have yet to be released, however, the package is expected to include a US$600 direct stimulus payment for Americans under a certain income level, among many other programs aimed at helping the economic fallout of the pandemic.
The House also passed a one-day government funding bill earlier Sunday night to avoid a government shutdown at midnight with the Senate passing the continuing resolution later the same day.
S&P500 futures were trading lower following the news as markets focused on the escalating Covid-19 situation in both the UK and Europe as well as in the US and the likely economic fallout of further lockdowns.
British pound takes a hammering
The British pound fell sharply yesterday as the UK grapples with a new coronavirus strain as well as uncertainty stemming from Brexit trade deal negotiations.
The British pound fell more than 1 percent against the US dollar to $1.33 compared with levels around $1.36 seen last week. Against the NZ dollar the pound is at $1.88 having declined more than 10 percent since April.
The new strain of Covid-19 which spreads more rapidly than previous variants has lead other nations to temporarily restrict travel from the UK in an effort to prevent the new strain from entering their borders. The new outbreak has lead the British government to order an even stricter Covid lockdown in London ahead of Christmas once again forcing retailers and hospitality businesses to close during one of their busiest times of the year.
The currencies have recently fluctuated around headlines related to Brexit trade deal talks. Britain and the European Union remain in a deadlock as a December 31 deadline looms, with disputes over issues such as fisheries plaguing negotiations.
Many currency analysts however remain bullish on the near-term outlook for the pound believing that an eleventh hour Brexit deal will eventually be finalised.
