Business & Investing: Air NZ and Freightways among 15 firms briefing shareholders this week on performance and outlook
Investors were not unduly rattled by last week’s higher than expected CPI figure of 4.9 percent after prices in the September quarter rose 2.2 percent, considerably higher than the Reserve Bank’s quarterly forecast of 1.4 percent.
Central banks are continuing to grapple with how to respond to inflation shocks while economic growth is moderating. US inflation is running at an annual rate of 5.5 percent, while Australia matches our own rate at 4.9 percent.
In the UK, the Bank of England’s chief economist Huw Pill told the Financial Times that the headline rate of inflation could exceed 5 percent next year, adding that the central bank would have a “live” decision on whether to raise interest rates from a current record low next month.
Rates and currency markets are now pricing-in multiple rate hikes next year for the US Fed, and as soon as December for the Bank of England. The Federal Reserve, in its Beige Book assessment of economic conditions released last week, said a rebound in US growth from the shocks of coronavirus had now “slowed”, citing supply chain shocks, worker shortages and the continued spread of the virus.
The Reserve Bank of NZ will release its final monetary policy statement for the year on November 24 with the central bank widely expected to hike the OCR by a further 25bp, though a more aggressive 50bp hike cannot be ruled out following last week’s higher than expected CPI result.
Flowing through to business
The NZX50 finished the week up 0.6 percent at 13,093, despite Auckland remaining in lockdown for what looks like at least another few weeks. A total of 15 listed company AGMs are scheduled to take place this week including Air New Zealand, Genesis Energy, SkyCity Entertainment, Port of Tauranga and Freightways, giving investors an opportunity to hear more from chief executives about market conditions, the impact Covid is having and their outlook for the next six months (Full list below). ANZ Bank will also announce its full year results on Thursday.
In Australia, stocks also ended the week marginally higher with the ASX200 index closing up 0.3 percent at 7,384.
In the US stocks pulled back from an all-time high last Thursday as investors weighed strong corporate earnings against persistent concerns over elevated global inflation. The S&P 500 ended the week up 1.6 percent at 4545.
Consumer goods groups Unilever and Procter & Gamble said they had managed to raise prices to pass on higher input costs to customers while electric car maker Tesla posted its highest quarterly profit which saw its share price hit an all-time high of US$909. Since June, Tesla shares have now gained almost 60 percent in value.
Earnings results this week from tech bellwethers including Facebook, Alphabet (Google), Microsoft, Apple and Amazon will be closely scrutinised for pricing pressures and topline revenue growth during the quarter. Last week, shares in social media platform Snap slid more than 26 percent after warning of reduced advertising revenue.
Oil continued its strong run for an eighth straight week. Brent Crude Oil futures gained a further 0.9 percent to close at US$85.70 a barrel as tight supply continued to push prices higher.
Gold prices also pushed higher on growing inflation concerns ending the week up 1.4 percent at US$1793 an ounce.
The US 10 year treasury yield gained 3.1 percent to 1.64 percent, while Bitcoin hit a new all time high of US$67,016 following the launch of a new exchange traded fund (ETF) allowing investors easier access to invest in the cryptocurrencies. Bitcoin shed some of its earlier gains, finishing the week down 1 percent at US$60,910.
The NZ dollar strengthened on the back of a weaker US dollar ending the week up 1.1 percent at 71.55 US cents.
WEEK IN REVIEW
a2 Milk shares lost some of their earlier gains following rumours the company may be facing a second class action claim. In a statement to the NZX a2 Milk acknowledged media reporting concerning a potential second action against the company that is apparently being investigated by Shine Lawyers but said it had not been formally notified of any case. Melbourne based law firm Slater and Gordon has already filed a claim in the Supreme Court of Victoria on behalf of shareholders who suffered losses when they bought a2 Milk shares on the ASX and NZX between Aug 19 2020, and May 9 2021. a2 Milk shares managed to close up 1.4 percent for the week at $7.18.
Greenfern Industries (GFI) became the NZX’s latest market debutant listing at 41.5 cents, though the company said it would not raise any funds in the process. The Taranaki-based cannabis and hemp food company became the third listed medicinal cannabis company alongside Cannasouth and Rua Biosciences, which have market capitalisations of $54.3m and $57.4m respectively. The company said the compliance listing would allow it to attract new capital and promote product development.
Vulcan Steel, a steel and metals distributor and processor is set to list on the ASX and NZX on November 4, after an initial public offer to raise $400 million. The Australian-domiciled IPO is seeking to raise A$372m at A$7.10 a share for a 39.8 percent stake in the business. The offering is understood to be backed by institutional investors in Australia, NZ and Asia, while the retail offer will open this week.
Fletcher Building said it is continuing to target 10 percent operating profit margins in the year ending June 2023 while acknowledging its current year’s margins would be impacted by the present lockdowns. Speaking at the company’s AGM, CEO Ross Taylor said he was confident that second-half 2022 margin would show good progress towards the company’s 10 percent target, assuming no further material impacts from Covid lockdowns. Fletcher’s earnings before interest and tax (ebit) before one-offs were $669 million in the year ended June this year, beating its own guidance by $9m. Taylor described trading either side of the lockdowns as “very solid” and at levels above the prior year.
PGG Wrightson says current financial year earnings should be in line with the prior year’s result despite ongoing uncertainties related to Covid and supply chain disruptions. Chair Rodger Finlay said that based on the first three months of the financial year, the company had experienced a “strong trading performance.” He said while external supply chain issues had the potential to be disruptive, operating earnings were expected to be broadly in line with last year’s result at around $53 million.
Mainfreight became one of the country’s first major companies to impose its own vaccine mandate. With around 86 percent of its employees and a similar number of drivers fully vaccinated, Managing Director Don Braid said the company had opted to employ only vaccinated workers following enquiries from a large number of customers asking about the vaccination status of its contracted drivers. With some employees refusing to have a Covid vaccination, an increasing number of major companies are calling on the Government to step up and force the issue with vaccination mandates.
Freightways announced it had acquired chilled food delivery business ProducePronto for $10 million. The Auckland-based business was founded in 2011 and operates 20 temperature-controlled vehicles for both fresh and frozen food delivery. With 41 staff across its Auckland, Wellington and Christchurch depots, the company last year generated sales of $16m, with pre-tax earnings of $1.6m. CEO Mark Troughear said the business would complement its existing Big Chill operation.
Kiwibank said its sale of $250 million of perpetual preference shares had been completed, with the distribution rate set at 4.93 percent for the first five years. The rate will be reset at five-yearly intervals at 2.6 percentage points over whatever the five-year swap rate is at the time of each reset, unless Kiwibank chooses to redeem them. The interest rate is higher than the 2.25 percent Kiwibank is currently offering for five-year deposits of $10,000 or more.
Scott Technology attributed its positive year-end results to a refocused corporate strategy with strong mining and meat sector demand helping to lift results. It posted an improved result with net profit after tax for the year ended August 31 of $9.5 million, up from a $17.5m loss the year prior and compares to a $8.6m profit in 2019. Revenue increased 15 percent to $216.2m, with pre-tax earnings of $22.1m. Chief executive John Kippenberger said the company’s mining and meat products were attracting strong global demand.
COMING UP THIS WEEK….
- New residential mortgage lending (Sept) – RBNZ
- Overseas Trade (Sept) – Stats NZ
- Skellerup Holdings (SKL) AGM
- Michael Hill International (MHJ) AGM
- Solution Dynamics (SDL) AGM
- NZ Windfarms (NWF) AGM
- Chorus (CNU) AGM
- ANZ Bank Full Year Results
- Air NZ (AIR) AGM
- Heartland Group Holdings (HGH) AGM
- Freightways (FRE) AGM
- Sky Television (SKT) AGM
- Property Transfer Statistics (Sept Qtr) – Stats NZ
- Employment Indicators (Sept) – Stats NZ
- Household Living-costs Price Index (Sept Qtr) – Stats NZ
- Port of Tauranga (POT) AGM
- SkyCity Entertainment Group (SKC) AGM
- SMW Group (SMW) AGM
- Genesis Energy (GNE) AGM
- MHM Automation (MHM) AGM
- South Port (SPN) AGM