Spark was one of the big disappointments of the reporting season, with a first half net profit drop of nearly 78 percent. File photo. Photo: RNZ / Kim Baker Wilson
The corporate reporting season underwhelmed the market, with many companies reporting weak results and few bright spots to be found.
The market's mood was not helped by a few surprises, including Ryman Healthcare, who conducted an unexpected billion-dollar capital raise, with a heavily discounted offer of shares to fund a restructure of its operations.
In contrast, Nikko Asset management equity analyst Tim O'Loan said Ryman's competitor Summerset reported a strong result in line with the guidance it had offered previously, along with a well-managed balance sheet.
"This has been a tough reporting season for New Zealand corporates," O'Loan said, adding Ryman's outlook did little to improve the mood.
Other disappointments included Spark's much weaker-than-expected first half net profit of just $35 million - a drop of nearly 78 percent on the year earlier.
Devon Funds head of retail Greg Smith said the results were mixed, with companies with an international focus doing much better than those with a focus mainly on the domestic economy.
"A good example, would be Spark New Zealand, which came in for pretty awful result. There wasn't really anywhere to hide," Smith said, adding the bottomline result and a weak outlook driving the share price down 20 percent on the day.
"Obviously, government is cutting back. Businesses are cutting back. Consumers are watching their money as well."
Fletcher Building also had a weak result with a net loss of $134m, but its outlook was a bit brighter.
"And they said, in fact, since the rate cuts late last year, that trading had improved a bit, albeit from depressed levels."
Smith said the Reserve Bank also cut the official cash rate by 50 basis points in the middle of the reporting season to 3.75 percent and flagged further rate cuts over the rest of this year to perhaps 3 percent.
"That offered a little bit of hope about the next earning season and looking at the next half later in the year."
Smith said agricultural companies with exposure to the export market had better results, benefiting from the low New Zealand dollar, and in particular the dairy sector.
"You saw a really strong reaction to the result from A2Milk. They are doing well in a in China and . . . Fonterra having upgraded the farm gate milk price."
Fonterra will report is first half result on 20 March.
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