MARKET CLOSE: Shares drop as a2 Milk falls on Synlait, Pacific Edge extends decline
New Zealand shares fell, with a2 Milk Company leading the NZX 50 Index lower after its milk processor Synlait Milk cut its forecast annual profit by $7.5 million. Pacific Edge dropped for a sixth consecutive day after announcing its full-year loss had widened 44 percent. Fisher & Paykel Healthcare rose to an eight-year high.
The benchmark index fell 4.726 points, or 0.09 percent, to 5178.435. Within the index, 14 stocks fell, 28 rose and eight were unchanged. Turnover was $133.6 million.
A2 Milk dropped 2.5 percent to a two-week low of 78 cents after its dairy processor Synlait cut its profit forecast for the second time this year to between $17.5 million and $22.5 million, from its March estimate of $25 million to $30 million, citing in part the volatility of global dairy prices. Off the benchmark Index, Synlait declined 8.8 percent to a nine-month low of $3.10.
“Investors are getting a little bit nervous because of the volatility of Synlait's guidance and share price,” said Grant Williamson, director at Hamilton Hindin Greene. “This is not the first time they have had to adjust their guidance and it reflects the fact forecasting in that industry with accuracy is difficult."
Units in Fonterra Shareholders’ Fund gained 0.7 percent to $6.10 after Fonterra Cooperative Group, the world’s biggest dairy exporter, forecast a farmgate milk payout for the coming season of $7 per kilogram of milk solids, down from a revised $8.40/kgMS for the current season. The total cash payout for 2015, including dividends, will be announced in July. The units give investors access to the dividend stream on Fonterra’s shares.
Pacific Edge dropped 1.2 percent to a seven-month low of 85 cents, ending the month 21 percent lower than where it started. The bladder cancer test developer posted a full-year loss of $9.95 million as it chases growth in its American market, where it is targeting $100 million in sales in five years’ time.
"Pacific Edge has had a pretty torrid week," said Chris Timms, investment adviser at Craigs Investment Partners.
Similar growth stocks followed suit. Xero, the cloud-based accounting software, dropped 2 percent to $32.00 while Diligent Board Member Services, the governance app maker, declined 0.5 percent to $4.19.
F&P Healthcare climbed 2.5 percent to an eight-year high of $4.60. The breathing apparatus manufacturer, which exports 98 percent of its product, last week said profit rose 26 percent to $97.1 million in the year ended March 31 but expects 2015 earnings growth to stall as it struggles against a high kiwi dollar. The kiwi is headed for a 0.4 percent decline this week.
"They do have a very good hedging policy in place but a lot of people associate a weakening dollar of being beneficial to them," said Craigs' adviser Timms.
Construction and building supplies company Fletcher Building fell 2.1 percent to a 15-month low of $8.95. Today government data showed that building consents fell 5.2 percent in April following strong gains the previous two months as activity slowed due to public holidays.
Telecom fell 1.1 percent to $2.69. New Zealand’s second-biggest mobile phone operator has been cleared by the Commerce Commission to buy the final lot of 700 megahertz radio spectrum flagged for fourth-generation mobile use.
Chorus fell 0.3 percent to $1.705 after the Commerce Commission said it would look at a handful of new products from the network operator to see whether they require regulation.
Outside the benchmark index, Abano Healthcare fell 2.5 percent to $6.60 after dissident shareholders Peter Hutson and James Reeves filed papers in the High Court in Auckland in a bid to delay the special meeting they called, where they’re seeking to dump the medical investor’s chairman, Trevor Janes. The special meeting is currently set for Friday June 13.
Moa Group jumped 9.3 percent to 47 cents, paring yesterday's 17 percent slide after the boutique beer maker posted a wider full-year loss and said major shareholders Pioneer Capital and the Business Bakery have committed to providing enough financial support to allow the company to keep operating for at least the year ahead.