MARKET CLOSE: NZ shares gain; Fletcher Building up on outlook

New Zealand shares rose on Fletcher Building's positive annual earnings and outlook while NZX dropped after posting first-half results that included costs of its legal battle with Ralec.

The S&P/NZX 50 Index gained 44.34 points, or 0.6%, to 7355.01. Within the index, 27 stocks rose, 13 fell and 11 were unchanged. Turnover was $175.3 million.

The index was led higher by Fletcher Building, up 4.9% to $10.16. The building and construction company posted a 71% gain in full-year profit and met its earnings guidance, driven by an improved performance in Australia and gains in its New Zealand distribution, residential and construction divisions.

It's forecasting a strong uplift in underlying earnings for 2017 in the range of $720 million to $760 million, mainly on the back of a boom in Auckland residential construction.

Rickey Ward, NZ equity manager at JBWere, said the share price had weakened heading into the results as a broker had downgraded their recommendation, but the earnings today had seen a recovery.

"The result today indicated the benefits of the last two to three years, of focus on restructuring Fletcher into a cleaner operation with better controls is finally paying dividends," Ward said. "Pleasingly, it signals finally that the downgrade cycle is over - we're moving into a company which has a management team which is hellbent on delivering growth to a business which has lacked it for a while now. The outlook's pretty positive - unusually, guidance was provided, and it doesn't seem unrealistic."

Metlifecare gained 2.9% to $6.07 and New Zealand Refining advanced 2.8% to $2.56.

Heartland Bank rose 2.8% to $1.48, Warehouse Group gained 2.5% to $2.88, and Freightways was up 2% to $6.81.

NZX was the worst performer, down 1.9% to $1.02. The market operator's first-half profit dropped 80% as costs related to the ongoing Ralec litigation offset gains in operating revenue.

"I think people are looking at the outlook comments - we're going through a period of a little bit of stagnation in volumes, or liquidity, with limited scope for new IPOs," Ward said. "Some people are saying they've been through a sweet spot and it's more difficult going out from here."

Kiwi Property Group advanced 1% to $1.575. The country's biggest listed property investor plans to build an $80 million office tower as part of a broader development of the Sylvia Park retail centre in Auckland.

Nuplex Industries, which is in the process of being taken over by Allnex Belguim SA, rose 0.4% to $5.35. The company posted a 19% gain in annual profit as earnings lifted across all its key markets.

Nuplex said final approval for the Allnex takeover from the European Commission antitrust body is expected by the first week of September, paving the way for its transfer into the hands of the private-equity backed Belgian company to create one of the world's largest makers of coating resins. Earnings lifted across all its major markets in the latest year following recent restructuring.

Fisher & Paykel Healthcare dropped 1.2% to $10.48 and Trade Me Group fell 1% to $5.14 ahead of its earnings report tomorrow.

Outside the main index, Pumpkin Patch shares spiked 60% to 12 cents. The childrenswear retailer has maintained its earnings guidance for the year ended July 31, and said it had seen a "pleasing second half performance," though it's still considering further restructuring and is looking for more "flexibility" from its lenders.

(BusinessDesk)