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Steel and tube companies said their earnings were under pressure.
After a day of lackluster trading, an earnings downgrade at the steel pipe company dealt a blow to stock market sentiment.
The S&P/NZX50 index closed at 11,864.89, down 7.75 points, or 0.07%.
turnover,
$103 million
Of the 181 stocks traded, 42 rose and 81 fell.
Topping the trading volume chart was retirement village company Ryman, with just over 2 million shares worth $14.2 million changing hands.
Steel & Tube shares closed down 2 cents (2 per cent) at 94 cents after the company released its 11-month update, which said the company was performing well despite challenging markets, with demand for steel now even lower than during the global financial crisis.
The company said it had sustained margin growth, stable market share, stronger customer relationships and significantly improved operating leverage, positioning it well for New Zealand’s economic recovery.
However, Steel & Tube now forecasts normalised EBIT of $14m-$15m in the year to June 2024, below consensus forecasts of around $23m.
Steel & Tube expects profit of $35 million to $36 million this year on an EBITDA basis, compared with a consensus forecast of $45 million. Steel & Tube still expects to declare a final dividend for 2024 and expects demand to improve in 2025.
“It’s a pretty big downgrade,” said Matt Goodson, managing director of Salt Funds.
“This shouldn’t be a surprise to anyone because the steel and tube industry is a classic cyclical stock, there are booms and busts, and we are currently in the bust phase.”
Vulcan Steel, which has extensive steel distribution interests in New Zealand and Australia, fell 4 cents to $7.72 “as the key drivers are the same”, Goodson said.
Fletcher Building closed steady at $3.00 as the dispute between Fletcher and BGC over alleged plumbing faults in Western Australia continues.
In response to BGC’s renewed allegations in the media, Fletcher Construction said it continued to participate in mediation discussions with the Western Australian Government and a number of Western Australian builders, including BGC, to finalise the industry’s response to the pipe failure in Perth.
“BGC’s public statements are a clear attempt to exert crude pressure on the negotiations,” it said.
“The conclusions shared by BGC have not been verified, have not been shared with Iplex, and are inconsistent in many respects with evidence we have gathered directly or with evidence provided by other parties,” Fletcher Construction said.
Goodson said the dispute was one of the key uncertainties surrounding Fletcher Building and that “both parties appear to be still at loggerheads”.
Aside from corporate announcements, markets took some comfort from data showing food prices rose just 0.2% in the year to May.
ASB Bank said price pressures appeared to be cooling and monetary policy was working.
The report said annual consumer price index inflation is expected to fall below 3% by the end of the year.
Goodson said there was now a reasonable view that the central bank could cut interest rates later this year, which would be positive for stocks.
Genesis Energy rose 3 cents to $2.24 after it was hit earlier this month by poor results from the KS-9 well in the Kupe gas field.
Goodson said the company’s stock price is catching up to other large power companies that have been holding up.
“Natural gas is still a relatively small driver for them compared to their power generation and retail businesses.”
In other moves, Fisher & Paykel Healthcare rose 25 cents to $30.77, the largest stock on the market, helping to offset broader market weakness.
Jamie Gray is an Auckland-based reporter covering financial markets and primary industries. He joined the Herald in 2011.
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