Christopher Niesche: Go-ahead businesses defy the current trend for gloomy predictions

The recent earnings season has been characterised by mostly dour outlooks for most companies, but there were exceptions. Christopher Niesche surveyed the brokers and found four stocks that stood out.


Delegat's

* Full-year net profit: $5.2 million, up 101 per cent.

* Share price since result: $2.29, up 6.5 per cent.

Delegat's net profit was 19.5 per cent higher than forecast in the wine producer's prospectus earlier this year.

The strong earnings have given the market - and founder Jim Delegat - increased confidence the company will meet its bullish forecast of a $13.8 million net profit in the next financial year.

In contrast to the many gloomy outlook statements this earnings season, Delegat said his company was experiencing continued strong demand in all major markets and had been able to lift prices in the "very big and tough" British market.

This year's results were the first time the company publicly reported its results after listing in April and unlike some other recent listings, there were no nasty surprises buried in the accounts.

The strong earnings also justify the rise in the shares from their $1.40 initial public offering price.


Fletcher Building

* Full-year net profit: $379 million, up 9 per cent.

* Share price since result: $8.55, up 0.7 per cent.

By continuing to increase profits even as the economy slows, Fletcher Building has shown the success of former CEO Ralph Waters' transformation of the company into a transtasman building materials manufacturer. The company is far less reliant on earnings from New Zealand than previously, which should stand it in good stead as the local economy continues to soften. While Fletcher Building's net profit was in line with what the market expected, its trading outlook - "another satisfactory result" next year - was significantly better. "People have been predicting profit growth to flatten out and the downturn in the economy to start to affect them," says ASB Securities broker Stephen Wright. "While profit growth is slowing, it's still reasonable."

If new Fletcher Building CEO Jonathan Ling can maintain Waters' habit of under-promising and over-delivering then this will be good news.


Nuplex

* Full-year net profit: $62 million, up 87.3 per cent.

* Share price since result: $6.28, up 0.5 per cent.

Around half of Nuplex's net profit was from the sale of its Environmental Services business late last year, but it was a good year for the industrial resin-maker nonetheless. The result was the first to incorporate a full year's earnings from the Netherlands-based Coatings Resins business bought from Akzo Nobel in January last year. It showed Nuplex's expansion into Europe has so far been a success and it hasn't suffered the growing pains many Kiwi companies do when they expand aggressively offshore.

"We believe Nuplex can continue to outperform the market," said Goldman Sachs JBWere in a research report. "This is based on our belief that it has good earnings momentum and is seeing steady demand for its products in most markets."


Mainfreight

* First quarter net profit: $6.33 million, up 49.7 per cent.

* Share price since result: $6.16, up 6.8 per cent.

After protracted difficulties in Australia, Mainfreight has turned the corner with its operations across the Tasman, and its New Zealand businesses are also performing well, despite the slowing economy.

The transport and logistics company now earns over half of its revenue offshore, which should provide a shield as the local economy weakens.

Like Delegat's and Fletcher Building, Mainfreight bucked the trend in this earnings season and issued a positive trading outlook.