NZ stocks: All eyes on the kiwi as some set to win and some lose

By ELLEN READ

The enduring strength of the kiwi will be a focus of the New Zealand stock market this week.

First NZ Capital strategist Jason Wong has looked at the impact on 18 listed companies that have US or Australian dollar exposure.

"For the majority of companies covered with significant currency exposure, an appreciating NZD-USD cross rate is positive for earnings due to lower import costs," Wong said.

Of those he looked at with such exposure, eight benefit from a strong kiwi (Air NZ, Briscoe Group, CanWest Mediaworks, Nuplex, Pumpkin Patch, Sky TV, Vertex and the Warehouse). And five suffer (Carter Holt Harvey, Fisher & Paykel Healthcare, Sanford, Skellmax and Tenon).

With the Australian dollar the situation is not as favourable because just CanWest Mediaworks is seen as benefiting, says Wong.

Carter Holt, Feltex, Fisher & Paykel Appliances, Fletcher Building, Guinness Peat Group, Nuplex, Pumpkin Patch, Vertex and Waste Management will all feel the pinch of the transtasman cross-rate as all are geared to exports.

Wong said he had ignored the impact of hedging - as this usually simply delayed the ultimate impact on earnings.

"With the risk of the New Zealand dollar holding up stronger for longer, there is clearly a downside risk to many companies earnings which are negatively impacted by a strong NZD-USD or NZD-AUD," he said.

Pumpkin Patch - one of the companies Wong studied - reveals its annual result on Friday. With the domestic economy robust, the company upgraded its profit forecast in July.

Raising eyebrows coming so soon after listing, the children's wear retailer said it saw after-tax profit for the year to July 31 of $7.5 million to $8 million, compared with its April forecast of $4.03 million.

Chairman Greg Muir said then that the group had benefited from a buoyant three months in Australia, New Zealand and Britain. Discounting in Australasia was less than expected and tax losses were also used in Britain.

The shares certainly seem to be expecting good news. They closed at $2.00 on Friday, sharply higher than the $1.25 June listing price.

Hallenstein Glassons is another retailer to have upgraded its profit forecast in recent months. The business now expects its full-year profit to "significantly exceed" the previous year's profit of $11.46 million.

Hallensteins has reported profit of between $11.3 million and $11.5 million for the past four years. Announcing the upgrade, in early July, the company attributed it to good winter trading and gains on the sale of properties in Nelson and Christchurch.

Finally, discount broker Direct Broking has released a research report on meat company Affco, rating it a buy. Affco shares closed at 41c on Friday.