NZ Stocks: Contact sparks in lively session

The Warehouse caught the market out with a profit warning yesterday, and Contact Energy shot up on news its cornerstone shareholder was finally looking to increase its stake.

The NZSE-40 capital index closed up 6.95 points, or 0.33 per cent, at 2103.95.

Turnover was reasonable, 29.21 million stocks valued at $111.57 changing hands.

Topping that was Telecom's $51.5 million. The stock gained 7c to close at $6.51.

Peter Stokes of JB Were said The Warehouse's long-term outlook remained strong despite a warning that tighter margins in its Australian operations would affect its full year result.

The Warehouse said sales and gross margins at its Australian subsidiaries were "significantly below plan" for March and April, and the chain would now not contribute any positive earnings this financial year.

The company, headed by chief executive Greg Muir, revised its annual profit down by about 15 per cent.

Its stock, which had been piling on gains in the past few weeks, reacted immediately by shedding 38c to $5.60 at the opening bell. It closed down 46c at $5.52.

"In the past these types of setbacks for the company have provided fairly good buying opportunities," Mr Stokes said. JB Were had a positive "overweight" recommendation on the stock.

Air New Zealand announced that it would not proceed with its planned $150 million capital notes issue, which came as no surprise to the market, he said.

Air NZ A shares were down 1c at $1.07 and the Bs shed 1c to $1.51.

Contact Energy finished up 17c at $3.05 after cornerstone shareholder Edison Mission Energy announced it may increase its stake by 8.5 per cent to 51.16 per cent, for between $2.90 and $3.25 a share.

"It's been a long time coming," Mr Stokes said.

"Because it's indicated a price range, clearly the rise is reflective of corporate activity.

"I just raise the question that if it's after 8.5 per cent, there's going to be just under 50 per cent of the total issued capital that won't participate in that."

Tightly-held carpet maker Cavalier rose 20c to $5.08 on fairly light volume, on anticipation the company would soon make a decent-sized capital payout to shareholders.

Baycorp rose 10c to $12.35, Fisher and Paykel was up 15c to $8.50, INL put on 5c to $3.40 and Sky City gained 5c to $9.20.

United Networks shed 15c to $8.10 and Sanford fell 6c to $6.14.

- NZPA