Market close: Inflation ogre continues to rattle NZ sharemarket

Reserve Bank Governor Adrian Orr announced today that the official cash rate would remain unchanged at 0.25 per cent. Photo / NZME

Global transport and logistics operator Mainfreight continues to be the stand-out performer on the New Zealand sharemarket after announcing another "significant" record profit, but the inflation ogre returned.

The Reserve Bank said inflation would reach 2.6 per cent in the second quarter this year, and implied that it will start lifting the official cash rate (now 0.25 per cent) and therefore general interest rates by August next year, with ANZ economists forecasting an OCR of 1.78 per cent by June 2024.

The market was rattled by the latest Monetary Policy Statement, and the NZ dollar rose from US72.19c to US73.17c during the day before settling at US73.05c at 6pm. The leading index slid downwards during the afternoon till another surge in the last half hour (of closing out transactions).

Finally, the S&P/NZX 50 Index finished steady, edging ahead 6.25 points or 0.05 per cent to 12,347.44 after reaching an intraday low of 12,299.69.

There were 71 gainers and 61 decliners over the whole market, with 52.59 million shares worth $182.18 million changing hands.

Greg Smith, head of research with Fat Prophets, said the market was sold off in the lead-up to the Reserve Bank announcement. "Inflation has been a bit of a buzzword lately, and there's going to be challenges over increasing interest rates sooner or later – with increasing commodity and house rises and wage pressures as unemployment falls.

"At least, the Bank has the luxury of taking a narrow measure of inflation – it gives them some leeway," said Smith.

Mainfreight increased its revenue $448.44m or 14.5 per cent to $3.54 billion, its gross profit 27.2 per cent to $262.41m, and its net profit $40.1m or 18.2 per cent to $188.11m for the year ending March. All its businesses, New Zealand, Australia, Europe, Americas, and Asia, had double-digit growth except for Europe at 6.5 per cent. The overseas businesses now contribute 76 per cent to revenue.

Mainfreight's share price finished 26c ahead at $73.26 after surging to $75.18 earlier in the day. The upbeat company is paying shareholders an increased final dividend of 45c a share on July 16, and staff a total bonus worth $43.9m, up 61 per cent from the previous year. Mainfreight said the first seven weeks' trading in the new financial year match the level of the past six months.

Smith said Mainfreight has made the most of fertile conditions for them during the Covid pandemic. It was a great annual result.

Another Covid beneficiary, courier and information management company Freightways, rose 41c or 3.59 per cent to a new high of $11.84; and Ryman Healthcare made a rally, climbing 62c or 4.82 per cent to $13.49. But rival Summerset Group Holdings was down 17c to $12.39.

Interestingly, interest-rate sensitive energy stocks were up – Contact rising 18c or 2.35 per cent to $7.83; Mercury climbing 25c or 3.88 per cent to $6.70; Meridian gaining 9c or 1.75 per cent to $5.24; and Genesis increasing 2.5c to $3.45. But Chorus was down 6.5c to $6.47.

Fletcher Building rose 22c or 3.05 per cent to $7.44 after telling the market it will return $300m to shareholders through an on-market share buyback next month, and it upgraded its operating earnings (Ebit) for the year ending June to $650m-$665m, up from the previous guidance of $610m-$660m.

Other gainers were Port of Tauranga up 12c to $7.29; Vista Group rising 6c or 2.78 per cent to $2.22; rejuvenated Turners Automotive gaining 9c or 2.27 per cent to $4.05; Rakon increasing 5c or 5.68 per cent to 93c; and Cavalier picking up 2c or 4.88 per cent to 43c.

Market leader Fisher and Paykel Healthcare fell $1.25 or 3.83 per cent to $31.38 on the eve of announcing its latest annual result; a2 Milk was down 16c or 2.78 per cent to $5.60; Auckland International Airport decreased 11c to $7.13; and Napier Port declined 9c or 2.74 per cent to $3.19. Personal lender Harmoney fell another 4c or 2.45 per cent to $1.59.

Insurer Tower increased revenue 2 per cent to $194.56m for the six months ending March but its net profit fell 20 per cent to $12.3m. It is paying an interim dividend of 2.5c a share on July 14 – its first in five years – and its share price increased 1c to 76.5c. Tower has forecast net profit of $25-$27m for the full year.

The New Zealand Refining Company rose 5c or 8.33 per cent to 65c as its plant at Marsden Point near Whangarei switches to an import refinery. The company received support from a major customer Z Energy.