Earnings downgrades topple NZ sharemarket from record high

Tourism Holdiings shares have nosedived after a the company issued an earnings downgrade. Photo/NZ Herald.

Earnings downgrades from three big NZX-listed companies have stopped the share market from bursting through the 10,000-point barrier on the S&P/NZX50 index.

The declines were led by Tourism Holdings (THL), whose shares were heavily sold off after the company issued a surprise earnings downgrade.

That downgrade, together with weather-related downgrades for Mercury Energy and Genesis, made for a soggy start for the share market, which yesterday closed at a record high of 9982.2.

By 10.45 am, the index was at 9,946 points, down 0.4 per cent.

Mark Lister, head of private wealth research at Craigs Investment Partners, said downgrades from the power generators were "smaller and less worrying" than THL's.

"That group of stocks has essentially dragged the index down, which makes it unlikely that we will hit that 10,000-point milestone today," he said.

"THL's earnings downgrade was pretty hefty - and it was a big surprise," he said.

THL shares fell 24 per cent when trading opened after the company lowered its full-year earnings guidance by as much as 22 per cent.

It said decisive operational and capital reviews of its US operations were underway.

The company, which rents and sells campervans, expects net profit of $25 million to $28m for the year ending June 30.

In its first-half result issued in February, THL signalled that its annual profit would be around $32m, already lower than its previous guidance of $32m to $34m.

The stock fell to $3.85, the lowest since June 2017. It recently traded at $4.05 as bargain hunters moved in after the initial tumble, said Grant Williamson, a director at Hamilton Hindin Greene.

He noted it was the second downgrade in a "relatively short period of time," and as a result investors had "treated it harshly".

"I think investors are concerned," he said, noting the company has recently expanded aggressively which creates some risk.

Tourism Holdings said the main reason for the downgrade was the ongoing deterioration in US vehicle sales.

"THL's expectations for the financial year are now substantially below previous forecasts," it said.

According to the Financial Times, US auto sales rose in 2018 but Ford and General Motors reported a drop in domestic sales that pointed to a slowdown in 2019.

In the six months to December 31, THL posted a 23 per cent decline in first-half profit as the rental RV operator continued to invest in its joint venture with Thor but reiterated its expectation for TH2 to be a "significant earnings contributor in the future".

THL's performance in the New Zealand and Australian markets remained on track with a solid outlook, it said.

Shares in Mercury were down 15 cents at $3.78 while Genesis lost 4.5c to $3.11 after their earnings downgrades.

Mercury said it had revised its FY2019 Ebitdaf guidance from $515 million to $495 million due to a fall full-year forecast hydro generation due to continued dry weather in the Taupo area.

Genesis now expects an outcome towards the lower end of its previously stated Ebitdaf guidance of $360m to $375m, following supply issues from the Pohokura gas field, the greater use of more expensive imported coal, and low hydro storage.

- Additional reporting Business Desk.