Market close: Mercury's earnings downgrade fails to jolt sharemarket

Mercury Energy fell 26c or 3.83 per cent to $6.52, but the New Zealand sharemarket rose for a third successive day. Photo / Supplied

Mercury Energy's unexpected earnings downgrade failed to jolt the New Zealand sharemarket which continued to consolidate with its third successive rise.

The S&P/NZX 50 Index picked up 48.85 points or 0.39 per cent to 12,566.5 after hitting an intraday low of 12,511.11. There were 82 gainers and 56 decliners over the whole market.

Trading was heavy with 119.7 million share transactions worth $395.13 million with strong activity in four Smartshares exchange traded funds. Nearly 80m units in the FNZ, NZG, NZ Cash and NZ Bond funds changed hands at a total value of more than $230m.

Dan Stratful said key blue chip stocks on the local market were rallying, and people were recognising the reliable dividend yields in Spark and Chorus.

"All year we have under-performed the Australian ASX market which is near a record high on the 20-year chart because of strong commodity prices and the economy bouncing back to pre-pandemic levels. But we are in positive territory now," he said.

The S&P/ASX 200 Index had fallen slightly by 0.21 per cent to 7277.60 at 5.45pm (NZ time).

Mercury Energy fell 26c or 3.83 per cent to $6.52 after downgrading its operating earnings (Ebitdaf) from $520m to $460m for the present financial year ending June. Stratful said the downgrade was a surprise.

"With the continuing dry conditions (at Taupo) and problem at Kawerau, the earnings pressure may now roll over into the 2022 financial year. I don't see further downgrades spreading through the energy sector. Each stock is different in terms of asset mix and geographical spread."

Mercury told the market that an expected 200GWh decrease in full-year hydro generation to 3600GWh, higher wholesale spot prices, and an unplanned outage at the Kawerau geothermal power station contributed to the downgrade. A mechanical failure will keep the station out of service for several months.

Other energy stocks Contact increased 7c to $8.27; Trustpower gained 11c to $8.65; and Genesis, which adds gas to its asset mix, was down 4c to $3.385.

Blue chip stocks on the move were Fisher and Paykel Healthcare, up 20c to $29.35; Auckland International Airport rising 11c to $7.70; Ebos Group increasing 33c to $33.30; and Ryman Healthcare gaining 29c or 2.3 per cent to $12.90.

Spark, which pays gross 7 per cent dividend, rose another 4c to $4.79, and Chorus, paying a gross 5 per cent dividend, was up 7c to $6.65.

Freightways increased 8c to $12.05; Vista Group rose 13c or 5.91 per cent to $2.33; Serko gained 5c to $7.10; and Turners Automotive was up 10c or 2.44 per cent to $4.20.

SkyCity Entertainment Group, under an anti-money laundering investigation in Australia, was unchanged at $3.45. An analyst said VIP earnings at the Adelaide casino appear to be at the centre of the investigation and account for 1 per cent of group earnings.

Tourism Holdings was down 4c to $2.53; NZME declined 3c or 3.95 per cent to 73c; and Evolve Education fell 8c or 8.51 per cent to 86c.

Me Today continued to climb, rising 1.2c or 12 per cent to 11.2c, after sitting at 7.9c on May 25. The penny stock attracted investors' attention after announcing a $36m deal to buy manuka honey supplier, King Honey.

"It's a bold acquisition by Me Today," said Stratful, "and if they bed it in well and make it work, then King Honey will be a game-changer for them. It will be interesting to see how it goes."

Sky Network Television is offering a year's free Disney+ access to people who subscribe to the new broadband service for at least 12 months. The offer finishes May 31 next year, and Sky TV's share price increased 0.002c to 17.1c.

Shareholders at the Scales Corporation annual meeting were told that the latest apple harvest totalled 4.8m trays, but Mr Apple own-grown volumes and pipfruit exports from the Tasman region were lower than forecast. Prices are expected to be higher. Scales confirmed its net profit guidance of $27.5m-$335m for the 2021 financial year, and its share price slipped 7c to $4.83.

Templeton Emerging Markets fund rose 20c to $20.50, after telling the market it is splitting its shares from 25p (NZ49c) to 5p a share. Templeton invests in 80 companies and manages assets worth $5.11b.