Recession rut: The major New Zealand companies doing it tough

Financial results from Spark, Fletcher Building, Sky Television and SkyCity among others show the recession has some of our biggest corporates reeling.

“It’s been yet another tough earning season for New Zealand, in line with pretty low expectations, I think it’s fair to say,” Forsyth Barr senior equities analyst Aaron Ibbotson told Markets with Madison.

Spark’s share price nosedived off its weak result, Fletcher’s financial losses deepened and steel companies noted demand was at its lowest level since the 1990s.

Ryman Healthcare’s $1 billion capital raise this week, announced alongside a decline in sales, wiped 20% off its share price.

Many of those companies had started cutting costs, in line with lower revenue from consumers and governments – something Ibbotson said was positive to see, albeit a bit late.

“Management has probably been too slow to react to the weakness in the markets,” Ibbotson said.

He also discussed some boards' commitment to paying dividends, which in Spark’s case had done nothing to support its share price which was down more than 20% year to date.

“There’s been this culture of defending the dividend above all else, but I think what you’re seeing is, when that gets disconnected from the cash generation in the business, that doesn’t work anymore.”

Despite the downturn damage, Ibbotson had an optimistic outlook, with interest rates continuing to fall, and market bright spots in Ebos, A2 Milk and smaller technology stocks Vista and Gentrack.

The question was when the broader economic impetus would arrive and lift the New Zealand Stock Exchange laggards.

Watch Aaron Ibbotson discuss the state of our largest companies in today’s episode of Markets with Madison above.

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Disclaimer: The information provided in this programme is of a general nature and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.

Madison Reidy is the host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment and has covered business and economics for television and radio broadcasters.