Market close: a2 Milk, Synlait shares surge after China breakthrough; Ebos plunges on lost contract

A2 Milk chief executive David Bortolussi. Its shares rose 30c or 5.23 per cent to $6.04.

Ebos Group, a2 Milk, Synlait and Pacific Edge were the centre of attention with transformative developments, while the New Zealand sharemarket made a recovery after a midday slump.

When the stocks produced good and bad news, much of it surprising, the S&P/NZX 50 Index was down as much as half a per cent, but it closed at 11,864.12 down declining 16.77 points or 0.14 per cent.

There were 87 gainers and 48 decliners over the whole market on volumes of 37.21 million share transactions worth $203.03 million, with Ebos and a2 Milk soaking up much of the trading.

The biggest shock came when Ebos, the seventh largest local stock on capitalisation and Australasia’s leading health products distributor, told the market it will lose the contract to supply the Chemist Warehouse from the end of June next year. The contract is worth $1.9 billion in annual revenue.

Ebos led the market down, plunging $4.08 or 9.84 per cent to $37.38 on trade worth $45.92m. Ebos lost the contract to smaller rival Sigma Healthcare, which will supply pharmaceuticals and consumer goods to Chemist Warehouse for five years.

Greg Smith, head of retail for Devon Funds Management, said Ebos had indicated there was a risk of losing the contract but it was hard to imagine they saw it coming.

“They could have expected to lower prices but not lose it. This will be a significant hit to Ebos’ earnings as they are unlikely to win the contract back,” he said.

Synlait received the long-awaited news that China’s State Administration for Market Regulation (SDAMR) has approved the re-registration of a2 Milk’s China label infant milk formula through to September 2027.

Synlait surged 27c or 16.88 per cent to $1.87 and a2 Milk rose 30c or 5.23 per cent to $6.04, with 2.57 million shares worth $15.77m changing hands.

Production at Synlait’s Dunsandel processing plant will start this month, and a2 Milk will switch its infant formula from the old to new registration over the first half of next year.

Synlait said the re-registration was pivotal for the ongoing success of the manufacturing and supply agreement between itself and a2 Milk.

Smith said the uncertainty over the SAMR re-registration had been weighing on the shares and the news came as a relief, with Synlait and a2 Milk share prices rebounding strongly.

Pacific Edge went into a trading halt, probably until tomorrow, to consider the surprising development that it won’t receive Medicare funding for its Cxbladder tests in the United States.

Cxbladder accounts for about 60 per cent of Pacific Edge’s revenue and it last traded at 49.5c, having fallen from a high of $1.56 at the end of September 2021.

Novitas, Medicare’s contractor, noted that Pacific Edge’s Cxbladder tests – triage, detect, monitor, resolve and detect+ - were not considered medically reasonable and necessary, the threshold for funding coverage under the US Social Security Act.

On a busy day for corporate news, there were other big price movements.

Tourism Holdings was down 25c or 6.786 per cent to $3.45. Eroad climbed 8c or 10.81 per cent to 82c; Serko increased 19c or 6.21 per cent to $3.25; Fletcher Building was up 20c or 4.04 per cent to $5.15; and Sanford added 16c or 3.9 per cent to $4.26.

Freightways decreased 15c to $8.85; Fisher and Paykel Healthcare was also down 15c to $23.81; Auckland International Airport declined 7c to $8.72; Arvida Group shed 3c or 2.46 per cent to $1.19; Seeka fell 10c or 3.57 per cent to $2.70; and TradeWindow was down 2c or 5.41 per cent to 35c.

In the property sector, Goodman Trust increased 5c or 2.34 per cent to $2.19; Vital Healthcare Trust was up 4.5c or 1.97 per cent to $2.33; Asset Plus gained 1.5c or 6 per cent to 26.5c; and Stride declined 3c or 2.24 per cent to $1.31.

Mainfreight collected $2.50 or 3.7 per cent to $70.05; Summerset Group increased 20c or 2.22 per cent to $9.19; Green Cross Health improved 4c or 2.86 per cent to $1.44; Third Age Health Services was up 2.6c or 1.76 per cent to $1.50; and Vista Group added 4c or 2.9 per cent to $1.42.

Turners Automotive increased 8c or 2.22 per cent to $3.68; Vulcan Steel was up 23 or 2.77 per cent to $8.53; South Port NZ added 22c or 2.91 per cent to $7.70; and NZ King Salmon Investments rebounded 1.9c or 9.69 per cent to 21.5c.

Mercury, up 7c to $6.72, has launched a $100m five-year green bond, with the ability to accept a further $50m in over-subscriptions. Fellow energy companies Meridian was down 3.5c to $5.54, and Contact gained 6c to $8.01.

Cannasouth declined 1.5c or 5.45 per cent to 26c after telling the market it has exported its first shipment of dried cannabis-flower to Australia.