Market close: Energy stocks take a hit, Vulcan Steel shares slide after downgrade

Vulcan Steel fell 64c or 6.89 per cent to $8.65 after downgrading its earnings for the year ending June.

The New Zealand sharemarket dipped more than half a per cent as interest rate-sensitive energy stocks took a hit ahead of this week’s latest inflation data.

The S&P/NZX 50 Index fell steadily all day and closed at 11,938.92, down 74.51 points or 0.62 per cent, with the utilities sector declining 1.49 per cent.

There were 64 gainers and 75 decliners over the whole market on volumes of 25.01 million share transactions worth $94.41 million.

Jeremy Sullivan, investment advisor with Hamilton Hindin Greene, said the market was driven down by utility and industrial stocks on concern that interest rate rises still have a little bit further to go.

He said all eyes will be on Wednesday’s June consumer price index. The market is expecting headline inflation of 5.9 per cent, slightly below the Reserve Bank’s forecast of 6.1 per cent.

“We are still more likely to get an official cash rate increase than decrease this year. The energy stocks, with stable cash flow, are particularly interest rate sensitive and when there is any change in interest rate expectation they tend to get hit first,” Sullivan said.

The NZ dollar continued to strengthen against the American greenback, trading at US63.50c after reaching an intraday high of US63.74c.

In the energy sector, Contact was down 9c to $8.03; Mercury also declined 9c to $6.40; Manawa decreased 6c to $4.79; Genesis shed 2.5c to $2.69; and Vector was down 7c to $3.98.

Meridian declined 15c or 2.7 per cent to $5.40. Meridian said the opening of the $448m Harapaki wind farm in Hakes’s Bay has been delayed by three months and will produce its first power in October and be fully operational in September next year.

Harapaki’s 41 turbines will produce 176MW of renewable energy, enough to power more than 70,000 average households.

Manawa told the market that generation volumes increased 27 per cent to 531GWh in the first quarter compared with the previous corresponding period, mainly due to North Island volumes being 41 per cent higher and South Island 12 per cent.

Utilities investor Infratil, down 9c to $9.90, is offering $75m worth of six-year infrastructure bonds to New Zealand investors, with the option to accept up to a further $75m oversubscriptions.

The interest-rate sensitive property sector was also weaker. Investore declined 4c or 2.76 per cent to $1.41; Vital Healthcare Trust was down 5c or 2.09 per cent to $2.34; Argosy shed 2c to $1.16; and Precinct decreased 2.5c or 1.95 per cent to $1.255.

Carbon Fund rose 23c or 17.04 per cent to $1.58 after the High Court ruled that Climate Change Minister James Shaw must reconsider Emissions Trading Scheme settings - including those in force this year - by the end of September.

Vulcan Steel fell 64c or 6.89 per cent to $8.65 after downgrading its earnings for the year ending June. Operating earnings (ebitda) is now forecast at $205m-$209m instead of $215m-$230m and net profit $86m-$89m (previously $95m-$109m) including the increased costs of integrating Ullrich Aluminium.

Vulcan said market conditions remain uncertain in the near term, with potential for further weakness, especially in New Zealand ahead of the upcoming general election.

Sullivan said the Vulcan update disappointed the market. Steel firms are facing a slowdown in the construction sector and starting to reduce their inventories.

Fletcher Building was down 11c or 1.97 per cent to $5.47; Tourism Holdings declined 13c or 3.61 per cent to $3.47; Michael Hill decreased 3c or 3 per cent to 97c; and Briscoe Group was down 7c to $4.12.

Oceania Healthcare decreased 4c or 5 per cent to 76c; Sky TV was down 5c or 2.08 per cent to $2.35; and Cannasouth declined 1.5c or 5.77 per cent to 24.5c.

Auckland International Airport decreased 9c to $8.31 after telling the market that passenger volumes in May were 83 per cent of pre-Covid traffic and 88 per cent in June. Total passengers in May were 1.32 million compared with 1.59 million in May 2019 and 1.34 million in June (1.53 million).

Advanced manufacturer Rakon, declining 3c or 3.37 per cent to 86c, told the market that the first quarter performance of the 2024 financial year was slightly above expectation, with the space and defence demand outlook remaining strong and a healthy order book through to the 2025 financial year.

Rakon, which makes frequency control and timing products, said there was a temporary slowdown in the deployment of 5G infrastructure and posed a risk of up to $10m in the 2024 financial year guidance.

Fisher and Paykel Healthcare added 12c to $24.58; Ebos Group gained 25c to $38; Serko increased 12c or 3.08 per cent to $4.02; Restaurant Brands collected 24c or 3.86 per cent to $6.45; and Allied Farmers added 3c or 4.29 per cent to 73c.

Software firm Black Pearl Group increased 2c or 3.51 per cent to 59c; 2 Cheap Cars added a further 3c or 5.08 per cent to 62c; MHM Automation was up 3c or 3.45 per cent to 90c; and Millennium & Copthorne Hotels NZ gained 5c or 2.55 per cent to $2.01.

Chatham Rock Phosphate, unchanged at 17c, has completed a private placement of 5.38 million units and raised $828,590.