Market close: NZ market edges up while Synlait Milk shares drop 10 per cent

Synlait Milk shares fell 12 cents or 9.4 per cent to $1.16 by the end of the day. Photo / NZ Herald

New Zealand’s benchmark share index rose while shares in milk processor firm Synlait Milk fell almost 10 per cent on the news that A2 Milk wants to cancel Synlait’s exclusive milk formula production and supply rights deal because of delivery and performance issues.

The S&P/NZX 50 Index rose 49.3 points or 0.4 per cent to 11,397.00. Turnover was $70.7 million. There were 57 gainers and 79 decliners on the main board.

A2 Milk told the market on Monday morning it had notified Synlait on Friday after trading closed that Synlait’s “full and on-time performance” fell below the level required for Synlait to maintain its exclusive rights. Synlait shares were put into a trading halt this morning and the halt wasn’t lifted until after 3pm. Synlait said it disputes that A2 Milk has the right to cancel the exclusivity arrangements.

The dispute resolution process involves a 20-business day period of good faith negotiation between Synlait and the a2 Milk Company, followed by arbitration if not resolved.

The milk processor also confirmed its full-year guidance ahead of the result due to be announced on September 25. Its net profit guidance range is a net loss of $5m to a net profit of $5m.

Peter McIntyre, an investment advisor at Craigs Investment Partners, described the guidance as “very wide” and was likely to have been revealed to “reassure the market of their financial position”.

Synlait Milk shares fell 12 cents or 9.4 per cent to $1.16 by the end of the day. A2 Milk was down 5c or 1 per cent to $4.83. Fonterra Shareholders’ Fund Units went in the other direction and were up 13c or 4.1 per cent to $3.30 by the end of day trading.

McIntyre said the next global dairy trade (GDT) auction was on Wednesday and because prices were pulling back for dairy producers, it was good for Fonterra’s ingredients side of the business.

McIntyre said Fonterra was also expecting to pay dividends towards the higher end of its payout ratio.

“Some investors are seeing this as an opportunity to maybe get more involved with Fonterra,” he said.

In other moves, SkyCity Entertainment Group fell 3c or 1.5c per cent to $1.97. The casino operator’s two-day scrap over a $220m contract it had with a Macquarie Group subsidiary kicked off at the High Court in Auckland on Monday. The court case is over a concession agreement for a parking building damaged in the international convention centre blaze in 2019.

Contact Energy was up 3c or 0.4 re per cent to $8.23. The company said its Tauhara geothermal project has continued to make progress and was 98 per cent on target as hydro lake levels fell below historical mean averages.

Contact’s mass market electricity and gas sales were 489 gigawatt hours (GWh) during August, compared to 458 in August 2022.

Also on the gentailer front, Genesis Energy said it now hopes its Huntly Unit 5 plant will start generating again at the end of January.

It told the market on Monday that it now expected the financial impact to be $25m after successful negotiations with third parties to accelerate a return to service, subject to any material adverse events or unforeseen logistical or supply chain delays.

Genesis Energy rose 1.5c or 0.6 per cent to $2.52, Mercury was up 1c or 0.2 per cent to $6.16, Meridian Energy also edged up 2c or 0.4 per cent to $5.38 but Manawa Energy fell 17c or 3.7 per cent to $4.40.

Heavyweight stock Mainfreight was up 1c or 0.02 per cent to $64.40, Auckland International Airport rose 11c or 1.4 per cent to $7.85, and Fisher & Paykel Healthcare edged up 35c or 1.6 per cent to $21.75.

Aged care stocks were mixed across the board with Ryman Healthcare down 10c or 1.5 per cent to $6.50.

Summerset Holdings was up 18c or 1.9 per cent to $ 9.88, Arvida Group was up 2c or 1.6 per cent to $1.24 and Oceania Healthcare fell 1c or 1.3 per cent to 76c.

The New Zealand dollar was trading at US59.08c at 3pm in Wellington, up from US59.26c on Friday. The trade-weighted index was at 69.71, from 69.86 on Friday.

CMC Markets analyst Tina Teng said in a note on Monday that it would be a “big week” for the financial markets.

Four central banks, including the US Federal Reserve (Fed), the Bank of Japan, the Swiss National Bank, and the Bank of England are set to decide on their policy rates.

“The Fed is expected to pause rate hikes this time but is likely to stay hawkish, which will be the most influential event to the financial markets,” Teng said.