Shares fall as investors weight up Fletcher rights issue

Fletcher Building today announced a $750 million rights issue at a 23 per cent discount to the previous trading price of $6.27.

New Zealand shares fell as investors weighed up the impact of Fletcher Building's deeply discounted rights issue soaking up demand from the broader market. Auckland International Airport and exporters A2 Milk Co and Comvita dropped.

The S&P/NZX 50 Index declined 61.83 points, or 0.7 per cent, to 8,344.52. Within the index, 26 stocks fell, 13 gained and 11 were unchanged. Turnover was a smaller-than-usual $82 million, with trading in Fletcher shares halted for the capital raise.

Fletcher today announced a $750m rights issue at a 23 per cent discount to the last trading price of $6.27, with an institutional offer running until Thursday, and trading of the shares halted until Friday.

The capital raise is part of a $1.25 billion refinancing plan shoring up the construction company's balance sheet having drawn $280m in the first three months of this year alone. Fletcher also announced plans to sell Formica and its steel roofing tiles business.

"Fletcher building's capital raising's taken a lot of attention of the market," said Shane Solly, director portfolio manager at Harbour Asset Management. "I think it's going to keep the focus for a few more days yet."

Auckland International Airport led the market lower, falling 2.7 per cent to $6.215, while exporters A2 Milk declined 2.3 per cent to $12.19 and Comvita dropped 1.9 per cent to $6.88.

A2 yesterday signed up an exclusive distribution deal in South Korea, while honey products maker Comvita yesterday cut earnings guidance over a poor honey season and said it was subject to due diligence by a potential suitor.

Mercury NZ fell 1.7 per cent to $3.25 after the electricity generator-retailer raised annual earnings guidance as favourable rainfall continued to bolster its hydro schemes.

Harbour Asset's Solly said Fletcher's capital raising had the potential to keep the building products and construction firm in the MSCI index, which put Mercury's spot in jeopardy.

Power companies' March metrics showed favourable rainfall for the entire sector on the generation side, although retail remained tough.

Meridian Energy fell 1 per cent to $2.87, Genesis Energy declined 0.9 per cent to $2.28, Contact Energy decreased 0.2 per cent to $5.23 and Trustpower was unchanged at $5.75.

The government announced the member of its interim climate change committee, which has been tasked with determining how agricultural emissions should be brought into the Emissions Trading Scheme and to start planning for the transition to renewable generation by 2035 in normal circumstance.

Primary industries stocks Fonterra Shareholders' Fund units and PGG Wrightson were both unchanged at $5.75 and 62c respectively, livestock broker Allied Farmers fell 6.3 per cent to 8.9c, while transport fuels firm Z Energy fell 1.2 per cent to $7.18, and wind farm developer Tilt Renewables slipped 0.5 per cent to $1.95.

NZX was the best performer on the index, up 1.9 per cent to $1.10. The stockmarket operator held its annual meeting last week where it outlined plans to introduce a new primary sector index, and elaborated on its dairy derivatives expansion plans.

Restaurant Brands NZ fell 0.8 per cent to $7.08 after reporting a 37 per cent increase in annual profit and signalling plans to keep expanding in Australia and the US.

Summerset Group Holdings increased 0.1 per cent to $7.05 and Metlifecare fell 0.7 per cent to $5.70 after each acquired land for new villages. Ryman Healthcare slipped 0.1 per cent to $10.65 and Arvida Group climbed 1.7 per cent to $1.20.

Spark New Zealand fell 1 per cent to $3.425 and Fisher & Paykel Healthcare dropped 1.3 per cent to $12.55.

Outside the benchmark index, Smiths City Group sank 11 per cent to 48c after downgrading its earnings outlook on soft trading and a $4.8m impairment charge on unprofitable stores.