Strong a2 Milk result helps drives sharemarket higher – Market close

A2 Milk said its first-quarter sales were running ahead of plan due to the weak New Zealand dollar.

Global marketer a2 Milk exceeded half-year earnings forecasts, produced its first-ever dividend and led the New Zealand sharemarket to a gain of more than 0.6%.

The S&P/NZX 50 Index broke through the 13,000 mark in the morning, had a dip at lunchtime and traded strongly in the afternoon to close at 13,068.93, up 79.75 points or 0.61% after reaching a low of 12,985.95.

Volumes were strong with 35.93 million share transactions worth $143.07 million.

A2 Milk, with a cash pile of $1.014 billion, surged $1.28 or 19.45% to $7.86 on trade worth $28.73m after reporting a 10.1% rise increase in revenue to $893.85m and 7.6% increase in net profit to $91.72m for the six months ending December.

It is paying an inaugural interim dividend of 8.5c a share on April 4.

Synlait, which manufactures a2 Milk’s infant formula, was taken along for the ride, increasing 15c or 19.48% to 92c – its highest level since December 2023.

Shane Solly, portfolio manager with Harbour Asset Management, said a2 Milk was more upbeat than it has been in recent results. The company had worked its way through the inventory stock and was getting good access to markets.

“They have worked hard in the China market and have done very well. There will be quite a number of earnings upgrades from brokers,” said Solly. “One surprising area was that a2 Milk was getting growth in the online-to-online channel 020 – where it’s hard to get data.”

A2 Milk increased its China infant milk formula business 7.2% in a market that declined 6% and its China label gained a record market share of 5.3%, up from 4.9%.

The company has upgraded its full-year revenue guidance, low- to mid-double-digit percentage growth rather than mid- to high-single-digit.

Solly said economy-sensitive stocks like Freightways are coming out with solid financial results.

“We are seeing more green shoots all the time.”

Freightways rose 55c or 5.01% to $11.53 after reporting a 6.7% increase in revenue to $662.1m and 9.5% rise in net profit to $44.74m for the six months ending December. Freightways is paying an interim dividend of 19c a share on April 1 – a 6% increase.

The express package and business revenue was up 5.8% and information management and waste renewal was up 11.3%. Freightways said lower customer volumes in the courier and temperature-controlled businesses were offset by higher prices and market share gains with new customers.

Freightways told the market it is well positioned to take advantage of opportunities and while business confidence is slowly returning in New Zealand, it will be a slow grind for the economy to provide organic growth in the second half of the financial year.

Spark improved 8c or 2.76% to $2.98; Chorus was up 10.5c to $8.78; Port of Tauranga gained 7c to $6.65; Skellerup added 7c to $5.32; and Mercury Energy increased 6.5c to $6.49.

Millennium & Copthorne Hotels NZ collected 5c or 2.17% to $2.35; Sky TV was up 5c or 1.96% to $2.60; NZME gained 2c or 1.89% to $1.08; and Smartpay rose 8c or 14.81% to 62c.

Ebos Group was down 31c to $41.49; Mainfreight declined 60c to $70.30; and Vulcan Steel shed 12c to $8.38.

Manawa Energy declined 12c or 2.26%to $5.18 after downgrading full-year operating earnings (ebitda) guidance to $80m-$95m, from $95m-$115m, because of the dry conditions in January and February – its storage lake levels are presently 79% of historical average.

As a result, Infratil – which owns 51% of Manawa – was down 15.5c to $10.975 after revising its proportionate operating earnings (ebitdaf) guidance to $951m-$961m, from $960m-$1b.

Manawa told the market that wind generation for the six weeks from the start of January was 38% lower than the long-term average and wholesale electricity prices have increased sharply.

Contact Energy, falling 24c or 2.56% to $9.15, reported a 30.7% rise in revenue to $1.7b and a 7.2% fall in net profit to $142.39m for the six months ending December. Unhedged financial electricity contracts worth $21m impacted the net profit.

Operating earnings increased 12% to $404m, because of higher geothermal generation with the new Tauhara plant operating and improved channel pricing from long-term contracts.

Contact is paying an interim dividend of 16c a share on March 25. As at February 12, South Island-controlled storage was 87% of mean and North Island was 117% of mean. Mass market electricity and gas sales of 271GWh were steady in January.

Carpet maker Bremworth increased 10c or 20.4% to 59c after announcing a review of its ownership, following the finalisation of its Cyclone Gabrielle insurance claim and approaches from other parties.

Westpac Bank fell $2.45 or 6.36% to $36.05 after reporting a 9% decline in first-quarter net profit to $1.7b, resulting from hedge accounting. Fellow banking group ANZ was down 68c or 1.95% to $34.22.