Watch for firms' outlooks, investors told

LAURA WALTERS
Last updated 08:17 29/07/2013

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The upcoming reporting season is unlikely to include any surprises but investors should be paying attention to the outlooks company bosses outline for the coming year, analysts say.

Grant Williamson, a director of Christchurch sharebroker Hamilton Hindin Greene, said listed companies' annual results for the June 30 reporting season were likely to be strong, though not particularly exciting.

Companies such as Opus and Steel & Tube were expected to have strong positions for the coming year with the Christchurch rebuild gaining momentum, he said.

The focus would be on directors' comments for the financial year ahead rather than backward-looking results, as ongoing disclosure regulations meant investors already knew what to expect in the way of profits, Williamson said.

First NZ Capital head of institutional equities James Lee said the market was expecting a "solid" reporting season.

However, the positive association with the "heavyweights" of the New Zealand economy, such as Fletcher Building, Freightways, and Mainfreight, was diminishing, he said.

Australian analysts were being overly enthusiastic about Fletcher Building - the country's biggest company by market capitalisation, Lee said.

"The tone of the economy might be a little bit upbeat."

Australian analysts expected 13 per cent growth in profits for the full year, while New Zealand analysts expected about 10 per cent, he said.

Fletcher Building said earlier this month that its trading earnings for the 2013 financial year were expected to be in the range of $560 million to $610m. In the half-year report chief executive Mark Adamson said weak market conditions in Australia had continued in the residential and commercial construction sectors.

About 43 per cent of Fletcher Building's revenue and 40 per cent of its earnings before interest and tax come from Australia.

While New Zealand was ticking along quite nicely, the Australian economy was "quite a bit behind", Williamson said. This meant those companies reliant on revenue across the ditch might be more impacted than those centred on the local economy.

Nuplex Industries was another affected by the slowing Australian economy, Williamson said.

Nuplex, which supplies resins to the paint, ink, adhesives and plastics industries, more than halved its first- half profits to $11.5 m compared with the previous year.

Companies' results would also be influenced by currency movements, he said.

The recent surge in the value of the New Zealand-Australian dollar cross rate was likely to have a negative effect, he said. While many would benefit from the kiwi's fall against the US dollar, that would show through only in the next financial year's results. Retail sector results would be interesting because they had been in the doldrums for some time, Williamson said.

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During the past month, clothing companies Pumpkin Patch and Hallenstein Glasson had both issued profit warnings to shareholders, cautioning of a drop in full-year profits following a downturn in the Australian retail sector, Lee said.

"Australia's still struggling."

Companies expected to continue performing well include retirement village operators Ryman Healthcare and Summerset.

Ryman's share price had increased by more than 100 per cent in the past year, and Summerset was up more than 67 per cent compared with this time last year.

Williamson said shareholders would be interested in the overall earnings progress of retirement sector companies.

Lee said Air New Zealand, which has a market capitalisation of $1.61 billion, would probably meet its full-year earnings before tax expectations of between $235 million and $260m. The national carrier had been "very bullish" during the past couple of years.

Then there was Xero, the market favourite. The accounting software provider's share price had soared more than 240 per cent during the past year with the company's results and fundamental not having much impact on the share price."That story's all about long-term growth," Lee said. Fairfax NZ

- BusinessDay.co.nz

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