Research Team, 22 February 2019

The local reporting season has again been front of mind for investors this week, with a plethora of results from some of our largest companies. So far, reporting season on both sides of the Tasman has been somewhat mixed with many companies citing higher costs and tougher economic conditions.

Without doubt, the standout performer of the week was The a2 Milk Company

The milk marketer announced a strong first half result, with net profit after tax rising 55.1% while operating earnings were up 52.7% for the period. The company saw continued strong demand for its infant formula out of China and a growing market share in the United States. Shares soared 10.5% to $14.22 following the result, closing at a 52 week high. Peer Synlait Milk was dragged higher by association, with its shares rising 4.2%. a2 Milk is the largest company on the NZX by market cap, beating out other index heavyweights, Fisher & Paykel Healthcare and Spark, for the top spot.

In contrast, Fletcher Building lost 5.7% despite the company reporting a rebound in profit in the first half and resuming its interim dividend payment. However, the outlook of a weakening residential market and stiffer competition left investors nervous about the year ahead.

It was another bleak week for Sky TV, which saw shares hit fresh lows after reporting a 19.6% decrease in net profit for the half year. The same day, the company announced subscribers are set for a price hike on April 1, after enjoying a string of price reductions over the last year. On average, subscribers can expect a price increase of 1.9% from April.

Heartland Group failed to impress the market with its interim result

The company achieved net profit after tax of $33.1m for the six months ending December, an increase of 6.5% on the previous corresponding period. However, Heartland lowered full year net profit guidance to $73m-$75m from $75m-$77m.

Fisher & Paykel Healthcare and ResMed announced an agreement to settle all outstanding patent infringement disputes between the companies, in all venues around the world. The settlement involves no payment or admission of liability by either side. Under the agreement, all ongoing infringement proceedings against named products will be dismissed, and each party will bear its own attorney fees and costs incurred in the global proceedings. All other terms remain confidential. The market cheered the result. Shares of F&P Healthcare rose as much as 7.3% on the news.

The latest Global Dairy Trade index saw a modest increase with the headline index rising 0.9%, marking the sixth consecutive increase.

Cheddar and skim milk powder drove the rise, lifting 2.9% and 2.8%, respectively. Whole milk powder posted a modest increase of 0.3%, while lactose was the only product to log a decline, falling 2.9%.

Next week, investors will continue to monitor reporting season locally with another busy week expected. Results from Freightways, Metlifecare, Tourism Holdings, Comvita, Vista Group, Genesis Energy, Scales and Air New Zealand will be of interest, just to name a few.