MARKET CLOSE: Shares fall led by Spark on earnings; Xero gets 'please explain' letter after 9% surge

New Zealand shares fell, led by Spark New Zealand after its first-half earnings fell short of market expectations. Skellerup Holdings paced the decline as it downgraded its profit outlook. Xero was issued a 'please explain' note by stock market operator NZX.

The NZX 50 Index fell 15.134 points, or 0.3 percent, to 5726.225. Within the index, 22 stocks fell, 16 rose and 12 were unchanged. Turnover was $149 million.

Spark fell 4.8 percent to $3.15, on concern the country's biggest telecommunications company slowed the pace of cost cutting in its first half, increasing the challenge of meeting annual earnings guidance. Earnings before interest, tax, depreciation and amortisation from its continuing operations fell 3.5 percent to $436 million in the six months ended Dec. 31 and revenue on the same basis declined 2.7 percent to $1.8 billion.

"The result was slightly under expectations and then on the cost front they may not have quite achieved people's expectations of being able to continue cost cutting as aggressively as they have done before," James Lindsay, who helps manage about $400 million in equities for Nikko Asset Management said. "A number of people are pretty sceptical about when or if they will get a return on Lightbox and certainly the space in the last few weeks and months has been as competitive as ever."

Skellerup fell 2.9 percent to $1.35 after the industrial rubber goods firm said first-half profit fell 10 percent to $9.7 million and annual earnings growth may stall as Australian mining customers delayed maintenance spending. Last October, the company told shareholders it expected annual earnings growth of up to 18 percent, as it looks to cash in on growing demand for food safety and clean energy applications. Today it said full-year profit was expected to be in line with last year's $20.7 million, below its $21 million-to-$24.5 million guidance.

Port of Tauranga fell 2.3 percent to $17.20. The port posted an 8.2 percent gain in first-half profit to $42.6 million as a gain on the sale of a stake in Timaru Container Terminal to logistics group Kotahi made up for weaker sales. It doesn't expect earnings to grow in the full year because of a downturn in forestry.

"On the plus side container growth continued to be pretty strong, but on the reverse the bulk was off around about 10 percent and would have been below people's expectations," Lindsay said.

Nuplex Industries shares jumped 7 percent to a three-month high $3.21 after the specialty chemicals maker confirmed it expects to meet its annual earnings forecast as it benefits from a reorganisation of its business.

Steel & Tube rose 3.4 percent to $3.04 after New Zealand's largest steel distribution company lifted first-half profit by 35 percent to $10.8 million, in line with expectations, following last year's acquisition of S&T Stainless and an uplift in construction activity

Xero was the best performer on the benchmark index for the second consecutive day, up 9 percent to $18.82, its highest level since November. The cloud-based accounting firm was issued a 'please explain' notice by the NZX after its share price rose some 16 percent since Feb. 17. The stock came under selling pressure last year, and saw its share price drop from a high of $45.99 in March to as low as $15 as investors mulled the outlook for growth particularly in the US.

The letter earned a curt one-line response from Xero: "We confirm that Xero continues to comply with its continuous disclosure obligations under the NZX Listing Rules, including Listing Rule 10.1.1."

Outside the benchmark index, Hellaby Holdings climbed 6.6 percent to $3.40 after it posted a 36 percent gain in first-half profit to $13.5 million, driven by improved performance in four of the diversified investor's five businesses, and said it on track to lift full-year earnings.

(BusinessDesk)