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Earnings Season Wrap

Most companies' reporting results this earnings season have been positive and optimistic on the future, with the exception of a few market shockers.

The first quarterly reporting season of the year has seen a number of companies report mainly interim results. While results have been mixed and so too the reaction, the overall level of announcements has been pretty positive across the board, which is a reflection of a reasonably strong economy in New Zealand.

A2 Milk has been the stand-out this earnings season with its stellar performance. A2 reported a $98.5 million net profit for the six months ended December, 150% up on the same period a year earlier. Not only is A2 now the largest listed New Zealand company by market capitalisation – its share price has soared more than 450% in the past 12 months – it is now knocking on the door of Australia’s top-50 index. The share price rise reflects earnings upgrades based on the company’s higher-than-expected profit margins as well as its deal with Fonterra.

The aged sector Retirement village operator Summerset Group also impressed the market with its annual results, with net profit after tax up 54% on the year before to $223 million. The value of its investment property climbed again, and it announced it would examine Australia to continue its growth, as rival Ryman Healthcare did in 2014. However, competitor Metlifecare is not faring so well, with its net profit after tax in the six months to December 31 2017 falling 66% on the same period the year before to $56.4 million. It saw a $59.8 million fair-value movement in its investment properties compared to last half-year’s whopping $170.7 million gain.

Auckland International Airport’s aeronautical income was hit by pricing changes made last year, and the company will need to rely more on retail and property income in future. The company’s profit after tax for the six months to December 31 2017 was up 17% to $165.9 million while underlying profit after tax increased 7.8% to $133.1 million. Aeronautical revenue was up 2.7%, driven by passenger growth and more runway movements but offset by price changes made last year to pass part of the cost of its $1.8 billion infrastructure spend programme on to airlines.

Meanwhile, Air New Zealand’s half-year earnings were down on the year before, although still its second highest interim earnings. The airline company reported pre-tax earnings for the six months to December 31 2017 of $323 million, compared with $349 million in the previous period. After-tax net profit was $232 million, down from $256 million, while cash flow from operations increased27% to $479 million.
New Zealand's largest port company, Port of Tauranga, raised its full- year earnings guidance after posting a 13% gain in first-half profit, driven by growth in cargo volumes. Net profit rose to $47 million in the six months ended December from $41.9 million a year earlier while sales rose to $141 million from $125 million. Container volumes have been particularly impressive, as the company continues to gain market share.

Electricity lines company Vector reported a 25% drop in first-half net profit to $78.3 million, with adjusted earnings before interest, tax, depreciation and amortisation falling by $7 million to $250 million. Its chief executive blamed the falling figures on Auckland’s rapid growth, which means more capital spent by the company to put in new connections.

At the bottom of the barrel was Fletcher Building, which saw its shares touch their lowest levels in more than five years after first-half results were released. The $273 million loss for the six months ending December 2017 compares with a $187 million net profit in the same six months a year earlier. Its building and interiors unit posted an operating loss of $631 million, and will be wound down as they complete their current projects.

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