Disappointing Genesis outlook weighs on energy stocks; NZX50 falls

Investors were disappointed with the earnings outlook for electricity generator-retailer Genesis Energy, casting a pall over the other big four power companies as they dragged the S&P/NZX 50 index lower.

Stock market operator NZX declined in its heaviest day of trading in more than five years, with volumes larger than usual with the MSCI index reweightings.

Markets across Asia were broadly weaker as the optimism about US rate cuts subsided, while currency markets were whipped around after US President Donald Trump said he was firing Federal Reserve governor Lisa Cook over allegations of mortgage fraud.

And Vulcan Steel halted trading of its shares to raise A$87.1 million to fund its acquisition of Roofing Industries, when reporting a 24% decline in annual earnings.

White House worries

Markets were thrown around during the Asian trading session when US President Donald Trump said he’s removing Federal Reserve governor Lisa Cook over allegations she submitted fraudulent information in mortgage applications, although she’s refused to resign, saying there’s no cause for her removal.

The kiwi dollar was whipped around, ending the local session at 58.40 US cents at 5pm in Auckland from 58.80 cents at 7am and 58.66 cents yesterday. Two-year swap rates fell 2 basis points to 2.89%.

Meanwhile, stock markets followed Wall Street lower as optimism about the prospect of rate cuts by the Fed subsided, and ahead of quarterly earnings from chipmaker Nvidia.

New Zealand’s NZX50 dropped 121.51 points, or 0.9%, to 12,957.98, with 29 stocks declining, 13 gaining and eight unchanged. Turnover across the main board was $273.8 million, heavier than usual as investors tweaked their portfolios to accommodate MSCI index reweightings.

NZX was the most heavily traded stock on a volume of 10.1 million, most of which was in a single trade of almost 9.9 million at the closing price of $1.40 a share, down 1.4%. That was the heaviest session for the NZX since June 2020.

Meanwhile power companies weighed on the benchmark index after Genesis reported a 14% lift in annual earnings, but disappointed investors with its forecast for the coming year.

“The market was pretty underwhelmed, it’s fair to say,” said Jeremy Sullivan, an investment adviser at Hamilton Hindin Greene. “It’s a bit of a downgrade for them and that set the tone a little bit for the market.”

The other big four power companies were also weaker, with Meridian Energy – which reports on Wednesday – down 3.5% at $5.45 on a volume of 5.4 million, while Contact Energy fell 1.7% to $8.85 and Mercury NZ declined 1.5% to $6.49.

Rag trade

KMD Brands led the local market lower, falling 4.1% to 23.5 cents, while Heartland Group Holdings’ recent rally came to an end as it slipped 2.1% to 93 cents.

The a2 Milk Co posted the biggest gain on the day, up 2.3% at $10.11, having hit a four-year high during the session.

The Fonterra Shareholders’ Fund rose 1.5% to $7.44 after the dairy cooperative reached a settlement with Bega Cheese over disputed licences, which will now join the Mainland Group of assets sold to Lactalis, adding another $375 million to the sale price.

Channel Infrastructure gained 1.8% to $2.24 as it raised its interim dividend on a small lift in first-half earnings.

Trading of Vulcan Steel shares was halted to let the steel products maker raise A$87.1 million at A$6.60 apiece – a 9.8% discount to the last trading price – to fund an $88 million acquisition of New Zealand roofing company, Roofing Industries. Vulcan also reported a 24% decline in earnings, while noting a stabilisation in subdued trading.

Outside the benchmark, NZME rose 3.6% to $1.15 after lifting first-half operating earnings 12%, and saying annual earnings are expected to be between $57 million and $59 million.

Restaurant Brands New Zealand slipped 0.3% to $2.90 after reporting a 5.6% decline in first-half profit.

Metro Performance Glass rose 5%, or 0.2 of a cent, to 4.2 cents. After the close of trading, the company said shareholders approved a recapitalisation plan.

Reporting by Paul McBeth. Image from Genesis Energy.