KMD Brands sinks on recapitalisation fears; NZX50 slides

KMD Brands sank to a new low as the retail chain led the S&P/NZX 50 index lower, with reports of a potential recapitalisation spooking already nervous investors.

The benchmark index fell for a third day, with travel and tourism companies including Air New Zealand, SkyCity Entertainment Group and Auckland International Airport weighing on the bourse as oil prices continued to rise, with no end in sight for the conflict in the Middle East.

Meanwhile, Channel Infrastructure rallied after Forsyth Barr analysts pointed to the import terminal as one of the few safe harbours in a world of rising oil prices, while Mainfreight and Freightways advanced after the courier operator’s chief talked up his firm’s ability to pass on rising costs.

And Fonterra Cooperative Group chief executive Miles Hurrell announced his exit from the world’s biggest dairy exporter, saying he’ll end a 25-year stint with the company in six months.

Still nervous

The NZX50 fell 22.76 points, or 0.2%, to 13,164.58, with 31 stocks declining, 18 gaining and one unchanged. Turnover across the main board was a relatively light $93.5 million, of which Auckland Airport accounted for $9.8 million as the country’s major gateway fell 1.4% to $8.29.

Travel and tourism companies weighed more broadly on the local index, with Air New Zealand falling 3.3% to 43.5 cents, Tourism Holdings declining 3.5% to $2.24 and SkyCity dropping 2.5% to 77.5 cents as the outlook for the Middle East conflict remains uneasy. Prediction market Polymarket is pricing in a 49% chance of a ceasefire by the end of May and Brent crude oil futures were up 1.1% at US$104.29 a barrel at 5pm in Auckland.

Finance minister Nicola Willis today outlined the government’s focus in responding to the Middle East conflict, saying keeping Air New Zealand’s schedule was non-negotiable and that the airline has told her it’s in a position to withstand the increases in oil prices.

Stock markets across Asia were mixed, with Australia’s S&P/ASX 200 index and Japan’s Nikkei 225 both down 0.4% in late trading, while Hong Kong’s Hang Seng gained 1.1%.

Kathmandu and Rip Curl owner KMD Brands led the NZX50 lower, sinking 13% to an all-time low 20.5 cents after hiring Goldman Sachs to help with its treasury and capital management strategies as part of a wider review of funding options. The Australian Financial Review’s Street Talk column reported the investment bank had been tapped to manage a major recapitalisation of the business.

“It’s clear shareholders aren’t particularly pleased by the prospect of tipping more funds into the company,” said Grant Davies, an investment adviser at Hamilton Hindin Greene. “It’s yet to be confirmed, but it’s tough times for the brands that have been around for a long time.”

Among other companies to decline, Vista Group International dropped 7.4% to $1.805 and Sky Network Television fell 2.5% to $3.19.

Job done

Fonterra Shareholders’ Fund unit slipped 2.1% to $8.12 after the dairy cooperative announced the upcoming departure of CEO Miles Hurrell after an eight-year stint in the top job. Hurrell will hand over the reins in six months to someone else to take the dairy exporter into its next strategic phase.

Meanwhile, Mainfreight posted the biggest gain on the day, up 3.8% at $62.80, while Freightways advanced 1.2% to $13.15.

Davies said Freightways chief Mark Troughear told BusinessDesk the courier operator was able to pass on increased fuel costs to its customers, which might have provided a bit of relief for transport and logistics firms more broadly.

Channel Infrastructure gained 2.8% to $2.94 after Forsyth Barr analysts talked up the import terminal’s defensive position in an environment of rising oil prices, although they retained their target price of $3.09 and ‘neutral’ rating.

Outside the benchmark index, Comvita gained 3.6% to 72.5 cents after the honey products maker raised its earnings guidance after a strong Lunar New Year trading period.

Taiko Critical Minerals resumed trading after withdrawing its financial model report, after NZ RegCo raised concerns it wasn’t signed off by an appropriate person under the JORC code used by mining companies. The shares jumped 14% to 24.5 cents.

The kiwi dollar clawed back some of its losses, trading at 58.10 US cents at 5pm in Auckland from 57.74 cents at 7am and 58.45 cents last week.

The BNZ-BusinessNZ performance of services index today showed activity shrank in February, while Statistics NZ figures showed increased spending on credit and debit cards that month and Real Estate Institute of NZ house sales data improved slightly.

Reporting by Paul McBeth. Image from Zachary Shea on Unsplash.