Investors on both sides of the Tasman have been punishing the share prices of some companies reporting financial results, including those coming in above guidance with multimillion-dollar profits.
While the full extent and effect of the global credit crunch must still be worked through this year - in particular, how companies will refinance existing debt facilities - investors have often sold down stock despite positive results in recent weeks.
In New Zealand, Fletcher Building delivered an increased 20% after tax profit at $244 million on the same period last year. Its stock fell initially, from $9.30 to $8.84, but it had since
rebounded to $9.35.
However, for Pumpkin Patch and Telecom there was no rebound.
Pumpkin Patch's after-tax profit was down 22.3% at $12 million and its share price fell from $2.05 to $1.83 and has since been trading up around $1.90. Telecom's after-tax profit of $172 million was down 26.8% and its share price has slid from $4.03 to $3.90, trading recently around $3.88.
In Australia, diversified company Wesfarmers came in above guidance with a six-month aftertax profit of $A601 million, but its shares have since slid from $A41.05 to $A36.53, largely because it was incorporating its Coles Myer acquisition into its operations and it was seeking the refinancing of $A4 billion of debt.
ABN Amro Craigs broker Peter McIntyre said four key issues were in the minds of investors, regardless of immediate financial outcomes or dividends.
‘‘It's about the amount of debt companies are holding in terms of refinancing, especially for those with more [forecast] borrowing costs ahead,'' he said yesterday.
There had been a withdrawal of availability of private equity funding and companies had higher costs in wages, transport and energy costs to pass on. These were being absorbed, to some extent, by a contraction in profit margins.
‘‘Also, there are the chief executive outlooks and forecasts being considered [by investors]. Shareholders want to know what effect the CEOs expect on future earnings because of the credit crunch,'' he said.
While some Australian companies are taking a hammering in share prices, the quarter to December overall has become a record period, with Australian companies posting a total $NZ57.3 billion in profits, up 3.9% on seasonally adjusted figures and beyond economists expected 2% forecast, AAP reported yesterday.
Woolworths in Australia reported an improved after-tax result of $A891 million, up 28% on the same period last year, but its share price had fallen from $A30.68 to $A28.27.
Mr McIntyre said investors were looking beyond Woolworths' immediate results to its plans to increase capital spending up 40% to $A1.8 billion on expansion and reinvestment.
Mr McIntyre also emphasised both Australian and New Zealand companies were being hit hard by the weakening of the US dollar, making their respective currencies strong - a further erosion of margins when considering foreign exchange necessities.
In the New Zealand reporting season so far, nine companies had exceeded ABN forecasts on results, 10 had underperformed and a further 10 were in line with expectations.
‘‘The results reflect the extent of volatility in earnings expected this season,'' Mr McIntyre said.
He said the main surprise had been the Telecom and Trust Power results in the underperformed class, with Telecom's ‘‘robustness for earnings'' affected by the Government's proposed splitting of its assets allowing more competitors access, and TrustPower, whose energy output had been affected by the dry summer and higher interest costs.
Also in the underperformed category were South Port, Stee & Tube, Hellaby Holdings, EBOS Group and New Zealand Refining.
Later this month, retailers The Warehouse, Hallenstein Glasson and Briscoes are expected to report - all forecast to be down on after-tax profit between 8.2% and 9% on the same period last year, based on earlier company guidance.
‘‘We're expecting very soft results from the three. Retail spending will be reflecting the [general] economic downturn and consumer reaction to paying higher interest rates,'' Mr McIntyre said.
