Market continues its weaker trend

Press, 9 June 1980, Page 26

Market continues its weaker trend

By

ADRIAN BROKKING,

commercial editor

The New Zealand sharemarket last week continued the weaker trend of the pre-j vious week. On Thursday the N.Z.U. index had fallen al-1 mast five points, but the market rallied on Friday, and the N.Z.U. index closed at 412.29 — a fall of 3.90 points. It would be nice to think that Friday’s rally means that the market has bottomed out, but such thought might be premature. Much of the recent enthusiasm for shares was generated by the promise of take-overs, real or imaginary. Now that many of these prospects seem to have disappeared, the market has to look for other support. All the talk of New Zealand’s bright energy-related future should not blind us to the fact that in the shorter term the economy lias some serious difficulties to overcome. Unwelcome reminders of this last week were the threat to our sheepmeat trading, the threat of further oil price rises and our weak balance of payments.

The economic recession in the United States appears to be more severe and more advanced than previously admitted, and world markets generally are jittery — not the least because of continued tensions in the Middle East. This is once again reflected in the price of gold, which is back to $6OO an ounce. On the sharemarket this caused renewed interest in precious metals miners. Australian shares benefited most, but local miners such as Consolidated Silver, Mineral Resources, and Southern Cross Minerals received much attention after having been neglected for most of the year. Mineral Resources closed on Friday at 53c, a rise of 20c for the week, and Southern Cross Minerals gained 4c to 20c.

The poof result from Thomas Borthwick and Sons, the large international meat

trader, seemed to have some effect on New Zealand meat shares, espcially C.F.M.

However the Borthwicks’ result was mainly because of the disastrous result of beef trading; especially in Australia the company received a hammering. None of the New Zealand freezing companies is involved in beef trading to that extent, especially as the beef kill, itself is down.

Waitaki’s lamb trading is so large that it should be able to absorb any adverse results from beef easily enough. C.F.M. lays off all its meat and is purely a processor, although it trades in byproducts. C.F.M. appears to be having a good year, with costs pretty close to budget. This week’s profit announcements were a mixed bag: one good, three fair, one 50-50, and two poor. N.Z. Steel reported a higher profit, which however, came mainly from a much higher share of retained profit of associated companies, amounting to $2,417,000 compared with $926,000 last year. Net profit of the parent company fell $742,000. The company proposes a 1:10 bonus issue and a higher dividend.

The 14 per cent dividend is covered by a 50 per cent earning rate and thus there is ample scope for the latest bonus. At around 200 c the shares would average out at 182 c for a 7.7 per cent yield, but in'-erest is likely to be restrained by the directors’ statement that trading is expected to be more difficult this year in view of the United States recession and destocking by local steel users.

The trading profit of New Zealand Motor Corporation edged up 1.2 per cent to $4.6M, although asset realisations — probably from the recent sale of the 36 per cent interest in General Fin-

ance, Ltd — of S2.IM increased total available profit--14.2 per cent to $6.7M. However, the dividend is increased from 13 to 15 per cent, and the final 9 per cent is tax-free. The dividend is covered 1.7 times. The shares lost 2c during the week and closed at 146 c. Investors likewise took a poor view of the result of Fisher and Paykel, and marked down the shares by 9c to 216 c. The group beat the prospectus . forecast of the profit, which was “not less than S7M” ' by earning $7.9M. Motor Holdings, able to proceed now that the disagreement with Brierely Investments has been resolved, plans \a 1:3. bonus, the second bonus isue this , financial year. As the shares of the earlier 1:5 bonus were to rank for the final dividend, as do the new shares, the dividend has been effectively raised from 15 to 24 per cent. The shares rose 8c last week, to 145 c. Goodman shares rose 5c to 235 c after the announcement of a 21 per cent rise in profit. This group (formerly A S. Paterson) seems to be making good progress with its reconstructing. It also announced during the week that it was not interested in in a reconstruction of Mosgiel Woollens.

Ballins Industries announced a disappointing result during the week: profit fell from $2.4M to SI.SM; this includes an extraordinary loss of $431,000 in the new fast-food interest. Trading in soft drinks has obviously not been good.

Deanes Industries were badly affected by the continuing loss drain from Fabiola. However, it is a measure of the strength of this company that it can take these huge losses and still return a profit of $785,978 and pay a steady 10 per cent dividend.