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Seeka sees annual profit growth of up to 11%, planning for beefed-up capacity

Seeka Kiwifruit Industries, the country’s biggest kiwifruit grower, sees annual profit growth of up to 11 percent and is planning to expand its capacity in coming years as kiwifruit crops recover from the outbreak of the Psa-V vine disease.

The Te Puke-based company forecasts net profit of between $2.6 million and $3 million in the 12 months ending Dec. 31, compared to $2.7 million in 2013, it said in stakeholder presentation slides published on the NZX. Earnings before interest, tax, depreciation and amortisation and before the cost of the share scheme are expected to be between $10 million and $10.5 million, up from $9.9 million last year.

The slides show the kiwifruit grower and coolstore and packhouse operator is predicting bigger kiwifruit volumes, primarily from the Psa-V resistant variety G3, and is evaluating options to expand capacity from 2016.

“Early financial planning indicates that Seeka can expand its capacity to meet kiwifruit demand within its current resources,” the slides say.

Earlier this month, Seeka came out in support of a class action to sue the Ministry for Primary Industries over the outbreak of Psa-V seeking compensation for the devastation of crops across the Bay of Plenty. Seeka estimates the Psa bacteria has cost it more than $45 million, and prompted it to slash its workforce by 40 percent to mitigate the impact of the outbreak, which is still impacting on the kiwifruit grower and coolstore owner.

The company today said it is open to expanding its existing business and other complementary investment opportunities.

The shares fell 1 percent to $2.94 yesterday, and have gained 40 percent this year.

Nuplex agrees to sell ANZ units to Champ-backed company for A$127.5 million

Nuplex Industries, the specialty chemicals maker, agreed to sell two of its Australasian units to a company backed by Champ Private Equity for A$127.5 million, using the funds to repay debt and possibly make a capital return.

Axieo, an investment vehicle of Sydney-based Champ, will buy Nuplex Masterbatch, the plastic additives business, and Nuplex Specialities, the distribution business, Auckland-based Nuplex said in a statement. Sam Bastounas, formerly Nuplex’s regional president of Australia and New Zealand and chief operating officer of its specialties unit, will be Axieo’s chief executive.

Nuplex has previously warned its earnings this financial year will be hurt as increased competition crimps margins at its ANZ resins and specialty chemicals businesses, diluting an improved performance from its European and Asian units. In August, the company posted a 18 percent gain in annual profit to $52.4 million, after twice lowering its guidance on increased competition in the Australian and New Zealand market.

‘‘The board was not actively seeking to divest these businesses, however they have become increasingly non-core to the company’s strategy as the resins business has continued to grow,” said Nuplex chairman Peter Springford. ”The offer delivers a premium for these two principally Australian and New Zealand focused businesses as stand-alone entities and the divestment is in line with Nuplex’s strategy to focus on the global resins business.”

The proceeds will be used to reduce debt. The transaction would have seen gearing as at June 30 reduce to 14.5 percent rather than the reported 31.1 percent, Nuplex said. It also flagged a potential return of capital to shareholders, as well as further investment emerging markets and research and development.

Axieo expects to offer all current Masterbatch and Specialities workers employment. The Australian and New Zealand sale will be completed before the end of the year, while changing ownership for its Masterbatch operations in Vietnam should be completed in the first-half of 2015.

Shares of Nuplex last traded at $3.08, and have fallen 9.4 percent since the start of the year. The stock is rated an average of ‘buy’ according to the consensus of six analysts surveyed by Reuters, with a median price target of $3.37.

While you were sleeping: US housing recovers

Wall Street advanced, up more than 1 percent, amid better-than-expected data on existing US home sales, and solid corporate earnings including from Apple.

In afternoon trading in New York, the Dow Jones Industrial Average rose 1.13 percent, the Standard & Poor’s 500 Index climbed 1.61 percent, while the Nasdaq Composite Index advanced 1.90 percent.

Gains in shares of Chevron and those of 3M, last up 2.5 percent and 2.3 percent respectively, led the Dow higher.

Shares of Apple gained, last up 2.5 percent, after the company reported quarterly revenue that surpassed expectations on buoyant iPhone sales and offered a solid outlook for the next quarter.

The latest US economic data also offered reason for optimism. Existing home sales climbed a better-than-expected 2.4 percent to an annual rate of 5.17 million units in September, the highest level in a year.

“Low interest rates and price gains holding steady led to September’s healthy increase, even with investor activity remaining on par with last month’s marked decline,” Lawrence Yun, NAR chief economist, said in a statement.

Even so, the recovery in the industry is lacking steam.

“The housing recovery continues to move along sluggishly, as consumers are stuck between tight credit standards and limited wage growth,” Sophia Kearney-Lederman, an economist at FTN Financial in New York, told Reuters.

Separately, the Philadelphia Federal Reserve Bank’s gauge of non-manufacturing activity in the mid-Atlantic region increased to 44.1 this month, down from 35.7 in September.

Meanwhile, US Treasuries fell, pushing the 10-year yield rose two basis points higher to 2.22 percent.

“There’s a tug-of-war going on,” Sean Simko, who oversees US$8 billion at SEI Investments in Oaks, Pennsylvania, told Bloomberg News. “You have stronger domestic growth versus softer global growth.”

Indeed, gold futures rose as investors bet the Fed might not raise interest rates as soon as expected. The Federal Open Market Committee’s next two-day meeting starts October 28.

“There is a growing consensus among investors that the Fed will continue with the low-interest rate policy,” Phil Streible, a senior commodity broker at RJ O’Brien & Associates in Chicago, told Bloomberg News. “Also, physical demand is expected to support prices.”

In Europe, the Stoxx 600 finished the session with a 2.1 percent jump from the previous close.

The UK’s FTSE 100 Index added 1.7 percent, Germany’s DAX gained 1.9 percent, while France’s CAC 40 rallied 2.3 percent.

The European Central Bank reportedly bought Italian covered bonds under its asset purchase program, following Monday’s reported purchase of French notes from Societe Generale and BNP Paribas as well as Spanish securities from other lenders.

“The ECB was slow to start and it’s still not US-style QE, but they’re doing the best to talk up the market,” Justin Haque, an equity sales trader at Hobart Capital Markets in London, told Bloomberg News, referring to quantitative easing.

MARKET CLOSE: NZ shares extend gains; Contact, Trustpower gain, F&P at record

New Zealand shares gained for a third day, paced by Contact Energy and TrustPower, as investors spooked by recent volatility sought high-yield stocks. Fisher & Paykel Healthcare Corp rose to a record.

The NZX 50 Index advanced 35.237 points, or 0.7 percent, to 5223.123. Within the index, 28 stocks rose, 12 fell and 10 were unchanged. Turnover was $140 million.

The benchmark index extended its recovery after a period of volatility saw the CBOE Vix Index, also known as Wall Street’s fear gauge, spike to its highest level since 2012 last week, spilling over into stock markets around the world. Investors have since returned to equities, and have been chasing high yielding stocks as a shift in sentiment about when the US Federal Reserve will start raising interest rates made reliable dividends more attractive.

“Investors who have sat on the sidelines for a bit, they may have been scared out by the volatility, are putting a bit more money back into the market,” said James Smalley, director at Hamilton Hindin Greene. “The yield side of things is relatively attractive as there’s a lot more debate as to whether the US is going to raise rates soon.”

Power companies, which are held for their reliable source of income, paced today’s gains on the local market. Contact, the energy retailer and generator, advanced 1.5 percent to $6.07. TrustPower climbed 1.3 percent to $7.30. Genesis Energy, the state-controlled power company, increased 0.5 percent to $1.98.

“We’re seeing Contact taking up the baton as the gentailer having a good day, on the back of MightyRiverPower and Genesis’s gains the other day,” Smalley said.

Spark New Zealand, formerly Telecom Corp and popular with offshore investors for its high yield and liquidity, rose 1.2 percent to $2.935. Vector, the Auckland power lines company, gained 1.2 percent to $7.30.

F&P Healthcare, the medical breathing apparatus exporter, advanced 1.7 percent to $5.33, a record close. The company has a September balance date and investors are expecting a good result, particularly given the recent fall in the New Zealand dollar, Smalley said.

Fletcher Building, New Zealand’s largest listed company, fell 0.6 percent to $8.61. The building supplies and construction company told shareholders it is forecasting full-year operating earnings to rise as much as 11 percent, driven by anticipated recovery in the second half. Earnings before interest, tax and significant items are expected to be in the range of $650 million to $690 million, departing chairman Ralph Waters said in his final address to shareholders. That would be up from $624 million in the 2014 year.

Xero, the cloud-based accounting firm, extended its decline to be the benchmark index’s worst performer on the day, falling 0.9 percent to $15.90, its lowest level since August last year. The stock has dropped 26 percent in the past month, as investors question the Wellington-based company’s pace of growth in the US, where it is competing against incumbent Intuit. Xero wants a million customers worldwide, and is targeting growth in the US market where so far it has some 22,000 of its total 371,000 customers.

New Zealand Oil and Gas led the benchmark index higher, gaining 2.8 percent to 74 cents.

Outside the benchmark index, Cavalier Corp was unchanged at $1, after announcing Cavalier Wool Holdings, its joint venture with ACC and Direct Capital, will merge with New Zealand Wool Services International to make a wool scouring monopoly. Melbourne-based Lempriere, parent of WSI, will take the biggest stake in the new business at 45 percent, while Cavalier will water down its holding to 27.5 percent from 50 percent.

PGG Wrightson, the rural services firm controlled by China’s Agria Corp, rose 3.6 percent to 43.5 cents after it said it expects to shrug off falling dairy prices and beat its strongest earnings result in several years in 2015 after an upbeat first quarter.

Hellaby Holdings, the diversified investment company, rose 0.3 percent to $2.93. The Auckland-based company has several potential acquisitions on the cards and is “optimistic that at least one will come to fruition during this financial year,” chief executive John Williamson told Hellaby shareholders at its annual meeting according to speech notes.

Kirkcaldie & Stains, the upmarket Wellington department store, rose 0.6 percent to $1.80 after yesterday reporting an annual loss of $6.5 million, sinking back into the red after a series of write-downs, including the loss on the sale of its Harbour City Centre building, wiped out an operating profit in the year.

NZ dollar holds gains as Chinese data beats estimates, narrow trading range seen

The New Zealand dollar held its gains against the greenback after figures showed the Chinese economy grew faster than expected in the third quarter, although still the slowest pace since early 2009 and leaving open the door for Beijing to introduce stimulus measures.

The kiwi traded at 79.85 US cents at 5pm in Wellington, from 79.73 cents at the start of the day and up from 79.48 cents yesterday. The trade-weighted index edged up to 77.26 from 77.16 yesterday.

China’s gross domestic product grew 7.3 percent in the third quarter, the slowest pace since the first quarter of 2009 but faster than the 7.2 percent rate expected by economists. China is New Zealand’s biggest market and the GDP data suggests demand for the nation’s exports won’t diminish soon. Traders said the kiwi may trade in a narrow range this week, with figures on Thursday expected to show inflation is benign.

“The expectation was that the (Chinese) data might have been weaker than it was actually,” said Mark Johnson, senior dealer at OMF. “The question from here is should we expect some more aggressive policy action such as rate cuts.”

Johnson said the New Zealand dollar “still looks pretty well capped” at around 80 US cents and would find support at 79.10 cents. It would take weaker US economic figures to push the kiwi higher, he said. “I don’t see it going anywhere in a heck of a hurry.”

Government figures showed New Zealand’s annual net migration rose to a record last month, driven by inflows of students. The country gained a net 45,400 migrants in the year ended Sept. 30, the biggest ever gain, according to Statistics New Zealand.

The central bank has said migration could fuel inflation although the composition of the arrivals, including labourers looking for short-term work, suggests any effect would be subdued.

The New Zealand dollar was unchanged at 90.57 Australian cents from late yesterday. It traded at 62.33 euro cents from 62.28 cents and was little changed at 49.37 British pence from 49.34 pence. The kiwi fell to 85.09 yen from 85.33 yen yesterday.

Power companies face ban on “saving’ departing customers

Power companies face a ban on so-called “save” calls, where they ring a customer departing for a rival and try to entice them back with a better offer, to the dismay of large electricity retailers.

The Electricity Authority published its decision today to ban the practice, but has stopped short of banning “win-back” offers, in which an electricity retailer tries to entice a customer who’s switched power companies to return to the original supplier after the switch has occurred.  Retailers wanting protection from “save” activity will have to opt in to the scheme, which will also require them not to make save calls of their own.

The move comes after complaints from small, often start-up retailers that they were losing money on campaigns to entice new customers away,, only to have the customer change their mind after a “save” call from their existing provider that, in some cases, offered inducements of up to $200 not to switch.

The size of the “save” inducement is generally related to the quality of the customer in question, with power companies willing to sacrifice unprofitable customers but bid high to keep high value customers.

A similar prohibition on saves applies in the telecommunications industry.

However, Tauranga-based TrustPower, which the EA identified as one of the most hard-hit by such save call activity, remained opposed to the move.

“Blocking saves is not in the best interest of the consumer, and has not been proven to increase retail competition,” said its operations general manager, Chris O’Hara. “There are major flaws with the problem definition, the complexity introduced to the market by the opt-in system outweighs the authority’s perceived benefits, and …. there are no examples of save blocking in other electricity markets,” he said in a statement to BusinessDesk.

“Despite the fact that Trustpower has been shown  to be one of the retailers most impacted by saves of its acquisitions, we do not support any restriction on retailers’ current ability to save or win back customers they lose.”

In particular, Trustpower had discovered misleading sales activity by competitors through the save process.

“The removal of this safety net will, we believe, increase the frequency of this sort of behaviour,” said O’Hara.

James Munro, general manager for retail electricity at MightyRiverPower, which owns the Mercury brand, said the ban added a costly layer of unnecessary bureaucracy to a market that was functioning competitively.

“If saving is negative for competition, for which we do not believe any evidence has been established, then it should just be banned outright. This would be a preferable outcome to the halfway house of allowing retailers to choose to opt-in/opt-out, which will undoubtedly have unintended consequences,” he said.

Genesis and Contact Energy declined comment and Meridian Energy did not respond to requests for comment.

The EA concluded, after investigation and taking submissions from the industry, that saves and win-backs both had the “potential to have a negative impact on retail competition.”

The only exception to save activity will be if a customer initiates contact with the electricity provider they are switching away from before the switch is completed.

Hellaby expects to complete at least one acquisition this year

Hellaby Holdings, the diversified investment company, expects to proceed with at least one acquisition this financial year as it looks to further broaden its portfolio.

The Auckland-based company has several potential acquisitions on the cards and is “optimistic that at least one will come to fruition during this financial year,” chief executive John Williamson told Hellaby shareholders at its annual meeting according to speech notes. The company has been on a buying spree over the past 12 months, purchasing a truck servicing business, an auto electrical, fuel and engine management components firm and 85 percent of Contract Resources, a specialised engineering maintenance and industrial cleaning company. It is looking to capture earnings growth from a more diversified portfolio.

“Experience has shown us the benefits of an investment portfolio of assets with earnings spread across different geographies and sectors,” Williamson said. “The ongoing acquisition of businesses that meet our investment criteria, and deliver the next step lift in earnings, remains a priority.”

In August, the company posted a loss of $1.1 million, in the 12 months ended June 30, compared to a profit of $18.2 million, a year earlier. Stripping out a $26.8 million charge on the goodwill of its Hannahs and Number One Shoes brands, earnings rose 44 percent to $26.8 million, ahead of its $25 million guidance given. Revenue grew 35 percent to $736.4 million.

Williamson told shareholders in the three months ended Sept. 30, group sales and earnings were ahead of the same period a year earlier, with four out of its five divisions reporting profit “well ahead” of last year, including both Contract Resources and the footwear division. Its packaging unit was impacted by a manufacturing plant relocation.

Hellaby expected to be insulated against any downturn in the dairy or logging sector, where commodity prices have dropped since the start of the year, because of its more diversified portfolio. Williamson said the company had “significant borrowing capacity” for further acquisitions.

Shares of Hellaby were unchanged at $2.92 and have fallen some 10 percent since the start of the year. The stock is rated an average of ‘buy’ according to the consensus of four analysts surveyed by Reuters, with a median price target of $3.45.

Summerset says first homes in New Plymouth village slated for completion next month

Summerset Group Holdings, New Zealand’s third-largest listed retirement village operator, said the first 14 homes in its $55 million New Plymouth retirement village will be completed next month, with residents expected to move in before Christmas.

The Wellington-based company plans to build about 150 units on the 4-hectare Carrington Road site ranging from townhouses and villas to care apartments and rooms. It acquired the site last year and began construction earlier this year. Many of the first homes have been sold, it said, without providing specific figures.

Summerset expects to build 250 retirement units in 2014, and aims to lift that to 300 in 2015. It has 19 villages across New Zealand and land sites in Casebrook, Ellerslie, Lower Hutt and Wigram.

Shares of Summerset last traded at $2.63 and have shed 19 percent so far this year, lagging an 8.7 percent gain in the NZX 50 benchmark index. The stock is rated an average ‘buy’ based on the consensus of five analysts polled by Reuters.

NZ dollar rises against yen as global sentiment improves

The New Zealand dollar gained against the Japanese yen as improved US economic data bolstered sentiment on global growth, prompting investors to reduce holdings of safe haven currencies such as the yen.

The kiwi rose to 84.73 yen at 8am in Wellington, from 84.15 yen at 5pm on Friday. The local currency was little changed at 79.22 US cents from 79.12 cents at the New York close and 79.27 cents on Friday.

Equities rose on both sides of the Atlantic at the end of last week amid better-than-expected earnings results from companies such as from Morgan Stanley and General Electric. Positive sentiment about the outlook for growth was bolstered after US data on new housing starts beat expectations and US consumer confidence unexpectedly rose to the highest since July 2007.

“Some relative calm returned to markets on Friday evening,” Kymberly Martin, senior market strategist at Bank of New Zealand, said in a note. “US data calmed some jangled nerves.”

The yen was the worst performing major currency “as the improvement in general risk sentiment undermined the ‘safe haven’ bid for the currency,” she said.

Some investors were also buoyed by a report in the Wall Street Journal at the weekend that China’s central bank plans to inject 200 billion yuan into the banking system to bolster the world’s second-largest economy amid concerns it could miss its 7.5 percent growth target for this year.

In New Zealand this week, the focus will be on third-quarter inflation data scheduled for release on Thursday. The kiwi will probably trade between 78.50 US cents and 80 cents ahead of the data, BNZ’s Martin said.

Today, the BNZ-BusinessNZ Performance of Services Index and the ANZ-Roy Morgan Consumer Confidence Index are scheduled for release.

The New Zealand dollar slipped to 90.45 Australian cents from 90.60 cents on Friday. Reserve Bank of Australia assistant governor (economic) Christopher Kent is speaking at an aged services conference in Adelaide while Chris Aylmer, the bank’s head of domestic markets, is speaking at a small to medium business conference in Melbourne.

The local currency advanced to 62.09 euro cents from 61.94 cents on Friday, and slipped to 49.21 British pence from 49.31 pence. The trade-weighted index gained to 76.92 from 76.84 on Friday.

World Week Ahead: Bulls bounce back

A slew of US corporate earnings and Chinese economic data will form the key focus in the coming days as Friday’s rebound could not prevent Wall Street from sliding for a fourth consecutive week amid concern about global growth.

Among US companies reporting quarterly results in the coming days are Apple, IBM, Boeing, McDonald’s, Coca-Cola, Amazon, and Caterpillar.

Friday’s jump in equities on both sides of the Atlantic amid better-than-expected results such as from Morgan Stanley and General Electric and a surprise jump in US consumer confidence stemmed the recent slide and offered optimism.

“The disconnect between the sharp market drops [last] week and the pretty good US fundamentals might’ve gotten some people interested in buying again,” John Canally, an economic strategist at LPL Financial in Boston, told Bloomberg News.

Friday’s rally limited losses for the week: the Dow Jones Industrial Average slid 1 percent, as did the Standard & Poor’s 500 Index, while the Nasdaq Composite Index fell 0.4 percent.

“I would think the market is going to be strong into the close this year,” Michael Mullaney, chief investment officer at Fiduciary Trust in Boston, told Reuters.

Today, investors will eye Federal Reserve officials for comments about the scheduled end of the central bank’s bond-buying program this month as well as the timing of an interest rate increase.

Fed Governor Jerome Powell speaks on a St Louis Fed conference call and webinar, while Fed Governor Daniel Tarullo will talk at a New York Fed conference.

The latest economic reports scheduled for release in the coming days include existing home sales, due Tuesday; the consumer price index, set for Wednesday; weekly jobless claims, the Chicago Fed national activity index, the FHFA house price index, PMI manufacturing index, leading indicators, and the Kansas City Fed manufacturing index, due Thursday; and new home sales, on Friday.

Reports on the US housing market will be closely watched for signs of a more sustained recovery in the industry. Last week the Standard & Poor’s Supercomposite Homebuilding Index posted its largest weekly gain since January.

Investors will also closely watch key economic data from China with reports on retail sales, GDP and industrial production data due on Tuesday.

In Europe, Friday’s 2.8 percent rally in the Stoxx 600 Index was its first gain in nine sessions and helped limit its loss for the week to 0.9 percent. The FTSE 100 Index’s 1.9 percent jump on Friday helped narrow its decline for the week to 0.5 percent.

On Wednesday, the Bank of England will release minutes from the Monetary Policy Committee’s meeting earlier this month, when it kept its key interest rate at a record-low 0.5 percent.

The latest data will arrive in the form of reports on German producer prices and the euro-zone current account, due today; euro-zone manufacturing and services PMI, euro-zone consumer confidence, UK retail sales, due Thursday; as well as German GfK consumer sentiment, and UK GDP, due Friday.

Oil prices remain a concern. A rebound late last week sparked hope the slide may be over but it was considered far from a safe bet.

“After a violent US$15-a-barrel swing in just two weeks, the market is likely to test lows again before it’s clear that a true bottom was hit,”Andy Lebow, senior vice president for energy at Jefferies, told Reuters. “You can’t say that the downtrend is definitively over.”

Last Thursday, West Texas Intermediate prices dropped below US$80 for the first time since 2012, before recovering.

“You’ve probably seen the worst,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, told Bloomberg News. For WTI, “my hunch is that we will hold the US$80 level. But I won’t be shocked if we do retest it.”

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