ATM are very dependent on a few things going their way, but they are well positioned for a good turnaround story. The company’s brand strength will be key in the very competitive Chinese infant formula market, however if they can maintain or even grow market share in the region then we expect to see the share price follow.
A2 reported a better-than-expected result and rose 12% on the day. Revenue was down, but by less than the market expected, with the company producing a modest (by their standard) Net Profit Before Tax of $59.6m.
Our key take out was the solid performance of their Chinese label brand, with the distribution footprint now up to 24.6k stores in China. A2 has also regained control of their inventory levels, with product freshness no longer an issue (they wrote off $90m in inventory last year to refresh shelves). The company maintains a strong cash position, and whilst margins will remain under pressure in the short term, the pathway for recovery is still there.
FBU Fletcher’s have benefited from a change in leadership, and a streamlining of the business. They are also set to benefit from a continuation in new builds, both residential and commercial. Some regulatory risk remains given the heavy market share the company has in some areas of the housing supplies market, but their scope in that area is also attractive from an investors point of view.
Fletcher Building produced a great result, with the share price rising 9% in the two trading days after the result. The Covid lockdowns impacted the first half result, but in spite of a $105m impact from Covid, Fletcher Building still managed to beat last year’s Earnings Before Interest and Tax (EBIT) for the period.
They also forecast EBIT of $750m for the full year, which was materially above market expectations, and noted that margins would likely remain elevated in the second half of the year. Margin expansion is no surprise given the supply chain issues, and Fletcher Buildings strong position in the building supplies market. Fletcher Building expect to be able to increase margins further in 2023.
FPH Whilst unlikely to repeat the meteoric rise the company experienced in 2019 and 2020, the company is well placed to consolidate, and as part of a diversified portfolio, offer a good hedge against Covid taking off again, or being with us longer than expected. – Full year result due in May.
IFT Is a company with a great track record and it offers investors diversified exposure to some attractive sectors with long term tail winds (renewable energy, healthcare, and data storage). They complement their more growth orientated investments with strong cash flow investments which includes Trustpower, Wellington Airport and Vodafone NZ.- Full year result due in May.
Freightways ticked up slightly after their result. They beat market expectations against a difficult backdrop that included covid restrictions and lockdowns. The key positive out of the result was the excellent 2nd quarter performance, with earnings and revenue up 20% each.
The outlook for the rest of the year was cautiously optimistic, although the caveat of covid still remains on all of these results.
