Jeremy Hutton: Milford Asset Management expert on investors' hopes for A2 Milk

Earnings season is well under way in New Zealand, with investors outlining their expectations and predictions.

A2 Milk is due to report their results soon, amid a 'rollercoaster' period for the company.

Milford Asset Management's Jeremy Hutton explained further.

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Episode Transcript

Speaker 1 (00:00):
Jeremy huss and Milford Asset Managements with us A.

Speaker 2 (00:02):
Jeremy, Hey you good eBay.

Speaker 1 (00:04):
So we've got the earning season underway to start with
A two milk. What's the market looking for next week
with this result?

Speaker 2 (00:11):
Yeah, I mean it's fair to say the A two
milk share price this year has been on a bit
of a roller coaster. I mean it started well year
well with an earning's upgrade in February, but since then,
over the second quarter, their share price fell forty percent,
and this was on concerns that their product was out
of stock in China. Their very important China label infant
formula product was struggling to get into market, and to

(00:34):
be fair, they scrambled well. They gave a good update
in June and the share price recovered some thirty percent.
So what are mess is expecting next week at their result?
I mean, their outlook for twenty fy twenty seven revenue
growth will be very important. Have they had some disruption
from these stockouts and winning those customers back. They've also

(00:55):
done a really good job recently at releasing new products
and expanding into new jog Can they keep the momentum
up there? But what I would say with a two milk.
I mean around updates. It's hugely volatile given the split
views out in the market. So I think there's a
high chance in Monday on Monday that we could get
a big move up or down for a two milk.

Speaker 1 (01:16):
Talk to me about Spark, because it has been tough
for Spark recently. A bit of a rally recently though,
but really it's been quite hard. What are we expecting
for their result?

Speaker 2 (01:25):
Yeah, I mean this year has continued to be quite
tough for Spark. I mean, in the first half of
the year the share price was down another twenty percent,
But you're right, I mean it has bounced back a
little bit recently, mainly on that update they gave in
July where they reiter rated their guidance for this result
coming up, and then they announced a strategic review of
their IT services business. So the market next week we'll

(01:49):
be looking for their view on next year's outlook. But
I think earnings could still be under a little bit
of pressure given their continued mobile market shared declines for Spark,
and then comments around the very important dividend and credit
rating could be discussed too. So I suppose the question
is for sparkingman. Can this business in its current format,
with its balance sheet, can it sustain the current dividend level?

(02:12):
And I think we really need to see some evidence
of earning stability before the market gets more confidence in
the story.

Speaker 1 (02:19):
And then, of course Fletcher Building has been another share
price on a bit of a roller coaster. Are they
going to highlight any green shoots for the construction industry
do you think?

Speaker 2 (02:26):
Yeah? I mean Fletcher's share price this year, I mean
it's been in the Iran linked washing machine so to speak.
I mean it rarely reasonably well in Q one alongside
the New Zealand economic recovery, but then we had Iran.
The share price fell thirty percent. But to be fair,
I mean it's bounced back really well. It's pretty much
back to where it was pre Iran. So the market,

(02:47):
in my view, is clearly assuming that there'll be an
uptick in activity and building material activity local construction. I mean,
we know the residential housing market in Auckland has been
a bit weak, but can the rest of the entry
lifted up? I mean, are these bigger commercial and government
projects getting underway? So, I mean they've always remained cautious
on the outlook, but I think the market is expecting

(03:09):
a decent earning step up coming for next year, so
perhaps some better times ahead for Fletcher Building.

Speaker 1 (03:15):
Jeremy, It's good to talk to you, mate, Jeremy husson
Milford Asset Management. For more from Heather Duplessy Allen Drive,
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