South Island Companies Survive Sharp Shock

South Island Companies Survive Sharp Shock

Deloitte South Island Index for the quarter to 31 March 2011 shows
post-quake resilience, by remaining stable during March

South Island listed companies suffered a setback from the devastating Canterbury earthquake but have showed considerable resilience, according to the latest Deloitte South Island Index.

The 13th edition of the Deloitte South Island Index, for the quarter to 31 March 2011, was down by 0.2% or $9.8 million in market capitalisation on the final calendar quarter of 2010. The total market capitalisation for the index now stands at $4.109 billion.

Paul Munro, a corporate finance partner in Deloitte's Christchurch office, says the year started positively for Deloitte South Island Index companies but January's growth was wiped out by the February 22 quake.

"No one emerged unscathed in the aftermath of the quake, even companies which weren't directly affected by the devastation. As everyone knows, business and consumer confidence plummeted, both in the South Island and the whole country," Mr Munro
says.

"But what has struck us is the resilience in the market during March, with only a $145,000 decrease in market capitalisation for the whole index. That's a minuscule amount in percentage terms.

"The real test for South Island companies will be how quickly they can recover from yet another major blow following last year's quake and Pike River. At this stage, it's too early to say when that bounce back will occur but already many commentators are talking about a gradual pick-up once reconstruction starts in earnest."

The hardest hit Deloitte South Island Index companies in February were Pyne Gould Corporation, Lyttelton Port Company and Ryman Healthcare, although the latter two bounced back quickly to record growth in March.

The big success story for the quarter was Kathmandu Holdings, which recorded a 27.8% gain (or $100 million market capitalisation increase) on the back of strong results for the first half of its financial year, and moved up two places on the Deloitte South Island Index to second place.

Other strong increases in market capitalisation were Ryman Healthcare (up $35 million or 3%), and Skellerup Holdings (up $28.9 million or 12.7%) Pacific Edge and Chatham Rock Phosphate (formerly Widespread Energy) recorded significant gains in percentage terms, up by 39.2% and 39.4% respectively for the quarter to 31 March 2011.

Kathmandu's performance helped the retail sector end three consecutive quarters of decline, and rebound with market capitalisation growth of $100 million for the quarter. Other top performing sectors were the property and manufacturing & distribution sectors, increasing by $33 million and $45 million respectively.

Another positive note was the commodity export sector, which continues to experience record highs, Mr Munro says.

The Deloitte South Island Index trailed other indices that it is benchmarked against during the March 2011 quarter, with the NZX Gross Index increasing by 4%, the Dow Jones up by 6.4% and ASX All Ordinaries improving 1.7%.

To see the full Deloitte South Island Index quarterly report, go to www.deloitte.com/nz/southislandindex.

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