Speculation around Fletcher Building drove the stock higher while the broader market weakened ahead of tomorrow’s rate call from the Reserve Bank.

The S&P/NZX50 index ended at 11,694.60, down 15.29 points, or 0.13 per cent,
but off its lows for the day.

There were 63 gainers and 74 decliners on volume of 38.35 million shares, worth $116.33 million.

The big mover on the day was the thinly-traded PGG Wrightson (PGW), which dropped 33c to $2.90 after the group axed its interim dividend in response to a 40 per cent fall in net profit to $12.7m over the first half.

PGW also reduced its earnings guidance for the full year to ebitda of around $50m, down from a previous guidance of $52m, and last year’s ebitda of $61.2m.

The rural services group also raised questions as to whether there would be a dividend for the full year.

The market was poised for interim results tomorrow from market heavyweights Meridian and Spark, followed by the Reserve Bank’s interest rate call at 2pm.

Market pricing suggests there is little chance of a change to the Reserve Bank’s current official cash rate, which sits at 5.5 per cent, although the odds are increasing for a rise later in the year.

“If there was to be a hike, then clearly the markets would react negatively to that,” Matt Goodson, Salt Funds managing director, said.

Shares in the previously out-of-favour Fletcher Building rallied 10c to $3.95 on heavy turnover after news out of Australia that France’s Saint-Gobain had struck a deal to buy construction firm CSR at A$9.00 ($9.55) per share, giving CSR an enterprise value of A$4.5 billion ($4.78b).

Goodson said a successful takeover of CSR would leave James Hardie and Fletcher Building as the two remaining large, Australia-listed building companies.

“Potentially, people are re-weighting into Fletcher Building for exposure in the sector,” Goodson said.

He also noted “loose speculation” in the Australian media that Fletcher Building’s low share price could make it a takeover target.

“But of course, there are some poison pills in that business, including the whole Iplex leaky pipe situation in Western Australia,” he said.

Fletcher Building maintains that leaks from its Iplex pipes in WA were caused by installation failures and that there is no manufacturing defect.

The company is seeking an industry solution.

Heartland Bank shares gained 1c to $1.18, despite the company reporting an $11.1m decline in its first-half net profit, which was in line with expectations.

The bank said it had been a mixed environment in which to operate, but it said the half had seen continued growth in most of its core lending portfolios, with good pipelines for further growth and to expand market share.

Goodson said Heartland’s margins were a touch worse than expected, as competition for deposits heated up.

“The only real growth in their business was in reverse mortgages, which is a significant and growing business for them on both sides of the Tasman,” he said.

Telco utility Chorus gained a cent to finish at $7.81 after the company released half-year financials, showing its net profit after tax had fallen from $9 million to $5m. Chorus’ lower net profit was at the top end of market expectations.

The company also advised that chief executive J.B. Rousselot is to step down in April and will be replaced by chief operating officer Mark Aue.

Electricity network company Vector eased 1c to $3.84 after reporting a 29 per cent lift in its underlying net profit for the half year, which was better than market expectations.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.