Market News – 16 June 2025 

Johnny Lee writes:

The dispute between Fletcher Building and SkyCity has finally entered the public domain.

Both companies have advised shareholders they are engaging legal counsel to resolve their long-running disagreement regarding the International Convention Centre project.

Fletcher Construction began work on the project in 2015, during Mark Adamson’s tenure as CEO of Fletcher and Nigel Morrison’s time at SkyCity. Both companies have since undergone several leadership changes. It has been a long and difficult process for all involved.

SkyCity is now seeking $330 million in liquidated damages. This is a material figure for both parties and exceeds the amounts already paid by Fletcher Building due to delays in project delivery.

Neither company is unfamiliar with litigation. Fletcher continues to address issues tied to its Iplex operations in Western Australia. SkyCity has paid millions in penalties following anti-money laundering breaches. Legal activity has been frequent for both.

This latest development is unlikely to reassure shareholders. A construction firm and a casino operator entering what may become a protracted legal process, amid soft sector conditions, is not a welcome headline.

Fletcher Building also issued an update confirming it had received interest from several undisclosed parties seeking to acquire parts of the business, including its construction division.

The company operates multiple divisions: building products, distribution, concrete, Australia, residential and development, and construction.

The construction arm includes local road maintenance contracts and brands such as Brian Perry Civil and Higgins, both of which have experienced volatile earnings in recent years.

There is no indication of a full takeover. Interest has focused on selected business units. This is not unusual for larger, multi-division firms.

Whether the interest amounts to casual inquiry or reflects a genuine opportunity for Fletcher to refocus remains uncertain. The company has said it will provide a further update at its Investor Day on 24 June.

Following the announcement, Fletcher’s share price rose 10 percent. After years of disappointing performance, its current market capitalisation of around $3.5 billion appears to be drawing external interest from those seeking exposure to New Zealand’s construction sector.

Scales Corporation upgraded its full-year profit guidance last week, following strong performance across all three of its business divisions.

Horticulture is leading the improvement. Higher apple prices and favourable growing conditions have lifted volumes. This has supported the logistics business, while the Global Proteins division has also benefited.

Scales has been shifting its horticulture strategy, redeveloping orchards to focus on premium apple varieties. The company aims for 80 percent of its exports to consist of these higher-value products by 2027.

Operational integration is also progressing. The Profruit business is being brought under Scales Logistics.

In April, Scales lifted its dividend. Although reduced imputation credits — the result of a greater share of earnings coming from offshore — tempered the benefit, there is optimism that dividend growth will continue.

The market responded positively. The share price rose 10 percent and is now nearing its highest level in almost three years.

Mercury Energy held its Investor Day last week, updating shareholders on its strategy and progress.

The company, previously known as Mighty River Power, was partially privatised under the Key government in 2013.

Mercury expects that new generation and tighter cost control will drive profitability over the next five years.

Wind energy remains the primary focus, though geothermal, solar and battery storage are also being developed. Most recent projects remain on budget and on time.

A key challenge is managing supply as gas production declines and weather patterns become more unpredictable. Mercury has identified firming generation — the backup needed when wind and solar output drop — as its top operational priority.

The company sees a range of possible solutions. Battery systems are gaining attention across the sector. Thermal supply agreements and demand-side responses, like Meridian’s agreement with the smelter, also play a role.

On the retail side, Mercury is targeting lower operating costs. Shifting customers to digital channels, such as the mobile app, is central to this approach.

Mercury aims to grow earnings from $900 million in 2025 to $1.2 billion by 2030.

It has maintained a reliable dividend record since listing, including regular growth. Although the yield is lower than Contact Energy or Genesis Energy, long-term holders have been rewarded.

Much like its peers, the next phase of Mercury’s growth will depend on investment in generation and disciplined cost management.

Travel

Wellington – 18 June – Edward Lee

Christchurch – 23 and 24 June – Chris Lee (fully booked)

Ashburton – 24 June (afternoon) – Chris Lee

Timaru – 25 June – Chris Lee

Auckland (North Shore) – 25 June – Edward Lee

Auckland (Ellerslie) – 26 June – Edward Lee

Auckland (CBD) – 27 June – Edward Lee

Please contact us if you would like to book an appointment with one of our advisers.Chris Lee & Partners