Chris Lee & Partners Ltd

Market News 13 July 2026

David Colman writes:

Last week, the a2 Milk Company provided a supply chain update in relation to its China infant milk formula (IMF) business and an update on its preliminary unaudited full-year 2026 results.

The supply chain update elaborated on the update from 13 April, which noted that shortfalls of China label IMF product at distributors and retailers were expected to materially affect in-market product availability during the fourth quarter of 2026.

The shortfalls were due to strong demand in the preceding quarter, freight challenges, Synlait Milk’s production backlog, extended product release times and additional customs requirements.

Basically, a2 Milk lacked the inventory needed to supply the market and keep shelves stocked.

China label IMF product availability was confirmed to have been materially affected by these factors, with a large proportion of existing users having to switch to alternative brands during the quarter.

Some users switched to a2 Milk’s English label products, which were not affected to the same degree, although a2 Genesis was affected by planned production downtime at the Pokeno plant and changes to Chinese importation requirements.

A2 product availability issues have now been substantially resolved, and product flows of China label and English label products have resumed, with stock levels returning to target levels.

The company must now focus on marketing, likely involving promotions and sales initiatives, to win back previous China label IMF users and gain new customers through its retail and distribution partners.

Full-year 2026 results will reflect the fourth-quarter supply chain issues affecting China label IMF sales, with full-year sales down approximately 14% on full-year 2025.

All other product categories, including English label IMF, Other Nutritionals and Liquid Milk, are significantly up for the full year.

The well-performing categories should help ATM deliver full-year results in line with, or slightly ahead of, the guidance range previously announced on 13 April 2026, which included:

- Revenue of approximately $1.97 billion, up more than 12% on FY25. April guidance was low to mid double-digit growth.

- EBITDA margin to be at the high end of the April guidance range of 14.0% to 14.5%.

- NPAT to be slightly up on reported FY25. April guidance was for a similar or lower result, with underlying NPAT expected to be up.

- Cash conversion of approximately 70%. April guidance was 50%.

ATM will release its audited FY26 results and FY27 outlook commentary on 17 August 2026.

Tāiko Critical Minerals

One of New Zealand’s newest listings, Tāiko Critical Minerals (TCM), which listed in March this year, announced last week a significant boost to its project with the receipt of a Government funding offer.

Hon Shane Jones, Minister for Resources and Regional Development, announced on behalf of the New Zealand Government that it has offered to provide financial assistance of up to NZ$20 million towards funding a $40 million wet separation plant planned as part of TCM’s Barrytown Critical Minerals Project on the West Coast.

Westland Mineral Sands, which is not listed, will receive $30 million towards progressing a proposed $70 million wet separation plant, also contributing to the development of the fledgling domestic critical minerals industry.

The minister, a flag-bearer for the New Zealand mining sector, has made it clear that if the world is looking to secure critical minerals for manufacturing and scientific development, the Government will support the industry in New Zealand.

TCM has since completed the first part of a capital raising with an oversubscribed placement of shares. The placement comfortably raised $7 million, including $2 million of oversubscriptions above the $5 million sought.

A total of 28 million shares were issued through the placement at $0.25 per share.

The second part of the capital raise involves a share purchase plan (SPP) for New Zealand-resident TCM shareholders, capped at $3 million. The SPP offers new shares at the same price as the placement of $0.25.

Based on the demand for the placement, and with the on-market share price closing at $0.30 on Friday, TCM appears likely to successfully raise the targeted funds.

The money raised will be used to fund working capital, including completion of the Fast-track resource consent process, the Definitive Feasibility Study and OIA approval for the Barrytown Critical Minerals Project.

Infratil

Infratil’s investment in the rapidly growing data centre sector has been a major success.

The company updated the valuation of its investment in CDC, which owns and operates large-scale data centres across Australasia.

CDC’s independent valuation increased by 23.6% during the April to June quarter to a midpoint of A$18.5 billion, up A$3.5 billion.

The increase was driven by:

- Strong growth in CDC’s contracted capacity to more than 1GW.

- The acceleration of CDC’s build programme to support this demand.

- The expansion of CDC’s total pipeline through to 2040 from 2.6GW to 3.9GW of leasable capacity to support future growth.

The numbers are impressive. One gigawatt is equivalent to the electricity used by many hundreds of thousands of homes.

Infratil’s 49.72% interest in CDC is now independently valued at A$9,213 million, up A$1,759 million from A$7,454 million.

A$9.2 billion is more than NZ$11 billion, which indicates that CDC represents more than half of Infratil’s business, noting that its total asset value was NZ$20.6 billion for the year ended 31 March 2026.

Bremworth

Minority shareholders of Bremworth (BRW) have no choice but to accept that the scheme of arrangement initially announced in October last year will not go ahead.

The board of Bremworth was forced to abandon discussions regarding a scheme that would have seen Floorscape acquire 100% of BRW for effectively $1.05 to $1.15 per share, comprising a cash payment of $0.75 per share and a capital distribution of between $0.30 and $0.40.

A group of shareholders, representing in aggregate approximately 38% of shares and led by David Ferrier, were committed to voting against the scheme.

The board was clearly frustrated with the opposing group, which decided to vote against the scheme after the final regulatory hurdle had been achieved but before an Independent Adviser’s Report was produced.

The report would have given shareholders the ability to assess the scheme and would have included an independent valuation, including an indicative value of the company compared with the offer price.

Bremworth’s remaining 2,300-plus shareholders might have welcomed the scheme, considering the on-market share price has ranged between $0.30 and $0.90, with no dividends paid, over the past five years.

The opposing shareholders have not offered an alternative plan for BRW or provided details of any other bidder with an offer at or near the level of the Floorscape scheme.

The board engaged with Floorscape in good faith and continues to believe that the scheme was in the best interests of Bremworth shareholders. It remarked that it was disappointed shareholders were not given the opportunity to vote on the scheme with the benefit of all relevant information.

The board will now focus on improving performance, with priorities including a cost reset, revenue recovery and capital discipline.

Wool carpet sales in New Zealand and Australia are ahead of last year, but trading in both markets is challenging, and the company was neither cash flow positive nor profitable in the second half of full-year 2026.

BRW will announce its preliminary full-year 2026 financial results in late August.

Fletcher Building

Fletcher Building’s increase in guidance for full-year 2026 was welcomed by long-suffering shareholders.

The company indicated there would be a 6.4% increase in full-year 2026 EBIT guidance to between $400 million and $403 million, including approximately $52 million of earnings from surplus property sales.

An update on volumes showed improvement across the company’s core manufacturing and distribution divisions.

Light Building Materials benefited from favourable raw material procurement, manufacturing productivity improvements and greater use of low-cost scrap.

Iplex in New Zealand and Australia saw increases in demand as customers accelerated purchases ahead of progressive price increases.

Heavy Building Materials delivered a mixed performance, reflecting an ongoing recovery from weaker roading and project activity in the first half of 2026, alongside stable performances from Golden Bay, Firth and Humes. Demand in the civil and infrastructure sector was elevated due to unseasonably settled weather through June.

Within Distribution, PlaceMakers Frame & Truss volumes were higher. A new Cavendish Drive site is now operational and supporting the Auckland market.

Residential took 220 residential and apartment units to profit in the fourth quarter. A total of 536 units were taken to profit in full-year 2026, compared with 666 in 2025.

FBU expects existing construction projects to progress, supporting ongoing demand for materials. However, economic and cost uncertainty were noted as causes of delays or cancellations of new projects, particularly in the commercial sector.

If sustained, this trend is likely to weigh on FBU’s performance in the first half of full-year 2027.

FBU’s full-year results will be released on 19 August.

Travel

David Colman – Lower Hutt – 21 JulyDavid Colman – Palmerston North – 24 JulyDavid Colman – Whanganui – 6 AugustDavid Colman – New Plymouth – 7 August

Chris Lee & Partners

Market News 6 July 2026

Johnny Lee writes:

Mainfreight (MFT) has provided its annual report to shareholders, outlining its targets and strategy for the next five years.

As always, the document begins with a brief thought piece from founder Bruce Plested. These have become a staple for the socially-inclined investment community, with the latest discussion focusing on the necessity of migration, specifically as a tool to ease pressure on our national superannuation affordability.

Mainfreight has long been one of our most “environmentally conscious” companies, using its financial success to invest in solar panels, battery storage, EV charging facilities, electric-based machinery and water collection. The management team are distinctly aware of their social license and have made real investments to ensure this is not placed into jeopardy, even going so far as to say their branches “are becoming both freight hubs and energy stations”.

Financially, the board is seeing rapid improvement throughout the year, after a disappointing 2025. The start of the 2027 financial year has seen some positive improvements, after a period of underperformance post-COVID.

The company also highlighted its increasing use of robotics in its warehousing division, and artificial intelligence in its analysis arm. 

Perhaps the most interesting part of the announcement was its five-year roadmap, which gives shareholders a glimpse into the current strategic direction of the company. While its current focus is largely on Australia, it has far more global ambitions long-term.

Included in this is a plan to structurally separate its airfreight network from the existing “Air and Ocean” division. It also includes an interest in expanding further into the Middle East, Africa and South America, eventually reaching 50 countries.

It also discussed a possible shift in its land acquisition strategy, moving from an “as-required” approach towards a land-banking one.

The last five years have been a long journey for Mainfreight. 2022 and 2023 saw a tremendous increase in revenue and profit, as freight costs soared following the COVID lockdowns around the globe. The company took a cautious approach to dividends at the time, with modest, sustainable increases that persist today. 

However, the last few years have seen a modest fall from these heights, with some regions underperforming, particularly in the Americas. The company is distinctly aware of this, and is taking steps, both strategically and with its capital expenditure, to address this. 

 ---

Shareholders of carpet manufacturer Bremworth Limited (BRW), formerly Cavalier Corporation, have finally received notification of Commerce Commission clearance for Floorscape’s bid for the company.

Much like the Contact Energy takeover of Manawa, the Bremworth decision appeared to surprise the market, as it rallied sharply following the announcement, up 20% on the day.

Cavalier Corporation first listed in 1984, a somewhat famous year for NZX listings which included Rainbow Corporation and Charter Corporation.

Very few have survived to 2026. Bremworth’s departure, assuming the takeover proceeds, will leave only a handful from that era, including the likes of Hallenstein, EBOS and Sanford. This survival rate reflects perhaps not just how hard it is to build an enduring business model, but how rare it is for successful New Zealand companies to remain New Zealand owned.

However, another wrinkle in the plan has since emerged. 

Bremworth has made a subsequent announcement to market this morning. Some shareholders, represented by David Ferrier, intend to vote against the proposal. Mr Ferrier’s group represents an interest of around 19% of Bremworth, enough to prevent a mandatory acquisition. 

Minority shareholders of Bremworth should watch the market very closely over the weeks ahead.

--- 

Tourism Holdings (THL) takeover is also progressing, although new twists are being introduced along the way.

Tourism Holdings received its first takeover offer in June 2025, with an indicative cash offer of $2.30 per share. The offer was from a group including Australian private equity firm BGH Capital, and the family interests of Luke and Karl Trouchet. Luke Trouchet was, at the time, a director of THL. He has since resigned from the role.

This offer was rejected by the board, expressing its view that the value of the company was “well north of $3 per share”, and that the offer was being made during a “bottom-of-the-cycle trading environment”.

In May of this year, Tourism Holdings received a revised offer from the same Consortium, at a price of $3.10 per share. So far, this was proceeding as shareholders would expect, with the board effectively negotiating on their behalf before providing a recommendation as to whether the offer represents a fair value.

Two weeks ago, an additional NBIO (Non-binding indicative offer) was received, this time at a range of $3.30 to $3.40. The buyer’s identity was not revealed, although Australian financial media believe the bid originated from a Portuguese RV rental company.

The bidders are now in the process of conducting due diligence, at which point the NBIO can proceed to a formal offer to buy the company.

These competing bids are always interesting to watch, especially when one side has acquired a meaningful holding. Rival bids tend to better shake out the “true” value of company, as bidders try to find a balance between securing acceptance and leaving themselves room to extract their own value following completion.

The winners, ultimately, will be the shareholders. The share price has climbed from $1.40 a year ago to $2.95 today, with the potential to go higher should either of the two offers proceed.

---

The Reserve Bank of New Zealand (RBNZ) will meet on Wednesday to discuss our economy and decide the Official Cash Rate.

Market expectations are fairly mixed, with some expecting a 25-point hike to 2.50%, while others expect the Committee to hold, pending further data. Both arguments are compelling in their own right.

The rapidly evolving oil price story is driving much of these differences of opinion. Oil prices, and commodity prices that correlate with the oil price, have fallen sharply following the most recent announcement of a ceasefire.

Indeed, the previous decision saw significant commentary surrounding the conflict in the Middle East, and discussed the negative impacts this would have on our economic recovery and our inflation rates. Now, there are some (very) tentative market views that the conflict has ended and that the oil price is now in decline.

When expectations diverge like this, it increases the chance of a market move following the decision. Currency and swap markets will inevitably react, as one side – the wrong side – adjusts positioning.

The one consensus is that the current rate, of 2.25%, is too low. Longer term, interest rates will need to rise to a higher neutral rate – perhaps above 3% - and this week’s difficult decision may be the first step towards this point.

Travel

David Colman - Lower Hutt - 21 July

David Colman – Palmerston North - 24 July

David Colman - Whanganui - 6 August

David Colman - New Plymouth - 7 August

Johnny Lee

Chris Lee & Partners