Tough trading conditions have taken a toll on 14 of the 32 NZX-listed South Island companies, whose value fell $166 million during the past three months, with financial services company Pyne Gould Corp and rural supplier PGG-Wrightson bearing the brunt of the downturn.
The Deloitte South Island Index quarterly survey to September, released today, revealed three consecutive monthly declines to register an overall 5.3% quarterly fall in the companies' combined market capitalisation, which dipped to $2.98 billion.
Deloitte corporate finance partner Paul Munro said for the first time in almost three years, market capitalisation movement of firms on the South Island index had been overtaken by New Zealand top 50-listed companies (+13% for quarter) and those listed on the ASX (+5.7% for Sept) and Dow Jones (+2.3% for Sept).
A combination of the credit crunch, recession and possible deflation had created "dual challenges" for companies, with PGG-Wrightson and Pyne Gould Corp bearing the brunt.
The latter, however, appeared to be poised for some rebound.
"The challenging economic environment has seen a switch as people zero in on underlying earnings and normalised profits," Mr Munro said.
The two main challenges for companies were managing short-term credit, cash and performance, while at the same positioning businesses for growth in a post-recession environment, he said.
Amid a "haze of bad news", Kathmandu's launch this week of its $457 million initial public offering was seen as a positive, Mr Munro said.
"That's a pretty strong signal that not everybody is predicting doom and gloom."
Most of the decline was in the primary sector, down 23.7%, and finance sector, down 65.7%, but four of the indices' eight sectors gained some value (bio-tech, five companies; development, 4; ports, 2; and other, 3).
Of single company gains, Ryman Healthcare grew $155 million or 14.4%; Queenstown-based Skyline Enterprises $29 million or 20%; South Port at Bluff $24 million or 45%; the National Property Trust $25 million or 35%; and EBOS Group $24 million or 9.3%.
Mr Munro said Pyne Gould Corp's market capitalisation took an almost 80% hit during the quarter, falling $158 million as its share price was driven down by shareholders selling stock in order to fund the purchase of cheaper shares in a $237 million rights issue.
Yesterday, Pyne Gould Corp shares were placed on a trading halt as the company prepared a book build to raise between $15 million and $30 million, having just completed a $237 million rights issue, 11.3% of which was taken up by underwriters.
It is expected to join the lower ranks of the sharemarket top 50 index.
PGG-Wrightson lost $155 million in value, or 43%, reflecting a downturn in dairying and general recession in the rural sector, Mr Munro said.
At the other extreme, although representing only 1% of the value of the South Island index, the bio-tech sector fared well, with Dunedin-founded Blis Technologies and Pacific Edge Biotechnology increasing their respective values by about 50%.
• The float of clothing retailer Kathmandu will boost the number of companies on the southern index to 33 during the next quarter.
