Market News 16 March 2026

Johnny Lee writes:

Volatility continues to be a key theme across markets, as the conflict in the Middle East continues to weigh on investor behaviour.

The price of oil has ranged from 60 USD to 120 USD over the month, while the fear of supply shortages has sent some consumers to begin stockpiling their own reserves, according to media. 

These fluctuations caused Air New Zealand to suspend its guidance, issued only a few weeks prior.

While Air New Zealand had hedged 83% of its fuel costs for the remainder of the financial year, this hedge is specific to Brent crude. Air New Zealand’s planes, of course, do not operate on crude oil. Jet fuel requires refining, and the cost of this refined fuel has skyrocketed over the last week, with jet fuel prices in Singapore leaping nearly 140%.

Air New Zealand notes that the cost of refining crude into jet fuel has broadly remained around $20 USD for some time, before rising to nearly $115 dollars per barrel. An extra $100 USD a barrel, approximately $170 NZD, costs the airline millions each day.

This price shock will be a good test for the elasticity of airline demand. Air New Zealand has already announced it will be adjusting fares higher and cancelling flights to recoup this sudden increase in cost. Obviously, existing sales will be honoured and reflected in the loss to be announced in August. The challenge will be to sell future tickets at higher prices and recoup this loss from travellers needing to travel.

Other airlines have struggled in the aftermath of the Middle Eastern conflict. Qantas’s share price in Australia has fallen 20% in the last fortnight, within Virgin Australia down 10% over the same timeframe. Air New Zealand shares have fallen around 20%.

Air New Zealand’s share price has struggled for some time. The developments in the Middle East, and the subsequent pressure on the global supply chain for fuel, has highlighted just how precarious its position is. August’s result was already forecasted to be a loss, and the company is warning this loss will grow every day.

Just how significant this loss is will be influenced by the duration of the conflict, and the willingness of consumers to pay significantly higher fares for air travel.

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Briscoes has published its full year results to the market.

Profit was very modestly lower at $59.2 million, compared to $60.6 million last year. Driving this was a fall in margin as the company faced increasing competitive pressure, and a consumer increasingly sensitive with its discretionary spending.

The company maintains a strong cash balance, with net cash of around $100 million. The company has no term debt but does expect to begin drawing down on its new funding facilities next month, as it continues its capital expenditure programme. This includes its new distribution centre at Drury, which is expected to be a major strategic advantage for the company long-term.

Online sales continue to grow and now make up over 20% of total sales. Many businesses ramped up investment into online sales platforms in the aftermath of COVID, after the weaknesses to the model were revealed at the time.

A dividend of 10 cents per share was declared, bringing the total dividend for the year up to 20 cents per share. This is down 2.5 cents from last year.

Outlook was positive. While the company highlighted the recent geopolitical disruption in the Middle East – specifically highlighting the impact of high fuel costs on discretionary spending – Briscoes is still confident that its distribution centre investments will be “transformational” for the company and will support the company’s long-term growth plans.

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Port of Tauranga has hosted its investor day, providing shareholders with an insight as to the company’s current strategy and what it sees as the main factors influencing the port industry at this time.

The Port sees further evolution of New Zealand’s port infrastructure network, leading to a “hub and spoke” style system. In such a system, increasingly large ships would land at “hub ports” – such as Port of Tauranga – before smaller ships distribute goods to smaller, regional “spoke ports” around the country.

Three key factors will drive Port of Tauranga’s strategy going forward.

The first is population growth. Statistics New Zealand projects that an increasing proportion of our population will be based in the upper half of the North Island, as New Zealand continues to grow in the years ahead. More people will mean more consumption, which means more throughput for the logistics sector.

The second is import growth. This is partly driven by changes in the warehousing sector, where new, lower-cost supply is coming online nearer to Port of Tauranga’s “catchment” in the Waikato and Bay of Plenty regions. If more companies are choosing to store goods closer to the port, it should result in growth in Port of Tauranga’s share of the market.

The last is export growth. While dairy and the meat sectors are gradually shifting towards “fewer but higher value” exports, the horticulture industry is anticipating strong growth. More product, again, should mean more throughput.

The presentation also discussed trends in the shipping industry. Carriers plan to continue deploying larger, lower-emission vessels, but this strategy requires ports to have the necessary capacity to process these deployments. Port of Tauranga’s Stella Passage development, which is currently seeking consent through the Fast Track Process, hopes to be a part of this solution.

Port of Tauranga is a key part of New Zealand’s infrastructure and a vital connection to the rest of the world. Both New Zealand and the world of logistics continue to change, and Port of Tauranga is looking to position itself to take advantage of the opportunities such change present.

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Contact Energy’s retail offer has closed. Contact received bids for $251 million, more than three times over-subscribed.

While the offer was to raise $75 million, Contact has exercised its right to accept over-subscriptions and increased this to $125 million, meaning the offer closed two times over-subscribed.

Scaling was not uniform. The terms and conditions of the offer state that scaling would be undertaken according to the number of existing shares. Typically, this means scaling is more severe for small shareholders.

Settlement of the new shares has already occurred and are now saleable. The refund of the scaled amount is expected to be paid later this week.

_ _ _ _ _ _ _ _ _ _Mercury Energy Bond OfferMercury NZ Limited is considering an offer of up to $250 million of 7-year senior fixed rate bonds. Further details of the offer are expected to be released next week.

Mercury is one of New Zealand’s largest renewable electricity generators and retailers and is 51% owned by the New Zealand Government. The company currently holds an investment grade credit rating of BBB+ from S&P Global Ratings.

The interest rate for the bonds has not yet been announced, however given current market conditions, we are expecting it to offer around 5.00%. This will be confirmed when the offer documents are released. Mercury is unlikely to cover the brokerage costs for the offer. This will be confirmed next week.

If you would like to register your interest, pending further information, please contact us promptly with the amount you wish to invest and the CSN you intend to use.

Please note that indications of interest do not constitute any obligation or commitment to invest.

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Travel

13 April – Taupo – Johnny Lee

14 April – Hamilton – Johnny Lee

15 April – Tauranga – Johnny Lee

16 April – Lowe Hutt – Dadid Colman

17 April – Napier – Johnny Lee

Chris Lee & Partners Limited