Interest rates

Investors watch the effect of inflation and interest rates on corporate results

Investors will be on the lookout for how rising inflation and interest rates are affecting the nation’s biggest companies as mini-corporate earnings season begins.

More than 25 companies are expected to publish their annual and interim financial results over the next fortnight.
Photo: RNZ / Rebekah Parsons-King

More than 25 companies are expected to release their annual and interim financial results over the next fortnight, including big names such as logistics company Mainfreight, infrastructure investor Infratil and a handful of real estate investors and operators. retirement villages.

Forsyth Barr analysts said in a recent research note that rising interest rates, cost inflation and the lingering effects of the pandemic would be the key themes this earnings season, particularly as they relate to the elderly care and real estate sectors.

“Fiscal 22 results could be the last of the easy years for the [property] sector with the sharp rise in interest rates over the past 12 months likely to weigh on the cost of debt and the value of assets in FY23,” they said.

“As such, we expect some caution in the guidance for FY23, with pressure from higher interest expense partially offsetting continued solid top line growth.”

McEwen & Associates analyst and StockFox app founder David Mcewen said he did not expect to see the effects of rising inflation and high commodity prices earlier this year in the results.

He said the damages would be reflected in their accounts for the current financial situation and all businesses would be affected by higher interest rates and labor costs.

“The question then becomes which companies are best able to pass on these costs.”

“I think any food or retail business would be well placed,” he said.

“The tricky part is companies that might find themselves in a situation where they are either facing strong competition or declining demand, and they are not able to raise their prices as much as they would like.

“The key thing I will be looking for is which companies are able to maintain their margins.”

The first company to report results this week is power generator Manawa Energy, formerly known as Trustpower.