New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2><a target="_blank">Food for Thought</a></h2>
What’s in Store for the Primary Industry this Summer?
Weather variability in recent years has led to some adverse outcomes for the New Zealand listed Food, Beverage and Agriculture sector — while we are not out of the woods, recent outlook has normalised for key areas and indicators, hence, risks have reduced. Forecasts are now for ‘average’ conditions over the key Summer harvest period, with movements over recent weeks lowering weather risk. Industry anecdotes we have gathered are also predominantly positive, although it is still early days. We have a positive bias to the sector, with stock preferences (in order): The a2 Milk Company (ATM), New Zealand King Salmon (NZK), and Sanford (SAN).
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.0.1&amp;permmsgid=msg-f:1655842314579063897&amp;th=16fabbcfe48bb459&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ_Fybp0ihSzH5NWnF7RzNgQBa7vUjTSCtIeGrFMpvUvpAPzAgkR5E_eHn_g14YheeUNNRPhcBKmniyMTKIMKOWLs0sjDqt3KTUdSZWmyEPyg33JZgsggLdn1mg&amp;disp=emb" width="401" height="186" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Climate outlook snapshot — average conditions with pockets of dry
NIWA’s seasonal outlook for the key Summer period (January to March 2020) is for average temperatures and rainfall, with indicators pointing to neutral weather patterns. History suggests this is favourable for the sector. The current weather outlook for key horticulture/viticulture periods should see Scales (SCL), Delegat (DGL) and Seeka (SEK) navigate summer unscathed.
Key areas of risk are: (1) localised dry spells in the upper North Island — with Fonterra (FSF) and Skellerup (SKL) most exposed, and (2) warmer waters — although temperatures are below last year and forecasts have improved in recent weeks, lowering the risk to NZK and SAN.
Other key data of interest in this edition
<ul>
<li>Recent Kantar data trends positive for growing consumption of ATM’s key Infant Formula products in China. December was particularly strong, with market share in the survey of 7.5%.</li>
<li>Dairy sector health indicators mixed. Positives: demand, milk price and confidence; key risks: negative farm prices, dry weather in some areas of NZ and elevated gearing.</li>
</ul>
<div class="content-highlight">
Investment View
We summarise our sector stock ratings as follows:
<ul>
<li>OUTPERFORM: The a2 Milk Company (ATM), Sanford (SAN), NZ King Salmon (NZK)</li>
<li>NEUTRAL: Scales (SCL), Synlait Milk (SML), Delegat Group (DGL),&nbsp; PGG Wrightson (PGW)</li>
<li>UNDERPERFORM: n/a</li>
<li>Not rated: Comvita (CVT), Fonterra (FSF), Skellerup (SKL)</li>
</ul>
</div>
Chelsea Leadbetter, CFA chelsea.leadbetter@forsythbarr.co.nz +64 4 495 5262
Guy Hooper guy.hooper@forsythbarr.co.nz +64 4 495 5255

Food for Thought
What’s in Store for the Primary Industry this Summer?
Weather variability in recent years has led to some adverse outcomes for the New Zealand listed Food, Beverage and Agriculture sector — while we are not out of the woods, recent outlook has normalised for key areas and indicators, hence, risks have reduced. Forecasts are now for ‘average’ conditions over the key Summer harvest period, with movements over recent weeks lowering weather risk. Industry anecdotes we have gathered are also predominantly positive, although it is still early days. We have a positive bias to the sector, with stock preferences (in order): The a2 Milk Company (ATM), New Zealand King Salmon (NZK), and Sanford (SAN).

Climate outlook snapshot — average conditions with pockets of dry
NIWA’s seasonal outlook for the key Summer period (January to March 2020) is for average temperatures and rainfall, with indicators pointing to neutral weather patterns. History suggests this is favourable for the sector. The current weather outlook for key horticulture/viticulture periods should see Scales (SCL), Delegat (DGL) and Seeka (SEK) navigate summer unscathed.
Key areas of risk are: (1) localised dry spells in the upper North Island — with Fonterra (FSF) and Skellerup (SKL) most exposed, and (2) warmer waters — although temperatures are below last year and forecasts have improved in recent weeks, lowering the risk to NZK and SAN.
Other key data of interest in this edition

Recent Kantar data trends positive for growing consumption of ATM’s key Infant Formula products in China. December was particularly strong, with market share in the survey of 7.5%.
Dairy sector health indicators mixed. Positives: demand, milk price and confidence; key risks: negative farm prices, dry weather in some areas of NZ and elevated gearing.


Investment View
We summarise our sector stock ratings as follows:

OUTPERFORM: The a2 Milk Company (ATM), Sanford (SAN), NZ King Salmon (NZK)
NEUTRAL: Scales (SCL), Synlait Milk (SML), Delegat Group (DGL),&nbsp; PGG Wrightson (PGW)
UNDERPERFORM: n/a
Not rated: Comvita (CVT), Fonterra (FSF), Skellerup (SKL)


Chelsea Leadbetter, CFA chelsea.leadbetter@forsythbarr.co.nz +64 4 495 5262
Guy Hooper guy.hooper@forsythbarr.co.nz +64 4 495 5255

Food for Thought: What’s in Store for the Primary Industry This Summer?

A2 Milk Co Ltd

Food for Thought: What’s in Store for the Primary Industry This Summer?