We call it the Mainland with our tongues in our cheeks but now we have the numbers to prove we’re weathering economic tough times better than the north.
The Deloitte South Island Index measures the market capitalisation of 33 companies with head offices or the majority of their business in the South Island and puts them into an index relative to their size.
For the first six months of this year, the index was down by 8.5 per cent, beating New Zealand’s benchmark NZX-50 index which fell 21 per cent. Over the last quarter (April to June) it has risen into positive territory, growing 3 per cent versus the NZX-50’s drop of 8 per cent.
However, doing better isn’t the same as doing well as Deloitte partner Paul Munro points out:
At a headline level it shows South Island companies are doing better than the rest of the country, but we need to balance that out with the fact that of the 33 companies measured 61 per cent saw a drop in their market capitalisation.”
Munro said the strong performance over the last quarter had been boosted by larger companies like PGG Wrightson and NZ Farming Systems Uruguay.
PGG Wrightson, the second largest company on the index, grew its market cap by $127 million, boosted by a higher share price and $5 million in bonus shares being issued, while NZ Farming Systems Uruguay saw its market cap increase by $83 million on the back of a rising share price driven by predicted increased earnings. Munro said their strength followed the boom in the dairy sector with record milk solid payouts.
He said this sector was having a positive impact on other businesses and because a greater proportion of business in the South Island was linked to dairying it was helping to hold up the economy.
It’s not all down to dairying, but the record payout from Fonterra and the continuation of conversions from sheep to dairy farms are pouring money into rural communities. That in turn is insulating the provinces from the worst effects of the recession.