New Zealand’s fledgling and fragmented medicinal cannabis industry is starting to consolidate, with the country’s first listed medicinal cannabis firm set to merge with a rival.

Shareholders in Cannasouth overwhelmingly voted in favour of a merger with Bay of Plenty-based Eqalis at a special meeting on Friday.

Cannasouth chief executive Mark Lucas told shareholders the merger would create New Zealand’s leading medicinal cannabis company, giving the combined group critical mass to accelerate innovation, combine technologies and grow faster.

The merger will see Cannasouth, which listed on the NZX in June 2019, buy Eqalis’ shares for $48.8 million through the issue of new shares at 33 cents each.

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Shares in Cannasouth fell 1.7% to 29c ahead of a capital raising expected to launch on Monday, which will see it sell shares at the discounted price of 29c to raise about $9m for the combined company. It has received commitments of $4.2m so far.

Air New Zealand fell 1.3% to 76c as investors looked through its upgraded profit forecast for this year and focused on a softer outlook ahead.

The airline is benefiting from robust demand for travel and constrained supply coming out of the pandemic, which is underpinning ticket prices. Costs such as jet fuel are also coming down, offsetting higher inflationary costs such as labour.

Air New Zealand on Thursday raised its forecast for full-year profit by about 9%, but its shares failed to lift on the news.

Forsyth Barr head of research Andy Bowley noted the company’s share price has been tightly range bound for the past six months and said he doesn’t see that changing in the current operating environment.

Yield management would be a challenge for the airline and its competitors in a period where demand may weaken due to cyclical factors, Bowley said in a note published on Friday.

“Capacity is the key industry lever, but in an environment where incrementally returning capacity meets lower demand, the industry’s ability to rationally manage that transition is likely to heighten yield, and therefore earnings risk,” he said.

Craigs Investment Partners was also looking ahead to potential weakness for the airline in the future. In a note titled “Making hay but rain threatens” analyst Wade Gardiner lifted his forecast for this year, but noted profit is likely to fall next year as greater market capacity and competition impact yields.

The benchmark S&P/NZX 50 Index gained 0.9%, or 101.623 points, to 12,019.84 on Friday. On the broader market 85 stocks rose and 45 fell with $156m shares traded.

Used car dealer NZ Automotive Investments posted the biggest gain on the index, jumping 15% to 30c.

The company said it expects underlying net profit after tax of $2m for the year to the end of March, up from $1.7m the previous year.

“Our new leadership team has been razor-focused on prudent cost controls, accelerating penetration rates on finance and insurance, and managing price and promotions more effectively whilst tailoring inventory to specific locations,” said chief executive Paul Millward. “This has seen gross margins improve significantly in the last quarter.”

Millward said February and March results alone made up about 35% of underlying profit, indicating a swift and marked impact.

The company will provide a detailed trading update when its full results are released at the end of May.

ASB’s latest commodities report highlighted a big dip in its forestry index.

Prices have eased despite a significant supply gap in the aftermath of recent weather events, said ASB economist Nat Keall.

AgriHQ’s weighted forestry index, a combination of wood, pulp and paper, has fallen about 7.5% to $110.80 a tonne from $119.20 a tonne over the past month.

Keall said both higher shipping costs and weaker export prices played a role.

“Despite the reopening of the economy, the recovery in the Chinese property market remains subdued,” he said. “The ongoing cooling in the domestic housing market is unlikely to be helping either.”

China’s recovery was expected to be consumption rather than investment-led, which implied food and fibre prices would outperform both forestry and harder commodities, he said.

Fertiliser prices are also coming down, after jumping as much as 25% last year.

Farmer-owned co-operatives Ravensdown and Ballance have reduced fertiliser prices, with some products down as much as $200 per tonne.

In a letter to customers on Monday Ravensdown said it reduced prices on some of its main products, such as urea and granular ammonium sulphate.

Urea prices dropped by $150 per tonne and granular ammonium sulphate by $100 per tonne.

Ballance products had come down by up to $200 per tonne.

ASB’s Keall noted that the United States economy looks to be slowing ahead of expectations, but inflation is proving more stubborn than hoped.

GDP figures released overnight on Thursday showed the US economy grew an annualised 1.1% in the first quarter, well below the consensus forecast of 1.9%. Meanwhile, the core personal consumption expenditure (PCE) index lifted 4.9% over the quarter, ahead of the market’s 4.7% expectation.

“It’s just two data points, but those figures are stagflationary stuff,” he said in a daily note.

Stagflation is characterised by low growth and high prices.

Treasury yields had focused on the PCE number, jumping markedly, he said.

With the balance of risks suggesting the Federal Reserve would have to do more rather than less at least in the near term, the 2-year yield rose 15 basis points to about 4.11% and longer-term yields also gained, with the 10-year up 8bp to 3.54%.

Markets have priced in 29bp of hikes over the next two Federal Reserve meetings, with another hike in the US looking increasingly likely next month, he said.