Forum Archive Index - February 2004

["David & Jill Stevenson" <djstevo@quicksilver.net.nz>]

Robin,

 

         You are certainly right that exchange movements and particularly the present strengthening $NZ  introduce a new dimension to exporting  and, it must not be overlooked ,importing companies profitability as well  (WHS)  . Not simply the old problem of gaining sales with a given margin  faced with what was once  just a subtle effect of the exchange factor which has now become  so significant as to be a matter of staying afloat or not . Particularly in a world of political upheaval influencing exchange rate movements even more than perhaps pure economics. As though there were not enough problems just gaining sales against fierce competition . Competition that could be rashly undercutting others to get sales when it was already dead in the water and should have called it quits long ago.

 

   I am still trying to get my head around the statement that CAH ,despite it`s overall large write down, yet achieved foreign exchange gains of $178 million in one year . Someone correct me if I am wrong. How did this effect flow through to their bottom line. Just how significant was their management of forward exchange contracts in this risky environment how often can they repeat this. FPA and FPH seem skilled in controlling forward contracts as they would have to be in the cut throat whiteware and allied industries.

    TWR ,GPG and AIA  are all special situations in this context and should be favoured in investment decisions. GPG are not in the business of exporting,except  their subsidiary companies perhaps being involved . Coats plc in particular, exporting from so many countries as leaders in the thread business that maybe things balance out. in the long run . Their profits come from wheeling and dealing rather than pure trading. Unlike an exporter who encounters foreign exchange exposure everytime he exports GPG need never repatriate funds simply reinvest until they pack it all in. Furthermore their investment portfolio one can reassess in value daily applying varying exchange movements. Sir Ron Brierley ,when questioned, has said he does`nt take exchange cover being active in several countries. What he loses on the swings he gains on the roundabouts. Over time he would argue his fixed domicile investments effectively remain relatively static.

 

                               Regards

 

                                                David