Christopher Adams

The Business Herald’s markets and banking reporter.

Export confidence growing

Companies selling overseas expect improved profits despite the high value of the kiwi.

Many companies are taking advantage of the high New Zealand dollar by importing. Photo / Brett Phibbs
Many companies are taking advantage of the high New Zealand dollar by importing. Photo / Brett Phibbs

Businesses are finding ways to deal with the stubbornly high dollar and most exporters are expecting profits to lift in the coming year, a survey says.

The annual DHL Export Barometer - which canvassed 277 firms in the manufacturing, agriculture, tourism and professional services sectors - found 59 per cent of companies were confident export orders would increase in the next 12 months, up from the all-time low of 51 per cent in last year's survey.

Fifty-four per cent of exporters were expecting profitability to rise over the same period, despite the strong currency.

"Overall we're seeing exporters adopt strategies that focus on what they can control as opposed to being held to ransom by external factors that they can't control," said Tim Baxter, country manager for DHL Express New Zealand.

The New Zealand dollar - which hit US86.58c against the greenback in April - was trading at US80.82c yesterday, up from US77.67c last Tuesday.

And the currency is expected to gain further ground against its US counterpart this week on the back of positive local economic data, with a BusinessDesk survey suggesting the currency could reach US82.50c.

The DHL survey said exporters were using a range of methods to deal with the dollar such as refining their offering (32 per cent), repricing (31 per cent), looking at new markets (26 per cent) and competing online (23 per cent). Companies were also taking advantage of the high dollar by importing. Almost 80 per cent of exporters were importing, up from 64 per cent in last year's survey.

The survey said the exchange rate was having the biggest impact on exporters, followed by fuel prices and international competition.

ExportNZ executive director Catherine Beard said the DHL survey results were positive and showed the resilience of the export community.

"We've had the global financial crisis, demand challenges and our currency being quite high against our trading partners when historically it's been a lot lower," Beard said. "It has been the perfect storm in some ways and I think the fact that our export statistics are generally holding up is an indicator of the growing sophistication of our exporters in terms of moving up the value chain and being as productive as they can."

The value of New Zealand's total exports rose 5.1 per cent in March, compared with the same month a year earlier, according to Statistics NZ.

Activity in the BusinessNZ/BNZ performance of manufacturing index rose to its highest level in nine years last month, which BNZ economist Doug Steel described as a "stunning result".

But the results of a parliamentary inquiry into manufacturing by opposition parties, released in a report yesterday, gave a less rosy verdict on the sector, saying the "killing" of the industry - which has shed 40,000 jobs since 2008 - could be stopped only if the Government introduced sweeping policy changes.

The report's recommendations included monetary policy reform to control the dollar, tax incentives to support investment in manufacturing and a government procurement programme that favours local businesses.

Exports lift

* Currency remains main challenge facing exporters.
* 59 per cent of firms expect export orders to lift in the next 12 months.
* 54 per cent expect profits to rise.

- NZ Herald

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