Some Auckland firms have weathered the latest economic storm well
Auckland manufacturers have faced tough times but those who have focused on profitable and smart niches have weathered the storm well.
That's the view of Anthony Healy, Director of BNZ Partners.
Growth has clearly been stifled and manufacturers have also been feeling the pain of the high New Zealand dollar over the last 12-18 months.
But Healy is optimistic about the prospects for New Zealand manufacturing.
The high dollar is undoubtedly impacting on those Kiwi manufacturers who export offshore and companies servicing the domestic market whose prime competitors happen to be importers ("that's tough"). But the relative strength of the Kiwi against the Australian dollar has assisted exporters across the Tasman, he says. Many businesses relocating or supplying goods into Asia also have a "good sector story" to tell.
And as a further plus, company balance sheets are strong; the upshot of the major focus on deleveraging. While that process continues, it is slowing down and businesses are starting to borrow to invest more.
Statistics NZ figures show manufacturing units in Auckland declined by 9 per cent between 2005 and 2010 with a significant contraction in the last two years. But the food and beverage industry clearly bucked the overall trend. Healy points to "encouraging signs" with particular manufacturers.
"Yes it's been tough, but specific sectors and players are doing quite well. It's not all ICT". The medical industry has been doing particularly well despite recessionary times - Fisher and Paykel Healthcare is a success story.
But it's not just well-known companies that are making a splash. Healy cites the experiences of two of BNZ's Auckland business customers: Sutton Group and NZ Hothouse.
The privately-owned Sutton Group is a family-oriented business which supplies infant formulas, nutritional powders, and a variety of dairy powders capitalising on the underlying strength of New Zealand's dairy industry. Healy says in 2004, Brent Sutton made the decision to invest in a new manufacturing plant to make high quality products. It has been tough, but Sutton is now a New Zealand success story making food ingredients and other dairy products.
NZ Hothouse supplies fruit and vegetables to large supermarket chains on both sides of the Tasman from its Karaka base. It is a significant exporter of glasshouse-grown produce throughout the Pacific Rim supplying product to Canada, USA, Japan, Taiwan and Oceania as well as Australia. With 20 hectares under glass it is one of the largest glasshouses in the Southern Hemisphere.
"There are lots of these stories," says Healy. "Yes the environment might be tough but sectors who have a competitive advantage will succeed."
BNZ scored a coup when it persuaded former long-time Fisher & Paykel Appliances chief executive John Bongard to chair its Highbrook business centre. Bongard, a passionate supporter of manufacturing in South Auckland, mentors BNZ's customers. Smack in the middle of New Zealand's industrial heartland, Highbrook is one of 31 centres BNZ is building to provide services for local businesses.
The centres are located next to the bank's retail stores but contain meeting rooms, wi-fi access, coffee and video-conferencing facilities all free for BNZ's business customers. They are particularly attractive in provincial areas as they enable businesses to avoid the need to make significant investments in front-of-house facilities.
Bongard acknowledges the manufacturing sector has shrunk - "You don't have to be a brainiac to figure that out." His particular focus is SMEs: trying to persuade them to focus on high value-add products with high innovation characteristics. he is also conscious of the problems manufacturers face if they try to export large manufactured products from here. ("We are too far away and freight costs are high").
At bank business level, BNZ is more focused as a cashflow lender. It has designed products specifically for the industry such as invoice discounting, stock and equipment financing.
BNZ is starting to see renewed confidence in the property and construction sector. More deals are being approved. Mergers and aquisitions are still happening, but with longer lead times than before the recession.
But Healy says the biggest factors holding back business growth are still management capability and the availability of capital. This is a pattern he has repeatedly seen during his ten years on The Icehouse board. Together with NZTE, BNZ is major sponsor of the Icehouse's owner manager programme which aims to build out management capabilities.