doug

The service sector showed a pick-up in expansion for the start of 2013, according to the BNZ – BusinessNZ Performance of Services Index (PSI). The PSI for January was 52.6. This was up 1.1 points from December, following a 3.6 and 2.7 point fall in the two previous months (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). Compared to previous January results, the 2013 value was lower than 2012, but higher than 2011.  BusinessNZ chief executive Phil O’Reilly said that the stop in slipping expansion levels, along with activity/sales and new orders/sales in positive territory, at least starts the year off on a positive note.  “Activity is certainly patchy, with differences evident across regions, industries and size of business. However, on a wider scale, New Zealand’s result for January sits only marginally below the JPMorgan Global PSI value of 53.6, which shows solid if unspectacular level of expansion. “Despite the pick-up in expansion, the proportion of negative comments from respondents (52.7%) remains higher than those with positive comments (47.3%), with the comments themselves having a strong seasonal influence due to the Christmas/holiday season.” BNZ Head of Research Stephen Toplis said that while the global environment has improved in recent months, there still remain significant threats.  “From New Zealand’s point of view, the strength of its nearest neighbours, rather than the US and Europe, are of greatest interest. While the consensus view about the Australian economy is that it will remain one of the fastest growth areas in the developed world, there are increasing risks to this view.  “Our exporters are exposed to the Australian economy, and this is facing some significant obstacles to its export sector, including cost structure increases, a high Australian dollar and a lower-cost-supply response elsewhere […]

The Carbon Disclosure Project (CDP), the Sustainable Business Council and Deloitte today launched the CDP Australia and New Zealand Climate Change Report, which analyses how NZX 50 and ASX 200 businesses are tackling climate change.  This CDP report, written by Deloitte on behalf of 655 institutional investors representing US$78 trillion in assets, provides an annual update on greenhouse gas emissions data and climate change strategies at the largest listed companies in NZ and Australia.  A key finding is that New Zealand companies are falling behind and need to improve their climate change disclosure if they are to satisfy their investors and customers. The average carbon disclosure score for NZX 50 companies fell from 49 in 2011 to 47 last year, well below the average scores of their international peers in countries like Australia (ASX 200 – 65), UK (FTSE 350 – 66), and the USA (S&P 500 – 70). Disclosure scores below 50 are considered to be low quality, while score of 50-70 are mid-range and 70+ high quality. The maximum possible carbon disclosure score is 100. Over 4,000 companies globally disclosed climate change information through CDP in 2012. This includes over 80% of the 500 largest listed companies in the world, and over 2,000 suppliers. According to a recent GlobeScan and SustainAbility survey of 850 sustainability professionals in 70 countries, CDP is considered the most credible corporate sustainability ranking.  The report also recognises five NZX 50 companies on the CDP NZX 50 Carbon Disclosure Leadership Index for the high quality of their carbon disclosure. These companies are: ANZ Banking Corporation, Telstra Corporation, Westpac Banking Corporation, Fletcher Building and AMP.  Air New Zealand, Telstra and Sky Network TV all significantly increased their carbon disclosure scores this year.   Westpac was also recognised for its high carbon performance, and is the […]

Positive indications from some companies today that they are prepared to work towards a living wage of $18 with and for their staff. Even though it might take a couple of years to get to that amount at least its a step in the right direction. The companies are working on their own initiative to make this happen, choosing this as against the financial change coming in through government legislation. It is a great initiative but shameful that government is not proactively bringing this change about for its citizens. How does this affect your company? Are you prepared (or able) to increase the wages of your staff without placing too much stress on your operations? Or will you need to lift the price of goods or raw components to make this a reality? We’d love to hear from you. -Doug Green

New Zealand’s manufacturing sector started 2013 with an encouraging result, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI). The seasonally adjusted PMI for January was 55.2 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 4.8 points up from December and the highest result since May 2012. Compared with previous January results, this was the highest since 2007. BusinessNZ’s executive director for manufacturing Catherine Beard said that the January result was heartening, and in various respects reflected the nuances of New Zealand’s manufacturing sector at present. “Recent headlines have concentrated on various job losses in the sector. This is also reflected in our employment index, which has remained in contraction for eight consecutive months. However, what we are seeing with the broader results is that job losses do not equate with overall declines in activity, as three of the last four months have shown growth in the sector. Also, a healthy lift in new orders for January, along with continued recovery work in the Canterbury region, should assist production levels in the months ahead.   However, what we are seeing with the broader results is that job losses do not equate with overall declines in activity “Obviously, it is too early to provide any indication whether 2013 looks set to be a better year for New Zealand manufacturers than 2012. However, looking more broadly, the JPMorgan Global Manufacturing PMI was at a ten month high in January, with expectations that this may strengthen further in the next few months. BNZ Economist Doug Steel said, ‘While positivity seems to be increasing among those associated with the much anticipated lift in domestic construction activity, there was growing anxiety among those that supply the slowing Australian economy. Still, overall, it […]

The Climate Control Companies Association (CCCA), representing New Zealand’s refrigeration, heating, ventilation and air conditioning sub-contractors, hasexpressed its dismay over Mainzeal’s receivership and backed calls by other industry groups to improve security of payments for subcontractors. Although the Construction Contracts Act clarifies the process for claims and subsequent adjudication, it does not extend to explicitly protecting retentions held back from sub-contractor payments – essentially providing interest-free loans to prime contractors. Prime contractors will often retain 10 percent of a contract value for up to two years, arguing they are necessary to enforce performance or complete remedial work.  “The announcement of Mainzeal’s financial meltdown on Waitangi Day highlights again the vulnerability of sub-contractors to the knock on effect of a major builder going bust,” says Rob Morgan, Chairperson, CCCA. “New Zealand cannot afford to lose the specialist skills and trades represented by our members, and those sub-contractors in other industries – who will now carry the can for Mainzeal’s losses.” “We believe it is now time to review security of payments of retentions, and identify cross-industry alternatives, potentially such as an escrow or trust, to ensure sub-contractors interests are protected. Subcontractor retentions are ineffective, add hidden costs on projects and actually increase the financial fallout from failure of contractors.” The CCCA Board is waiting for further news from PwC and in the meantime intends surveying members to ascertain the full extent of the industry’s exposure.    

Accelerating successful commercialisation of innovation in New Zealand firms is the yardstick by which Callaghan Innovation will be measured, says the Chair of the newly established Crown entity, Sue Suckling. “There is great potential in the high value manufacturing sector and Callaghan Innovation’s role is to help firms grow through greater application of science, engineering and technology based innovation,” Ms Suckling said.  “Ultimately our success will be based on the success of others. Our reputation will be earned by creating opportunities and revenue, for firms in the manufacturing sector as well as organisations in the science, engineering and technology sector.”  Callaghan Innovation legally came into being today. It is named after the late Sir Paul Callaghan, one of New Zealand’s top scientists who was committed to the role innovation must play to unlock New Zealand’s potential. From today, Callaghan Innovation will incorporate former Crown Research Institute IRL and the government’s R&D grants schemes transferring from MBIE. The Auckland Foodbowl research facility and NZTE’s Better by Lean Programme will go into Callaghan Innovation in coming months. “Today is the start for the new organisation. We will be focussed on integrating and shaping the parts coming into the new organisation. More than that, we now start refining and validating the new services and support we will start to roll out later in the year. “This work will result in something tangibly different from what we had before, including services to help firms navigate the science, engineering and technology system and easily access providers to help them with their business opportunities and challenges.” “It will encompass, for example, working with customers, industry, providers and government to develop platforms for competitive advantage including, in the first instance, food and beverages, medical devices and advanced materials.” “Perhaps most importantly, the new organisation will be looking […]

Picture: Gordon Sutherland, A W Fraser. -Doug Green Opposition parties have commenced a series of meetings with the country’s manufacturers with an eye to a better future. Difficult conditions are affecting New Zealand’s manufacturers brought about in part by the high exchange rate. It’s an obvious one. I know through my meetings and conversations with manufacturers around the country that this is one of the key concerns for their viability, indeed for the future of their company. I don’t know how much communication I have had from John Walley of the New Zealand Manufacturers and Exporters Association on this point. Indeed, his frustration has been (almost) toxic at times because he points out what we all know – the exchange rate effects our companies too much in today’s market and something has to be done about it. NZMEA gathered key people together for these meetings and are to be commended on doing so. A participant and also contributor to this issue of NZ Manufacturer, Gordon Sutherland of A W Fraser says “The prevailing view from the media and government is that we cannot do anything about the exchange rate, in fact it almost seems as if the government are willing to sacrifice exporters just to keep to the long held view that the reserve bank act and its ensuing monetary policy is sacrosanct. “As the dollar climbs, we often hear in the media and from, in my view uninformed parties ask, “Why don’t exporters just put their price up?” “It sounds like a beautifully simple solution; as the exchange rate goes up, put your price up. Unfortunately this view outlines a very poor understanding of basic business practice. “As an exporter, if our product is being shipped to and sold in the US, we are competing with local US manufacturer’s, […]

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during January 2013, shows total sales in December 2012 decreased 5.35% (export sales decreased by 3.83% with domestic sales decreasing 6.62%) on December 2011. The NZMEA survey sample this month covered NZ$556m in annualised sales, with an export content of 46%. Net confidence fell to -14, down from the  result reported last month.  The current performance index (a combination of profitability and cash flow) is at 101, down from 104.5 in November, the change index (capacity utilisation, staff levels, orders and inventories) went down to 97 from 102 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 101.75, down on November’s result of 104. Anything less than 100 indicates a contraction.  Constraints reported were 86% markets, 7% skilled staff and 7% production. Staff numbers for December increased year on year by 1.89%. “2012 ended on a negative note, both domestic and export sales fell year on year,” says NZMEA Chief Executive John Walley. “Confidence fell, after a bit of a recovery in November. This is largely due the ever higher exchange rate. At the same time we see decreases on our composite indexes.” “There is not really a lot of good news about at the moment, markets are soft and margins are squeezed by the exchange rate.” “The Reserve Bank yet again chose to keep interest rates at 2.5%, despite the recognition that the dollar is overvalued. This is disappointing, as the recent low inflationary pressures have left room for a cut to boost growth and counteract some of the exchange rate appreciation. Their main concern, as always, was a house price bubble, but bereft of any supplementary instruments interest rates cannot do it all. Mutterings from the RBNZ on […]