Business News

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during August 2011, shows total sales in July 2011 increased 13.5% (export sales increased by 16.4% with domestic sales increasing 11.2%) on July 2010. The NZMEA survey sample this month covered NZ$439m in annualised sales, with an export content of 46%. Net confidence rose to -22, up from the -38 result reported last month. The current performance index (a combination of profitability and cash flow) is at 96, up from 93 in June, the change index (capacity utilisation, staff levels, orders and inventories) went down to 99 from 102 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 103, up on June’s result of 99.75. Anything less than 100 indicates a contraction. Constraints reported were 78% markets, 11% staff and 11% production capacity. Staff numbers for July increased year on year by 2.8%. “Export sales have recovered this month although continuing currency pressures will reduce returns,” says NZMEA Chief Executive John Walley. “Favourable conditions remain for those exporting to Australia and Asia driving the sales expansion.” “The indexes and confidence measures are still a concern with the performance index in particular showing the loss of profitability and the confidence rating remaining in negative territory where it has been for six of the seven months surveyed so far this year. The number of pessimists has strong grown strongly as the no change group has contracted.” “Overall the demand for New Zealand’s exports is holding up for the moment, but with the global outlook very uncertain this could change quickly.” “Comments from the survey covered reduced margins due to the high New Zealand Dollar and concerns over whether demand from overseas markets will hold up. Christchurch respondents also noted that ongoing impacts […]

The SME sector can play an even more important part in the recovery and growth of the New Zealand economy.   Picture: Paul Kane With an election looming, every small businesses in New Zealand needs to lift their voices and be heard, asking each electoral party what they will be doing to help the SME sector. Paul Kane, a partner in New Zealand accounting firm Grant Thornton, said that for a sector that plays such an important part in the New Zealand economy, it is plaqued by a defeaning quietness. “Businesses employing five or fewer staff make up about 84% of New Zealand enterprises and businesses employing fewer than 50 staff make up nearly 99% of enterprises. “Yet, when it comes to the Budget or elections, what do you hear from small business? Normally, very, very little. Minority groups of all shapes and size are out beating their drums, but small business seems to be paralysed by stereophonic silence. “Most small business owners obviously do not know what other countries do for their small to medium enterprises otherwise they would be up in arms,” he said. The United States, Canada, the United Kingdom, India and Germany, to name but a few, all offer assistance to the SME sector. “One of the best examples and one that could be easily copied in New Zealand, is the United KingdomÕs Enterprise Finance Guarantee (EFG), which is a targeted measure intended to facilitate additional commercial lending to viable SMEs unable to obtain a normal commercial loan due to having insufficient or no security. “EFG facilitates lending that would not otherwise be available by providing lenders with a partial guarantee,” he said. Kane said that undercapitalisation is perhaps the biggest single reason for SMEs to fail in New Zealand. “The number of new businesses that […]

41 percent of respondents rate the overall performance of their insurance company’s response to claims as ‘very poor’ or ‘poor’ while only 18 percent rated their performance positively according to a New Zealand Manufacturers and Exporters Association (NZMEA) survey. The survey assessed damage after the June earthquakes and the performance of insurance companies and Government organisations. It showed that significant further damage has occurred setting back rebuilding plans. Overall there was significant dissatisfaction with the performance of insurance companies but the response to the efforts of the City Council, Civil Defence and the Central Government rated much better. NZMEA Chief Executive John Walley says, “We have had complaints from a number of sources that insurance companies have been slow to pay out and this is obviously frustrating for firms wanting to get on with business rather than chasing insurance companies. At the extreme end a couple of firms have had to employ third parties to manage their claims.” “Comments expressed concerns about insurance companies delaying claims, not responding to emails and only dealing with issues after being chased. Insurance companies have the experience and should be guiding claimants through the process rather than putting up roadblocks – it seems incredible that insurance companies would not have procedures in place to manage the claims process, after all these events are their business. QBE was rated poorly by all respondents insured and while it must be noted that some respondents did report a good experience with their insurers there were no companies that scored consistently well.” “There have also been some concerns with new policies with excess required for a claim going up from $2,500 to between $100,000 and $200,000 in some cases. While it is understandable that costs will increase this leaves firms completely uncovered for a small event.” “Government organisations […]

            Picture: Busy times on the Cigweld stand at SouthMACH 2011. By Doug Green Reports in suggest some good business was done at SouthMACH 2011, which wound up today in Christchurch. A worthy effort by the show organisers, Hayley Media who had to delay the show until now because of the earthquakes only to have the snow come down and trying weather occur. Chris Whittington,from Camplex NZ was happy with the quality of business done, as was Francis Coutinho, general manager of Chevpac who noted some good quality enquiries. One exhibit,who finally got through the snow was Gordon Anderson of BayCad who found enquiries a bit thin on the ground. Carr Group of Auckland was one of the unfortunate companies not able to make it because of the weather. Their truck full of equipment was held up in the snow somewhere south of Waipukurau in Hawkes Bay and flights from Auckland for staff were cancelled three times. Enough was enough! Attendance figures are still to be confirmed by the organisers.    

 The July results are tremendously encouraging. Business sentiment remains perky. A net 48 percent of businesses expect better times for the economy over the coming year, up marginally on June. The construction sector remains the flagbearer for general business confidence with a net 60 percent of construction firms’ optimistic about the general economy. Sentiment is strong across all the sub sectors, with business confidence residing well north of their historical averages. The elevated readings in general business confidence continues to be reflected in respondents’ own activity outlook. A net 44 percent of businesses anticipate an increase in activity, up 5 points on June. This continues to be reflected in expected gains in profits (+24, up 4 points), investment (+18, up 3) and employment (+19, up 9). The July results are tremendously encouraging. They have been taken amongst a backdrop of global uncertainty, softening commodity prices (from highs), firming expectations that interest rates will be moving up (a net 59 percent of respondents expect higher rates) and a rising currency, though the majority of the New Zealand dollar’s movement over the month occurred after most responses were received. To see New Zealand’s economic pulse beating louder when the only certainty is uncertainty, particularly globally, is testament to real local substance. -National Bank’s Business Outlook, July 2011

  Brightwater have announced the appointment of Chris Ellis to the position of Chief Executive Officer Brightwater. Chris is currently Chief Executive of the Building Products Division of Fletcher Building Limited. This role involves the leadership of a portfolio of businesses across Australasia. In this role he is also a member of the Senior Executive Committee of Fletcher Building. Chris has been in his current role for five years. He was previously General Manager of Winstone Aggregates, and prior to that General Manager of Fletcher Construction Engineering Division. In addition to his Fletcher roles, Chris is Chairman of the Business Leaders Health and Safety forum, and a member of the Minister of Building and Construction’s, Construction Strategy Group. He is a qualified engineer and a graduate of executive development programmes at Stanford and Wharton Universities. On welcoming Chris to Brightwater Chairman Mike Simm says “The Brightwater story to date, company culture, and the growth aspirations in New Zealand, Australia and beyond, have all attracted Chris to this position. His focus will be on applying his industry experience and leadership skills to assist Brightwater to achieve its Strategic Goals.” Chris commences with Brightwater in late August.          

July saw ongoing durability in New Zealand’s manufacturing sector, partly aided by our trans-Tasman cousins according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI). The seasonally adjusted PMI for July was 53.2 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). Although this was down slightly on the June result of 54.3, combined the last quarter of results represent the strongest level of expansion since early-mid 2010. BusinessNZ’s executive director for manufacturing Catherine Beard said that the exchange rate story for New Zealand’s manufacturing exporters involves a few angles that need to be considered. “There is no doubting that negative comments describing the overall value of the New Zealand dollar have increased from June as more manufacturers experience tighter competition for the exporting dollar. However, Australia remains a suitable destination for New Zealand exports given the ongoing competitive exchange rate by historical standards. We also need to throw in recent global economic turbulence which has seen the New Zealand dollar drop back on various currencies. How that plays out in terms of increased orders remains to be seen given jitters in the markets may also have an adverse effect on demand”.

  Improved economic conditions have contributed to ASB recording a 27.6 percent increase in statutory net profit after tax to $568 million for the year ended 30 June 2011. For the prior year, the result was $445 million, excluding the one-off tax charge of $209 million. Commenting on the New Zealand economy and the ASB financial result, ASB’s incoming Chairman, Gavin Walker (left) says, “New Zealand is continuing along the road to recovery from the global economic downturn. Clear evidence of this is the significant reduction in ASB’s impairment charges over the year, down 42.4 percent to $72 million. Another key factor has been customers continuing to shift from fixed to floating rate loans, and the re-pricing of some new fixed rate loans has also contributed.” “ASB’s balance sheet remains strong, with a 7.1 percent growth in retail deposits to $33.7 billion and steady lending volumes. Demand for lending has definitely weakened as customers continue to choose to deleverage debt,” Mr Walker says. “On 27 May 2011, Moody’s Investor Services announced the outcome of its review of New Zealand’s four major banks, resulting in a one-notch downgrade of their long-term senior unsecured ratings to Aa3. ASB was the only bank to retain a C+ stand-alone rating for financial strength. Moody’s noted that this reflected ASB’s “stronger credit risk profile which has resulted in lower non-performing loan metrics compared to its New Zealand peers” as well as the Bank’s lower reliance on wholesale funding because of its higher proportion of customer deposits.” “Looking ahead, New Zealand’s improved export commodity prices, growing demand for limited housing stock in some regions and low interest rates are all expected to contribute to New Zealand’s steady economic recovery.”  

Make government a customer, not an investor   At a forum hosted recently by the New Zealand Computer Society in Auckland some participants talked about the role of government in fostering innovation. I was struck by the contrast between this and a lecture by visiting University of Texas professor Rob Adams the following week giving very clear and direct advice to aspiring entrepreneurs where he never mentioned government even once. The fundamental role of government, at least in a free society like ours, is to provide adequate infrastructure (UFB for instance), maintain security via police, customs, defence etcetera and ensure a social safety net is available for those unfortunate enough to be unable to look after themselves. That’s it. Everything else is up to the private sector, and if the private sector doesn’t generate wealth and jobs then there will be no tax revenue for the government to do anything. Where we get confused is between the government’s role as I have described it above, and its role as a provider of services. In many sectors the government has an extended role in that it delivers the majority of services. This is particularly true of health, one of the single largest areas of government expenditure. In health, probably 80 percent or more of services are delivered either directly by Crown corporations such as District Health Boards or supported indirectly through government subsidies and contracts. This makes the government a very important customer. This just happens to be the way we do things in this country, it’s not a universal model, and other countries do it differently – a fact we should be aware of when attempting to export our ideas. If we forget the idea that it’s the government’s role to provide corporate welfare and/or fix everything, then we can […]