Business News

The Electricity Authority’s proposed conclusion that an undesirable trading situation (UTS) took place on 26 March, sends a clear signal to the market about expectations of appropriate trading behaviour, says BusinessNZ Chief Executive Phil O’Reilly. “The Electricity Authority is an independent body, designed for making fair decisions in instances of this nature. It has produced a lengthy report on the investigation into this incident, and the proposed decision to reset prices is a finely balanced judgement based around participantsÕ expectations about prices. \”The fact that the Authority is inviting submissions on its proposed decision is welcomed by BusinessNZ. “The key issue now is what this means for NZ Inc. The proposed decision should provide significant comfort to those businesses caught by the events on 26 March. It should also be reassuring to those who may have perceived the New Zealand electricity market to be so inherently risky that they wouldn’t want to participate in it. “We hope that it doesn’t have an unintended effect of deterring investors in new generation, or unnecessarily hastening the retirement of existing capacity. Likewise, electricity customers buying from the wholesale market should not get complacent. Risk management is still of crucial importance.  “Focus now needs to be paid to ensuring a vibrant, competitive electricity market exists and that businesses can have confidence in its operation. “BusinessNZ welcomes the fact that the Electricity Authority has reforms underway to improve performance in both the spot and hedge markets in order to increase competition in the electricity industry. This increase in competition should serve to drive out the risk of excessive prices.”

Minister of Corrections Judith Collins initiative to train prisoners in Christchurch in a wide range of vocational trades is to be commended, says the Employers & Manufacturers Association. “Giving prisoners skills training is a practical response to the shortage of skilled workers Christchurch will need as the re-build gets underway,’ said Alasdair Thompson, EMA’s chief executive. “Its also good for New Zealand in the longer term. Just as important is that prisoners will get the chance to earn a trade’s skill they can put to good use in their lives after prison for their own benefit and the nation.”

-Doug Green We sure have had some decent issues to deal with lately – two Christchurch earthquakes, Pike River, collapsed finance companies, the resurgence of Don Brash and  wait for it, money needed for ‘the boats’ (tourism)again. My oh my, what  can we do with $36 million right now? Let’s start with business investment into a new company with that money, develop fantastic products and assist in the training of our youth and employment of our people. How does that idea sit with you? We cannot continue to hand out money to promote yachting -disguised as tourism in this country- especially when the majority of the people are against this flagrant fiscal mismanagement . We are surely not that short of striving, successful entrepreneurs that we cannot recognize more the efforts of the manufacturers in the business community. There are businesses around which  are focused on ‘development’ – investing in internet-type activities which are return-yield-to-investor- and not necessarily product developments.A bit foggy for what they really are.  Know what I mean? Easy cash without the sleeves being rolled up. So what to make of the $36 million? A waste – money needed now  in these tight times which can be better spent.

A post earthquake survey conducted by the New Zealand Manufacturers and Exporters Association (NZMEA) shows that most manufacturers are filling their orders. The survey, conducted between the 30th of March and the 8th of April, also found that Canterbury manufacturers were generally pleased with the response of Civil Defence and the Christchurch City Council. NZMEA Chief Executive John Walley says, “It was quickly recognised that customers would not wait, and getting going fast was the only way to get to the other side of this event with a business still intact.Ê It really was a case of be quick or fail.” “The extraordinary efforts to restore production capacity are evident from a superficial look around those manufacturing sites hardest hit. There are extensive building repairs, temporary structures and machines operating in significantly less space. The overwhelming message has been that the commitment and resilience of staff and owners has made for a fast recovery.” “On the performance of the City Council and Civil Defence respondents were positive overall, but it is worth noting that anyone with a business inside the cordon was and is extremely frustrated. Procedures to gain access through the cordon could have been managed better.” “Responses to the performance of insurance companies were not as positive with some firms reporting what they were experiencing slow decisions. That said, overall responses were positive.” “Areas where manufacturers recognised a need for further work were communication, regulation and staff shortages. The communication problems that have hurt firms inside the cordon must not continue into the rebuilding process and regulations must allow firms to rebuild with a minimum of red tape. In some cases firms have had skilled staff move away; if replacement staff need work permits these need to be issued quickly.”

Despite the on-going drag of a stubbornly high New Zealand dollar and the September earthquake, biotechnology company PharmaZen is pleased to report both an increase in volume and profit as well as a lift in confidence for the future. For the 12 months ending December 31, 2010, PharmaZen reported a surplus before tax of $482,338 on turnover of $6,277,516. This compares with a before tax surplus of $186,088 on turnover of $5,209,442 for the previous 12 months. PharmaZen chief executive, Craig McIntosh, said while the biggest single challenge for the company remains the strength of the New Zealand dollar, the company is no longer dependent on the dollar to be profitable, rather it is the level of profitability that is impacted. “Compared with 2009, the New Zealand dollar was up 13% against the United States dollar and 20% against the Euro in 2010,” he said. Investment in new plant in the last few years is starting to pay dividends with significant Êincreases in efficiency. “Volumes in production terms were up by 30% last year, but because of our recent investment in the plant we are putting product through at less than two thirds the cost of 2005, which is a significant achievement given rising costs.” While the Canterbury earthquakes (September and February) provided some challenges, damage to the site was largely external. ‘The September quake caused some disruption to our supplies, the bulk of which were held in a third party storage premise which was badly damaged. In the February quake, which was centred much closer to our site, we again came through relatively unscathed, although disruption to the Christchurch utility supply was significant. “Power was available three days after the quake and we were able to secure a supply of water that could be trucked in, allowing us to […]

The recent Christchurch earthquake has led to a clear divide in the level of activity between the two main islands, according to the BNZ – BusinessNZ Performance of Services Index (PSI). The PSI for March was 50.8. This was down 0.2 points from February, and the same as the January 2011 result.Ê A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining. The average PSI value for 2009 was 48.8, while for 2010 it was 53.2. BusinessNZ chief executive Phil O’Reilly said that like its sister survey the PMI, the PSI also showed a clear distinction in activity levels between the North and South Islands. “While the significant drop in activity for the Canterbury/Westland region is unsurprising, it is also important to note that the flow on effects of the earthquake extend to other areas of the South Island, with the Otago/Southland region also being negatively affected. Respondent comments from the deep south confirm that the earthquake has been the largest inhibitor on activity, with new business/orders and activity drying up.  “The newly established BNZ – BusinessNZ Performance of Composite Index (PCI), which combines the results of both the PSI and PMI, also reinforces the fact that despite the significant drop in activity in the South Island, the relative healthy level of activity in the North Island is keeping the index in positive territory for now.  BNZ senior economist Craig Ebert said that just like the PMI, the PSI showed a dent in the southern region post-earthquake, but was able to narrowly miss dipping into negative territory thanks to it being healthy enough beforehand. “Industry-wise, despite dips in expected areas post-quake – such as retail and accommodation, the overall employment index has improved since last year. This, combined with similar results in […]

 A year ago, the International Monetary Fund (IMF) pointed to the lacklustre performance of those smaller economies fixated on the one lever (interest rates) one target (inflation) approach to monetary policy, now IMF advice is moving towards regulation of capital movements. New Zealand cannot afford to ignore this advice and persist with the failed purist approach to monetary policy say the New Zealand Manufacturers and Exporters Association (NZMEA). Late last year a report from the Bank of International Settlements showed New Zealand to represent about 1.6% of the global forex market yet in GDP terms New Zealand is about 0.2% of the global economy- something is out of balance. How does forex trade at some 46 percent of GDP on a daily basis serve New Zealand? Persistent high interest rates drive this speculative flow to many times that of our trade flows. Exchange rates do not reflect or support export activity and as a result the real economy has gone backwards since 2003. The IMF explains the problem well: “Surges in inflows can pose challenges such as rapid currency appreciation and a buildup in financial sector fragilities, such as those stemming from asset price bubbles or rapid credit growth, or the risk of a sudden stop or reversal of inflows.” NZMEA Chief Executive John Walley says, “This is a great description of a key New Zealand problem. Large capital inflows have caused a high currency and a house price bubble which reduced margins for exporters and starved many of credit. ” When the asset bubble burst in 2008 and the credit supply stopped we had finance company failures, and without the credit influx, the Government struggles to balance its books. “The effects on economic growth are clear and there are still a number of borrowers sitting on negative equity. “The IMF […]

ExportNZ says New Zealand’s educational institutions offer a valuable export commodity with great potential for growth. The news that there is to be a dedicated Government agency focussed on maximising its potential is a welcome economic growth initiative. ExportNZ executive director, Catherine Beard says a sector based approach through increased collaboration seems sensible. “As a small country, collaboration is key to leveraging our position and boosting our presence in a highly competitive global marketplace. We’re seeing the need for this approach across many sectors where small Kiwi companies are otherwise falling under the radar. “We look forward to working with the new Crown Agency.”

Clean energy technology company LanzaTech is partnering with LCY Chemical Corporation (LCY), one the world’s leading chemical companies, to identify key bio-based chemicals to produce for global fuels and chemicals markets. Dr Jennifer Holmgren, LanzaTech’s chief executive, says the implication from the heads of agreement is LanzaTech’s technology will be able to deliver economic benefit through the entire value chain from its feedstock suppliers to distributors. LCY, a billion dollar enterprise, is fully integrated and operates in Taiwan, China, Japan, Qatar and the United States. With potential global revenue for bio-based chemicals and plastics forecast at US$15billion (Û11.4bn) by 2020, LanzaTech is fast tracking the commercialization of its chemical production process so it can integrate in to the distribution chain. “Bio-based chemicals are currently one per cent of global chemicals production, but that is expected to increase to nine per cent during the next 10 years,” Dr Holmgren says. “LanzaTech and LCY will produce key bio-based chemicals, creating new products and revenue streams for both companies.” Mr Bowei Lee, CEO and Chairman of LCY, says it is a proudly strategic intellection for LCY to pursue advance technology. “The benefits may expand far beyond the impact on company revenue in this case,” Mr Lee says. “We value this opportunity as the essential step to a future with unlimited potential as we again fulfill our promise of effectuating green technology and being a resident of global village.” Mr Lee says LCY plans to investigate alternative bio-C2 to C5 feedstock as raw materials, replacing petroleum oil for LCY’s current portfolio of products such as TPE, PP, solvents, and methanol derivatives. LCY is also looking to further developments in bio green products including bio-plastics and bio-fuels. LCY will fund the construction of production plants in exchange for access to LanzaTechÕs technology. LanzaTech’s proprietary gas […]