Monday Feb 25, 2013
Fisher & Paykel Healthcare chief executive Mike Daniell says manufacturers should view the strong New Zealand dollar as the “new normal” rather than a challenge that will eventually go away.
As debate continues over whether the Reserve Bank can or should take steps to bring the exchange rate down and give exporters a helping hand, Daniell says the Manukau-based medical device maker is coming to terms with currency’s profit-sapping strength.
Last week, the company revised up its forecasts for net profit in the year to March.
“I think it would be fair to say that many manufacturers, ourselves included, have been thinking that this is a cycle that we’ve just got to ride out,” he said. “That may not be the case now.”
F&P Healthcare, which derives around 50 per cent of its operating revenue in US dollars, has recently released products it can gain better pricing from, including a new range of face masks, and focused on making its production lines more efficient.
At the same time, the firm – which makes respiratory humidifiers used in hospital intensive care units and sleep apnoea treatment devices – has been ramping up production at its lower cost production facility in the Mexican border town of Tijuana.
It has also been increasing sales in the local currencies of countries including Turkey, Canada, Hong Kong and Japan, which lessens its exposure to volatility in the kiwi-greenback exchange rate.
Daniell said the company had benefited from good foreign exchange hedging cover it had put in place three years ago when the New Zealand dollar was much weaker.
“That’s provided us with some protection that gives us time for all of those other strategies to really begin to have effect.”
When the hedging cover runs out in two years’ F&P Healthcare will be in a position to deal with a dollar trading in the US80c to US85c range, Daniell said.
Despite the continuing strength of the kiwi, which broke above US85c versus the US dollar last month, F&P Healthcare raised its full-year profit guidance to $75 million from its previous guidance of $69 million to $72 million. “We all hope the dollar might revert to a more normal level but we certainly are not relying on that and we are doing things to ensure that we can grow, thrive and be profitable
John Walley, chief executive the New Zealand Manufacturers’ and Exporters’ Association, said companies deriving most of their revenue in US dollars were being “crucified” by the exchange rate.
“One swallow, in this case Fisher & Paykel Healthcare, doesn’t make a summer for everybody else,” said Walley, a vocal advocate of Reserve Bank intervention to lower the dollar.
In a speech to the Manufacturers and Exporters Association in Auckland last week, Reserve Bank governor Graeme Wheeler said there were no simple solutions to dealing with the dollar but the bank would intervene “when the circumstances are right”.
Daniell said he hadn’t seen anything that could practically be done to bring the exchange rate down.