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Exporters optimistic despite confidence downturn


Exporters optimistic despite downturn in domestic confidence

Both short and long-term exporter confidence is up, but exporters are wary of rising fuel prices, overseas competition and strong New Zealand dollar

Auckland, 23 November 2005 – Despite recent reports that the economy is slowing, at least 63 per cent of experienced New Zealand exporters remain optimistic in their outlook – forecasting significant offshore sales, and increases in profitability, in the next 12 months.

The fourth DHL Export Barometer finds that while optimism is high, marginally up from 61 per cent in March, there are some concerns around exchange rates, and some new issues arising in regard to escalating fuel prices and increased competition in export markets.

Developed by DHL in consultation with New Zealand Trade and Enterprise (NZTE), the DHL Export Barometer remains the only large-scale evaluation of export confidence within this country. The results gauge the opinions of experienced New Zealand exporters, with 71 per cent of those surveyed exporting for more than ten years.

DHL Express New Zealand General Manager, Phil Rountree, said that it is heartening to see the level of assurance from such a seasoned crop of exporters, 73 per cent of whom are exporting weekly or with greater frequency, and 37 per cent of whom have been exporting for more than 20 years.

“The good news is that we have an astute group of exporters, with more than a third who are planning to invest in their businesses and two-thirds who expect their industries to pay wage increases over the next 12 months – outcomes that underpin our findings for an optimistic export sector.”

However, the confident entrepreneurial spirit of exporters should be underlined with a note of caution – particularly in the light of recent domestic business studies, such as the National Bank’s confidence survey published in October, which found 55 per cent of firms expect domestic business to decline over the next year.

New Zealand Trade and Enterprise Chief Executive Officer, Tim Gibson, said that while two-thirds of exporters report that the exchange rate is having a negative impact, there is evidence that a good number are weathering the difficult conditions by taking a more strategic approach.

“It is encouraging that the DHL Export Barometer finds almost one-third of exporters have developed international business partnerships offshore, investing in joint ventures for example, instead of relying on direct sales arrangements.

"These same companies are well represented in the group of DHL Export Barometer respondents who have an offshore presence, plan to invest and recognise the importance of collaboration."

Export Outlook

The latest survey finds that exporters are also positive about their short term prospects, with 47 per cent of businesses expecting increases in the next three months, compared to just 38 per cent in March 2005.

While exchange rates remain the primary concern for 72 per cent of exporters, 62 per cent also regard rising fuel prices as a concern and 46 per cent perceive overseas competition as a negative factor going into the next 12 months.

Interestingly, economic and political conditions abroad are not as big a concern for exporters despite it being in the news of late (terrorist activity and avian influenza). This compares to March 2005 when 44 per cent listed such issues as a concern.

Support for the view that New Zealand is well established itself as a travel destination of choice can be found in the tourism sector which is the most confident – 73 per cent predict an increase in industry foreign earnings over the next 12 months – despite no major events being planned for the coming year in New Zealand.

This can be compared to the percentage of those in other industries who are expecting an increase in profitability: agriculture/food and beverage (55 per cent), manufacturing (62 per cent) and services (72 per cent).

Exchange Rate Impact

As in previous editions of the DHL Export Barometer, New Zealand exporters expect the US dollar to continue to strengthen against the New Zealand dollar in the next 12-month period.

The exchange rate remains the primary issue affecting New Zealand exporters, and the percentage of companies on whom the exchange rate had a negative effect has declined by just two per cent since March.

A significant 81 per cent of exporters in the agriculture/food and beverage industries believe exchange rates have had the most negative impact on their export sales in comparison to manufacturing, tourism and services.

Profitability Expectations and Planned Investment

More exporters expect to increase profitability over the next 12 months – 65 per cent compared to 55 per cent in March. As a result, more exporters plan to invest in plant and equipment, additional staff, market research and research and development (R&D) in the next year, than was reported in the March survey.

More than a third of New Zealand exporters expect to make enough margin to re-invest in plant and machinery, and 77 per cent of exporters plan to pay wage increases.

A good example of a company investing in R&D is the winner of this year’s DHL sponsored, New Zealand Trade and Enterprise Export Award for Agritech, Life Sciences and Biotechnology. Fisher & Paykel Healthcare spends a significant seven per cent of revenue on R&D to help it remain competitive.

Simon Hall, from Fisher & Paykel Healthcare’s Corporate Relations Team said earlier that the company is in the medical device market and needs to be technologically advanced.

“To come up with ideas and have that integrated with manufacturing, gives us a competitive advantage.”

The company has had to increase staff numbers significantly to keep up with its growth, increasing its R&D team alone from 150 to 170 staff in the past year.

Export Markets

More than 50 per cent of companies exporting to Australia, China, the United Kingdom and the Middle East anticipate growth in these markets.

Nearly half of exporters active in Australia believe it is the most profitable market for New Zealand firms, and one in three companies that export to North America and the Pacific believe these regions have been the most profitable.

The top four most profitable countries or regions for Kiwi exporters are Australia, North America, Pacific and the United Kingdom, in that order, with Western Europe and Asian markets rating somewhat lower.

A company that successfully exports to the Pacific region is this year’s winner of the DHL sponsored, New Zealand Trade and Enterprise Export Award for Wood Processing, Building and Interiors, Fletcher Construction South Pacific Division. The company earned almost $60 million in foreign exchange last year.

Manager New Business for Fletcher Construction’s South Pacific division, Andy Smith, said earlier that the South Pacific may be widespread geographically, but it’s like a village, and good relationships have been a key to the company’s success.

“We pride ourselves on our ability to build and maintain relationships and we have some that go back dozens of years. This is one of the cornerstones of our business and calls for skills that go way beyond construction expertise.”

Collaboration

Of those surveyed in the DHL Export Barometer, 30 per cent of New Zealand exporters have formed international business partnerships that are beyond direct sales agreements. Sixty-three per cent of those are involved in joint ventures, 17 per cent have licensee / franchise agreements and nine per cent are involved in contract manufacturing.

The majority of exporters (59 per cent) do acknowledge that collaborative groups or networks are important to their business. However, manufacturers are least likely to feel that collaboration is as necessary as in other sectors.

ends


About the DHL Export Barometer

The DHL Export Barometer is an initiative aimed at analysing export confidence in New Zealand and identifying export trends, and was first launched in May 2004. Developed in consultation with New Zealand Trade and Enterprise and based on nationwide independent research, it examines the business outlook of New Zealand exporters, highlights changes in overseas market demand and provides insights into the factors impacting on New Zealand export trade.

For the purposes of the research, conducted by ACA Research, the 300 exporters surveyed were grouped into four main industries: agriculture/food and beverage, manufacturing, tourism and services. The New Zealand DHL Export Barometer is comparable to the Australian DHL Export Barometer, launched in November 2003. Both barometers are issued on a biannual basis.

About DHL

With annual revenues of over €24 billion in 2004, DHL is the global market leader of the international express and logistics industry, specialising in providing innovative and customised solutions from a single source.

DHL offers expertise in express, air and ocean freight, overland transport and logistics solutions, combined with worldwide coverage and an in-depth understanding of local markets. DHL's international network links more than 220 countries and territories worldwide. Over 170,000 employees are dedicated to providing fast and reliable services that exceed customers' expectations.

DHL is 100% owned by Deutsche Post World Net.

About DHL Express in New Zealand

DHL New Zealand employs over 350 staff at nine locations. DHL's New Zealand operation is committed to customer value, service excellence and shipment visibility. In 2004, DHL was awarded the Contact Centre Manager of the Year by TUANZ and again in 2005, is the General Services sector winner of the CRM Contact Centre awards. DHL is also a corporate sponsor of Surf Life Saving New Zealand, business partner of New Zealand Trade & Enterprise and supporter of Fashion Industry New Zealand.


About New Zealand Trade and Enterprise

New Zealand Trade and Enterprise (NZTE) is the New Zealand government’s national economic development agency. Through its network of offices worldwide, New Zealand Trade and Enterprise aims to grow New Zealand’s economy by boosting the capability of business and regions, and facilitating their sustained and profitable participation in overseas markets.

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