COMMERCIAL Some Australian firms cushioned themselves

Press, Volume CXII, Issue 33111, 29 December 1972, Page 4

COMMERCIAL Some Australian firms cushioned themselves

4 (N’.Z. Press A.s.sociation— Copyright) ' SYDNEY, December 28. At least two major Australian commodity exporters have cushioned the initial impact of the dollar revaluation through forward currency cover.

The Colonial Sugar Refining Company, Ltd, whose exports include sugar, iron ore, bauxite and alumina, says that revaluation will have only a marginal effect on its revenue for the financial year to March 31.

Its revenues for the 197374 year will also be protected “to a significant extent.” The general manager (Mr R. G. Jackson) said that the company’s foreign currency sales proceeds, of established contracts, covering shipments over the next 18 months or so, had been sold forward.

MIM Holdings, Ltd, which exports more than sloom worth of copper, silver, lead and zinc annually, is understood to have been successful in hedging its foreign currency for all its “priced” materials — that is metals and concentrates covered by firm contracts. Even so, a company spokesman yesterday confirmed that the recent statement by the chairman (Mr J. W. Foots) on the impact of revaluation on the company’s profits still stands.

; Mr Foots told the annual i meeting that every 1 per cent ! appreciation in the Australian dollar meant a I reduction of about 3| per cent in net profit. MIM is understood to have nothing priced in United States dollars. The commodity markets on which it sells are predominantly based on sterling. In C.S.R.’s case, its revenues from sugar and iron ore (through its effective 20.4 per cent interest in the Mount Newman project) are derived from sales contracts expressed in sterling and United States dollars.

Its export contracts for bauxite and alumina (through ! its .interests in the Gove project as the major Australian i partner) are mostly expressed fin Australian dollars, ■ although some are expressed in United States currency. Its success in being able to hedge forward contracts with the Reserve Bank of Australia for at least 18 months points up a variation from the usual practice of providing cover of up to six months.

C.S.R. is unlikely to have been the only exporter to have obtained such cover. Most mineral producers were still studying their changed situation in detail and few were willing to be specific about the likely impact on profits. A Broken Hill Proprietary Company, Ltd, spokesman said: “It will cost us because of our export commitments, the revaluation will result in a substantial loss of revenues.”

Apart from its 30 per cent interest in the Mount Newman iron ore project, B.H.P.

has been active in the past year in securing export contracts for iron and steel.

The C.R.A. group, which embraces Hamersleys iron ore, Bougainville’s ’ copper, Comalco’s bauxite, alumina and aluminium, and Broken Hill’s silver-lead-zinc, will still be studying the complexities of the new situation yesterday.

They include not only the loss of Australian dollar income from overseas sales of metals and minerals, but also the saving on interest and capital repayments on overseas borrowings.

Consolidated Gold Field Australia, Ltd. which recently secured a slom Eurodollar loan, will have such savings to compensate partly for the cut in its export income. The executive director (Mr S. L. Segal) said that revaluation was “going to hurt a lot” since the group sold most of its products at world prices.

However, he said that the; group had been able to take forward sales positions for $2.5m worth of copper on the London Metal Exchange., A similar hedging operation in copper in 1970-71 by C.G.F.A.’s copper subsidiary.; Mount Lyell, Ltd. resulted ini a sl.Bm net profit. The group’s coal contracts! (through Bellambi) have cur-! rency clauses and its sales of tin (through Renison) are mainly made on the domestic market. The group’s mineral sands: (through Associated Minerals' Consolidated, and Western Titanium) are sold under, contracts written in Aus-! tralian dollars. Since Australia accounts 1 for about 90 per cent of j world rutile output it has a 1 bargaining advantage. But for! zircon (where it accounts fori about 60 per cent) and for] ilmenite (about 30 per cent)| prices are subject to stronger ! competitive forces.