Exporters limited in protection—Allflex

Press, 24 August 1988, Page 40

Exporters limited in protection—Allflex

There is a limited amount any exporter can do to protect their profitability in the real and not the political world, the chairman of Allflex Holdings, Mr Bill McPhail, told the company’s annual general meeting in Wellington yesterday. “No matter how many political lectures the Government delivers to exporters to ‘manage’ their exchange activities, the fact remains that, at the end of the day, the prevailing exchange rate determines whether there is a profit or loss to be made on an export sale,” he said. “There is a very limited amount an exporter can do to protect his profitability in the real and not the political world. New Zealand’s currency situation remains, far too uncertain.” Mr McPhail said that the edge which New Zealand manufacturers used to enjoy over competitors in major markets had

been eliminated by inflation over a number of years. “It is good to see inflation down to current levels, but most of the damage has been done. “Our domestic cost structure, including the cost of getting goods to the marketplace, has meant that Allflex tag

production now has to take place as close to the end user as possible or in the most cost effective location. “No matter how much loyalty we feel to New Zealand, our first loyalty is to all our staff and shareholders.” Allflex introduced a flexible manufacturing policy with production in France, Spain, the U.S. and Brazil, as well as New Zealand, to ensure cost effective production and to minimise exchange risk. “This year a substantial proportion of our U.S. requirements will be manufactured in Dallas. The flow of product out of New Zealand will reduce,” he said. While the reduction in exchange risk and use of cost effective manufacturing centres will benefit the group’s bottom line, the New Zealand company’s manufacturing operation must suffer. “Its traditional role as

the major tag producer in the group will steadily decline,” Mr . McPhail said. However, it was expected the New Zealand company’s part in the essential consolidation of industries supplying the New Zealand agri-market would ensure the ongoing viability of the domestic operation. Mr McPhail painted a positive picture of Allflex Holdings’ current and future situation over all. The group had returned to profitability and sales for the first quarter ended June 30, 1988, were up about 12.5 per cent on the previous year and in line with budget forecasts, he said. Since balance date Allflex had acquired a specialist injection moulding company, PME Industries, and certain dairy equipment lines from Wallace Corporation aS well as the majority shareholding in a Masterton company, Donald Presses. Ltd.