One way or another you have to deal with it

One way or another you have to deal with it

The latest Canterbury Manufacturers’ Association (CMA) Survey of Business Conditions completed during October 2007, shows total sales in September 2007 decreased 9.5% (export sales dropped by 17.5% with domestic sales decreasing .6%) on September 2006.

The CMA survey sample this month covered NZ$565m in annualised sales, with an export content of 48%.

Net confidence improved to 8, up from the -18 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 98, down from the previous month’s 98.5, the change index (capacity utilisation, staff levels, orders and inventories) decreased to 101 from the previous months 103, and the forecast index (investment, sales, profitability and staff) is at 101 down on the previous month’s result of 102. Anything less than 100 indicates a contraction.

Constraints reported 8% production, 15% staff and markets 77%.

Staff numbers for September increased by just over 3.5%.

“The sentiment surrounding this latest survey is that manufacturers are, as they must, getting on with the job. Some are feeling better about business conditions, especially those with a domestic focus or who sell into Australia as the Australian dollar cross is yielding some improved returns. There remains huge pressure on companies margins as costs are creeping up – wages, compliance and the cost of raw materials. There seems to be a bit of sunshine in the responses as manufacturers and exporters, ever optimistic, hope for a stronger year end and some respondents are ahead of where they were this time last year”, says Chief Executive John Walley.

“The demand for NZD, off the back of high interest rates, continues to make life difficult for most exporters. We are off the all time highs but anyone with a substantial sales volume in USD is still suffering, and the longer this lasts, the more business models will change and the more likely we are to lose the activity from New Zealand forever”.

“Those operating within the supply chains and providing products and services to exporters feel the same pressures that fall on their customers. Capacity is being reduced and contracts are tending to be short term and project based”.

“European countries are spending more and more on research and development, driving innovation much harder and respondents are concerned that New Zealand is falling further behind. There are also comments that Australian first-tier customers are also facing increasing competition from ‘China price’ and may be forced to change their business models as well. The Association will be monitoring both situations closely, especially given Australia’s importance as a market for our elaborate products”.

“For the first time it has been reported that Chinese suppliers are quoting in Euro. Even with the loose RMB-US$ peg, Chinese suppliers seem intent on having their cake and eating it, clearly indicating their view of further downside on the US$”.

“Over all, this survey shows that conditions remain tough for the manufacturing and exporting sectors. It remains a story about the margins squeezed between a strong currency and increasing costs”.

“Christmas and the summer might be making people feel a bit better, but the pressure to switch activity from New Zealand remains the strategic threat to hard won capability. Once the capability evaporates, we collectively lose our ability to respond to future opportunities, and over time, the sophistication of our exports will be eroded, along with our living standards”.

For more information contact: John Walley on 021 809 631

Corner Cambridge Terrace & Manchester Street
PO Box 13-152, Christchurch, New Zealand
Phone: 0064 3 353-2540
Facsimile: 0064 3 353-2549
Website: www.cma.org.nz
Email: cma@cma.org.nz

CANTERBURY MANUFACTURERS' ASSOCIATION
Survey of Business Conditions – September 2006 compared with September 2007

SAMPLE SIZE: The Survey respondents represent elaborate transformed manufacturers with annual sales of approximately $565 million.

CHANGE OVER 12 MONTH PERIOD
(The table below represents the above returns expressed as percentages)
Sept August
TOTAL TURNOVER: Export /Domestic ratio 48/52 44/56
% Change in Total Turnover DECREASED -9.49 1.47

DOMESTIC TURNOVER: % of respondents reporting a rise 36 70
% of respondents reporting a fall 45 30
% of respondents reporting no change 18 0
% Change in Ave Domestic Turnover DECREASED -.60 9.17

EXPORT TURNOVER: % of exporters reporting a rise 30 44
% of exporters reporting a fall 50 33
% of exporters reporting no change 20 22
% Change in Average Export Turnover DECREASED -17.59 -6.85

STAFF NUMBERS: % of respondents reporting a rise 54 70
% of respondents reporting a fall 18 10
% of respondents reporting no change 27 20
% Change in Average Staff Numbers INCREASED 3.53 4.02

CHANGE OVER 12 MONTH PERIOD
(The table below represents the above returns expressed as percentages.)

Large Fall
(Over 15%) Modest Fall
(2.5%-15%) No Change
(Within 2.5%) Modest Rise
(2.5%-15%) Large Rise
(Over 15%)
Sept Aug Sept Aug Sept Aug Sept Aug Sept Aug
Profitability (YoY) 15 9 31 27 23 18 31 45 0 0
Cashflow (YoY) 0 9 31 36 46 27 15 27 8 0
Exchange Rate (YoY) 15 0 38 36 31 9 15 55 0 0
Investment Forecast 8 9 23 9 38 36 8 27 23 18
Sales Forecast 0 0 25 18 33 27 33 45 8 9
Profit Forecast 8 0 17 36 33 27 42 36 0 0
Staffing Forecast 0 0 25 18 58 73 17 9 0 0
Very
Negative Negative Neutral Positive Very
Positive
Confidence 8 0 15 36 46 45 31 18 0 0
Constraint Production Skilled Staff Capital Market
8 0 15 18 0 0 77 82

Net Confidence Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
2003 +21 -6 +12 -11 -5 +12 -6 0 +11 +40 +29 +33
2004 +5 +19 +41 +41 +36 +50 +12 +20 +7 0 -7 +5
2005 +13 -13 -6 -25 -33 -13 -13 -36 -27 -32 -29 -33
2006 -47 -13 -23 -29 -42 -13 -14 +8 +15 -7 40 0
2007 -17 0 -8 25 8 -17 -60 -18 +8

Index
(base =100) Sept 06 Oct
06 Nov 06 Dec 06 Jan 07 Feb 07 Mar
07 April
07 May 07 June 07 July 06 Aug 07 Sept 07
Performance 95 93 101 91.5 98 93 94 95 96 95.5 96 98.5 98
Forecast 100 101 108 102 101 101 102 105 102 102 99 102 101
Change 103 102 107 100 100 100 99 99 103 103 102 103 101

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