Businesses trading offshore stay afloat amid plunging dollar
Businesses are looking to increase exports and absorb the higher cost of imported inputs to make the most of a “sweet spot” for the Aussie dollar, executives said.
Seafolly’s chief executive Anthony Halas said he had “mixed feelings” about the drop in the Australian dollar on Wednesday, but believed expanding his business offshore was key to staying afloat amid fluctuations in the Aussie.
Mr Halas’ swimwear is designed in Sydney, but manufactured in China. He started selling his product wholesale and retail in the US and Canada six years ago and has also entered markets in Asia and Europe.
“The dip has definitely had an impact. Our Australian margin has been squeezed; we have had to fix pricing quite far ahead,” he said.
Mr Halas said his international branches served as an “insurance policy” for a weakening Aussie dollar, and proved the value of broadening business offshore.
“The value of my sales to America are going up at a very rapid rate and that feels good; so I guess I have mixed feelings about the low dollar. It’s possibly a good reminder to others that there is a big world out there and we need to look beyond our own shores, be less reliant on the local market, and look for opportunities elsewhere,” he said.
The Australian dollar tumbled to a six-year low in the afternoon, dropping below US76¢ for the first time in six years, and as low US75.88¢ and was trading late on Wednesday at US76.11¢. The Aussie has dropped by 19 per cent against the US dollar over the past six months, and by 1.9 per cent against the Euro.
Mr Halas said he would not be increasing prices in Australia or limiting his range. “We will try to look for ways to resist that.”
More enthusiasm
Also enthusiastic about the diving dollar was Walter Berryman, the owner of a manufacturer of electronic circuit boards on ceramic material, Hybrid Electronics, which distributes to the electronics industry. Its uses range from temperature sensors, pressure sensors, baggage X-ray machines, data loggers, components for cars and solar cells.
My Berryman, who started his company 40 years ago, trades exclusively in US dollars, buying and selling materials across Australia, US, German and Japan.
“The change in the Australian dollar has been a godsend. We are selling in US dollars, buying components in US dollars, but our manufacturing costs are in Australian dollars, so we’re paying people with the Aussie. That has made a big difference to us.”
Shipping giant Asciano chief executive John Mullen said while the drop in the Australian dollar did not directly benefit his business, it was positive for his customers.
“Most of our customers who are big commodity companies, it’s making their lives easier, which in turn obviously brings benefit to us,” Mr Mullen said. “So we welcome it.”
Mr Mullen said the dollar’s current value was close to the “sweet spot” and didn’t believe it would need to go lower to benefit business.
Gil McLachlan, chief executive of tour company McLachlan Tours said the local tourism industry was likely to benefit from the low Australian dollar. But the drop served as a slight disincentive for travellers looking to tour in the US and Asia.
“There has been some marginal increase in costs caused by the decline in the Australian dollar against the US, but at this point, touring operations haven’t noticed any major consumer resistance.”
Mr McLachlan said Australian travellers had grown fairly “resilient” to changes in the dollar and people tended to travel during the peak selling period regardless of broader economic factors.
“People have adapted. In the past, when there have been dramatic changes for the worst, we have found people travel for shorter periods of time, but then adapt fairly quickly. It doesn’t stop them travelling altogether when the dollar weakens, but certainly influences how long they stay away and where they choose to go.”
He said business had slowed down towards the end of last year, but that was a result of a weakening local economy and low consumer confidence.
