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Winners and losers from rising dollar

By Nick Stride

Friday 24th January 2003

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Sky Network Television, Michael Hill International, Tranz Rail and Telecom are the major winners from the New Zealand dollar's rise against the greenback and the Australian dollar, according to research by sharebroker ABN-Amro.

The broker's survey of 37 companies listed 14 companies that will benefit from currency appreciation. Four will be unaffected.

Among the 19 negatively affected many will see little or no earnings impact for some time because exposures are hedged.

In the ports and airports sector the picture was mixed.

Ports of Auckland was expected to benefit from rising import volumes. Auckland International Airport, enjoying strong visitor arrivals growth, would benefit from more New Zealanders travelling abroad.

Port of Tauranga and South Port, both export hubs, would "in theory" experience slight negative effects while Lyttelton Port had a balanced exposure.

In the agricultural sector Wrightson would suffer from reduced export volumes. The effect on Sanford was negative but ABN noted the company was hedged for three years.

Among manufacturers Fisher & Paykel Appliances' exposure to the US dollar was completely hedged but it still had exposure to the Australian dollar exchange rate. The effect on Fisher & Paykel Healthcare would be negative but the company was well hedged.

Scott Technology and Software of Excellence would be affected negatively but Skellmax was very well hedged.

Cavalier would see a theoretical negative effect but that would be offset by increased pricing power.

In the retail sector Briscoe, The Warehouse and Hallenstein Glasson would benefit. The impact on Restaurant Brands and Kirkcaldie & Stains would be minimal.

Up to 80% of the negative effect on Vending Technologies would be offset by lower machine import costs.

Carter Holt Harvey would be unaffected due to its good hedge position while Fletcher Forests had indicated each 1USc rise took $1.5 million from ebit (earnings before interest and tax), indicating a minimal impact. The effect on Fletcher Building would be insignificant. New Zealand Refining was considerably exposed as it didn't hedge its US dollar refining margins. Contact Energy would see a minor negative impact in the longer term.

Air New Zealand was benefiting on an operating cashflow basis but its asset backing had decreased in New Zealand dollar terms.

Much of Telecom's planned $730 million of 2003 capital expenditure was imported equipment, resulting in currency movement gains. The translation loss on loss-making AAPT was minimal.

Other beneficiaries were Independent Newspapers and Hellaby Holdings. Sky City, Infratil, GPG, Calan Healthcare Properties and Trans Tasman Properties would see minor negative impacts.

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond

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