Sanford's Barratt calls for tax on forex trading as soaring kiwi erodes profit

Wednesday 27th January 2010

Sanford chief Eric Barratt has called for a tax on non-trade related currency transactions in a bid to smooth the volatility of the kiwi after the rampant currency sapped returns on exports through the second half of last year.

The managing director of the country’s largest listed fishing company told shareholders at their annual meeting that the New Zealand dollar isn’t “determined by the fundamental economics of New Zealand,” rather it was held hostage by “currency traders looking for safe havens to park large sums of money for usually very short periods of time.”

The kiwi dollar has surged as much as 54% from a sub-50 U.S. cents low in March, and has held above 70 cents since September.

“It is high time New Zealand as a country started earning some income from these currency traders that costs shareholders in Sanford and other trading companies many millions of dollars each year,” Barratt said. “A tax on non trade related currency transactions could not only earn significant income for the government it could also result in our exchange rate moving closer to its realistic value and thereby add significant value to the wealth of New Zealanders.”

Sanford posted a 27% slump in profit to $39 million in the 2009 financial year, including a $29.7 million gain from asset sales.

The company blamed the strong kiwi dollar for second-half pretax earnings being 50% below the first half.

The shares climbed 1.2% to $4.96 on the NZX today and have gained 1.5% this year.

Barratt told shareholders the company will focus on stimulating demand for greenshell mussels this year, as present selling prices are “uneconomical.”

“We forecast that markets will remain challenging but gradually improving over the coming year,” he said. “The exchange rate will continue to be impossible to predict but our efforts will continue to maximise prices and manage the exchange rate risk.”

The company will continue to support Federated Farmers’ lobby for the country to introduce trout farming, and Barratt said they would immediately invest in it if the government allowed it.

Sanford’s major capital project for the year will be its automation of its processing plant in Havelock in the second half of the year.

Businesswire.co.nz

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