Kiwi exporters’ confidence defies exchange rate

EMBARGOED UNTIL 0500 6 JUNE 2007

Kiwi exporters’ confidence defies exchange rate

Auckland, 6 June 2007: The latest annual Export Barometer by DHL, the world’s leading express and logistics company, finds that New Zealand exporters are still confident regarding export prospects, despite the perception of tough times.

The sixth DHL Export Barometer has revealed that export confidence was strong over the last 12 months and predicts this confidence is set to continue. More than half of the exporters surveyed (58 per cent) stated an increase in export orders over the last 12 months, compared to 46 per cent in the previous year. Sixty-three per cent anticipate an increase in their export orders in the next 12 months, which is only marginally lower than last years’ results.

However, exporters anticipate their profitability will decrease in the next 12 months. Only 56 per cent of exporters said they are optimistic about their prospects for increased profits in the next 12 months. This is significantly below the 2006 survey results of 67 per cent.

The survey also showed the negative impact of the exchange rate for exporters is down 10 per cent compared to last year, with 72 per cent of exporters citing the exchange rates as having had a negative effect on trade, compared to 82 per cent a year ago.

DHL Express General Manager, New Zealand, Derek Anderson, said, “There has been a great deal of discussion about the exchange rate recently, so it is interesting that the exchange rate had a bigger negative impact last year.”

“Clearly there is a range of factors that are impacting exporters’ profitability. These may include the cost of wages or investing in more plant.”

Glidepath Group Chairman, and Export Year ’07 Business Champion Ken Stevens, claims “Exporters are either numb from the pounding they have taken from the high New Zealand exchange rate; have been able to seriously reduce costs and retain their margins; or have made other arrangements in the market like investing in offshore foreign direct investment”.

Developed by DHL Express and conducted by ACA Research, the DHL Export Barometer remains the only large-scale evaluation of export confidence within New Zealand. In 2007, the results gauged the opinions of 305 experienced New Zealand exporters, with 74 per cent of those surveyed exporting for more than ten years.

Commenting on the findings, Ken Stevens said, “There is no doubt that the uppermost topic of conversation amongst exporters is foreign exchange, followed closely by the intrinsically linked interest rates. I personally cannot see any substantial foreign exchange relief this side of the parliamentary elections in October 2008”.

“So while business and exporting is tough right now, there are still opportunities in offshore markets that will excite our more entrepreneurial exporters. There is evidence that our staunchest exporters are finding and developing new value-added goods and services to sell into their markets.”

Despite the exchange rate, a higher proportion of exporters across all industries plan to invest compared to last year. Three out of four exporters (77 per cent) – up from two out of five in 2006 have widespread investment plans in the next 12 months.

Compared to 2006 DHL Barometer results investment in technology has increased by 12 per cent; plant and equipment has increased by 13 per cent and research and development has increased by 8 per cent. Technology (54 per cent) and plant and equipment (53 per cent) remain the primary areas of investment for exporters.

This is in-line with the 2006 DHL Export Barometer where future investment was found to be continuous and widespread, with more than one-third of respondents planning to spend on key areas in the next 12 months in order to support and develop their businesses.

Ken Stevens said, “A number of our exporters are finding alternate ways of growing the value of their businesses and with it, the wealth of New Zealand. Many businesses are investing directly offshore in branch sales and management offices, distribution networks, factories and even collaborative ventures. In effect, New Zealand’s business leaders are becoming part of global networks and are intrinsically linking with their markets”.

Emerging markets

The survey revealed that Europe has returned to the radar of exporters, as an increasingly important destination for New Zealand exports with strong profitability expectations. Europe is a new arrival to the top eight of most profitable destinations/markets, with 12 per cent of exporters stating it as their most profitable export market. Exporters who currently service Europe, China and South Asia anticipate the highest increase in exports to these destinations, in the next 12 months.

Australia maintains its dominance over other countries as New Zealand’s largest and most profitable export market, followed by North America.

According to Ken Stevens, “Asia will become our most important market in years to come as markets and relationships develop regionally”.

Internet Usage

The DHL Export Barometer showed that 82 per cent of exporters use the Internet as a tool to market their goods and services, and about half (49 per cent) have an e-commerce portal.
However, only one in five exporters (20 per cent who sell online derive more than half their total sales via the Internet (including 7 per cent that derive all their sales via this channel).
DHL Express New Zealand General Manager, Derek Anderson, said, “The Internet is a valuable marketing tool for exporters but it is not the primary sales channel. Exporters are still heavily reliant on traditional sales and marketing methods.”

“It is encouraging to see that exporters are realising the benefits of online marketing. However with only 15 per cent of exporters deriving 75-100 percent of their sales online, the survey reveals there is scope to develop this channel.”

The survey results also showed that 18 per cent of exporters do not use the Internet at all for marketing or selling their goods. Of those, only one-third have plans to set-up an e-commerce portal within the next two years.

Reasons for not using an e-commerce portal varied between ‘not effective/relevant for product/service’ (nine per cent) and ‘already have established customers’ (five per cent), to ‘deal direct with customers’ (four per cent) and ‘never looked in to it’ (one per cent).

Free Trade Agreements

The 2007 DHL Export Barometer survey found that Free Trade Agreements with the USA, China and Japan are nominated as having the most positive impact on exporters’ businesses. This is similar to the 2006 results. Free Trade Agreements with China and the United States will have a positive impact on the highest proportion of exporters at 40 per cent.

The survey also revealed that exporters in the agricultural industry are more likely to believe that Free Trade Agreements with China and ASEAN, plus the Doha Development Round of WTO negotiations, will have a positive impact on their businesses compared to other industries. Most notable is the tourism industry which stated these agreements would have little or no impact on their business.

Moreover, the prospect of a Free Trade Agreement with China is not embraced by all exporters. Twenty per cent of services exporters believe a Free Trade Agreement with China will have a negative impact. This is higher than for the agricultural sector, with only 5 per cent of exporters believing it would have a negative impact.

ENDS

See... 2007 DHL Export Barometer (PDF)

About the DHL Export Barometer
The DHL Export Barometer is an initiative aimed at analysing export confidence in New Zealand and identifying export trends, and was first launched in May 2004. It is based on nationwide independent research, examining the business outlook of New Zealand exporters, highlighting changes in overseas market demand and providing insights into the factors impacting on New Zealand export trade.

Conducted by ACA Research, the 305 exporters surveyed were grouped into four main industries: agriculture/food and beverage, manufacturing, tourism and services. The New Zealand DHL Export Barometer is comparable to the Australian DHL Export Barometer, launched in November 2003. Both Barometers are issued on an annual basis.

About DHL
DHL is the global market leader of the international express and logistics industry, specialising in providing innovative and customised solutions from a single source.

DHL offers expertise in express, air and ocean freight, overland transport, contract logistic solutions as well as international mail services, combined with worldwide coverage and an in-depth understanding of local markets. DHL's international network links more than 220 countries and territories worldwide. 285,000 employees are dedicated to providing fast and reliable services that exceed customers' expectations.

DHL is a Deutsche Post World Net brand. The group generated revenues of more than 60bn euros in 2006.

For the latest news and happenings about DHL in Asia Pacific, please visit http://press.ap.dhl.com.

About DHL Express in New Zealand
DHL Express New Zealand has been operating in the New Zealand market for 34 years and employs over 350 staff at nine locations. DHL's New Zealand operation is committed to customer value, service excellence and shipment visibility. In 2006, DHL won TUANZ Contact Centre Trainer of the Year, and was awarded the Contact Centre Manager of the Year in 2004. DHL was also General Services sector winner of the CRM Contact Centre awards in 2006 (for the fourth year).

DHL is a corporate sponsor of Surf Life Saving New Zealand, business partner of New Zealand Trade & Enterprise and supporter of Fashion Industry New Zealand.

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