Importers and exporters crunched by plunging dollar

As the Australian dollar continues to slide towards to the US60c mark, importers and exporters are being crunched by the currency’s downwards spiral. As the Australian dollar continues to slide towards to the US60c mark, importers and exporters are being crunched by the currency’s downwards spiral.

In one of the more dramatic examples of the havoc the Australian dollar is wreaking, homewares group McPhersons has halted trading of its shares as the company’s board assess the damage the dollar is doing to its operations.

The group imports products from brands such as Wiltshire, Stanley Rogers, Multix kitchen wraps and Swisspers personal care products, and sells them to department and home ware outlets. But the falling value of the dollar, and the speed at which it has declined, is causing chaos from a cost perspective.

In a statement to the ASX, McPhersons says it is “evaluating the impact of the recent significant decline in value of the Australian dollar against the US dollar, including the estimated impact on the company’s first-half results and ongoing trading position.”

Ian Campbell, managing director of GUD Holdings, is another wrestling with the dollar’s plunge. His company imports a range of products and components, particularly from China.

“The speed has been the issue. Everyone will adjust, but I think importers have absolutely no option but to put prices up to maintain their margins. The difference between US70c and US90c was 28%. The dollar has dropped about 37%. No one has made such handsome profits that they can absorb a majority of that.”

“If you bring in product and it’s arriving on a monthly basis, each container at this stage is becoming more expensive as we’ve continued to fall.”

But Campbell also says every importer is “in the same boat”.

“At some point in time all your competitors are going to be in the same position. The only variables are the stock you have, and any hedging policy you may have in place.”

But Australian Institute of Export director Ian Murray says the dramatic fluctuations of the dollar aren’t good for anyone, including exporters.

“Nobody likes a situation where the currency is moving up or down in fairly dramatic shifts because everyone’s contractual arrangements are for the long term. No one wants to see a situation where currency is fluctuating. It’s very hard.”

Murray also says a large number of companies, particularly manufacturers, both deal with imports and exports, so it isn’t just one sector feeling the blows.

“It’s very much easier for exporters, and importers, if they understand what the currency will be, say, two weeks from now. It’s just easier if you have a fairly stable currency.”

Meanwhile, the Reserve Bank has today stepped in again to prop up the dollar, buying against the US dollar in Europe. The move comes as the bank confirmed it intervened last Friday in both European and Asian trade.

The dollar has plunged more than 37% since July, when it hit a 25-year high in July at US98.49 cents.