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CAN'T FIND SOMETHING? |
Businessess in B.C. buck exchange rate negativityMost companies are making a profit or making do with a stronger Canadian dollarBy Andrew Petrozzi Despite the recent appreciation of the Canadian dollar relative to the U.S. greenback, more B.C. business leaders say the stronger loonie is having a positive rather than negative impact on their companies, according to the latest BIV-Ipsos survey. While 49% of respondents said the strong Canadian dollar had neither a positive nor negative impact, 26% saw it as positive compared with 22% who viewed it as negative. More than a third (37%) said the exchange rate had no significant impact on their business. Another 23% said the exchange rate had an insignificant impact. Of the remainder, 40% said it had a very significant (10%) or somewhat significant (30%) impact on their companies. “Most of the news we hear about the exchange rate is negative and how it’s going to hurt Canadian manufacturers,” said Steve Mossop, president, market research, Canada West for Ipsos. “But from a broad industry perspective, it’s actually a positive impact and quite noticeably so, or, at least relative to the negative impact.” The most positive impact of the strong Canadian dollar, according to respondents, is input/raw materials costs: 36% identified that factor as very or somewhat positive. Fifty per cent said it had neither a positive nor negative impact. The near-par dollar was also identified as very (6%) or somewhat (17%) positive for overhead costs incurred in U.S. dollars. Almost two-thirds (63%) said it was neither a gain nor a loss for them. The area most negatively affected was identified as revenue from U.S. customers; 34% said the near-par exchange rate had a somewhat (18%) or very negative (16%) impact on their businesses. The survey also revealed how B.C. business leaders are tailoring their company activities relative to how positively or negatively the exchange rate is affecting them. While neither group is generally involved in currency hedging (57% of those positively affected versus 60% negatively affected are not hedging and are not considering it), other activities show a range of strategies. •Of those positively affected, 20% are sourcing other suppliers (versus 24% of those negatively affected), 37% are considering sourcing other suppliers (versus 12%) and 43% are doing nothing (versus 60%). •Of those negatively affected, 28% are renegotiating prices with current suppliers (versus 23% of those positively affected), 12% are considering renegotiating prices with current suppliers (versus 27%) and 56% are doing nothing (versus 50%). •Of those positively affected, 37% are finding new customers (versus 56% of those negatively affected), 13% are considering finding new customers (versus 16%) and 50% are doing nothing (versus 28%). •Of those negatively affected, 24% are raising their prices (versus 3% of those positively affected), 32% are considering raising them (versus 3%) and 44% are doing nothing (versus 90%). Whatever the impact, the U.S. remains an attractive place for big-ticket buys for both groups and offers expansion opportunities. •Of those positively affected by the stronger Canadian dollar, 10% are making a major purchase such as vehicle or boat in the U.S. (versus 16% of those negatively affected), 30% are considering making a major purchase (versus 24%) and 57% are doing nothing (versus 56%). •Of those negatively affected, 16% are expanding U.S. operations (versus 3% of those positively affected), 24% are considering U.S. expansion (versus 23%) and 52% are doing nothing (versus 70%). While B.C. business leaders clearly believe Canadian consumers are benefiting from the exchange rate – 86% indicate it’s a positive impact – they’re much more doubtful when it comes to Canadian businesses (only 24% view it as positive) and Canada as a whole (36% see it as positive). American consumers are perceived to be the most negatively affected (65%). “We typically get a barrage of negative news in the mainstream media that says here is all the ways it’s going to be bad for Canadians,” said Mossop. “What’s happened here is companies have looked at it and told us, ‘For us it’s OK; for the rest of the world, it’s not going to be OK.’” More than a third of respondents (35%) indicated that, for the next three months, $1 would be worth US$1.03 to US$1.04, while more than another third (36%) think the loonie will be worth between US$0.95 to US$1.02. More than a fifth (22%) think it will climb to US$1.05 to US$1.09. The 12-month outlook, however, offers some interesting thoughts. Most (36%) believe the Canadian dollar will return to the US$0.95 to US$1.02 range, with just 12% of survey respondents saying it will hold in the US$1.03 to US$1.04 bracket. But a surprising number (18%) see it in the US$1.05 to US$1.09 range. And some (8%) even see it rising to the US$1.10 to US$1.19 range. • apetrozzi@biv.com This article from Business in Vancouver May 11-17, 2010; issue 1072 Business in Vancouver (www.biv.com) has been publishing in-depth local business news, analysis and commentary since 1989. The newspaper also produces a weekly ranked list of the biggest companies and players in a wide range of B.C. industries and commercial sectors, monthly features and industry-focused sections that arm its subscribers with a complete package of local business intelligence each week. |
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