By ELLEN READ
Consumers are expected to win ahead of shareholders as New Zealand's retail sector competes away the benefits of a stronger currency.
A rise in the kiwi dollar is positive in the short-term for the retail sector, as reduced import prices mean higher profit margins.
However, investment bank ABN Amro said the longer-term impact was largely neutral, because any improved margins would deteriorate as companies came under pressure to cut prices.
On the other hand, lower prices should lead to more sales, which were likely to be more sustainable than margin improvements, which depended on the kiwi continuing to strengthen, the company said in a research report.
The kiwi is at 3 1/2-year highs against the United States dollar and at five-year highs against its Australian counterpart. As a net exporter, this puts New Zealand's economy under pressure.
ABN Amro looked at the effects of the stronger dollar on various industries and listed companies.
Warehouse chief executive Greg Muir said the rising kiwi's effect on his company was still unknown. The company's foreign-exchange hedging meant it would not be affected by higher rates until mid-year.
"It will be wait and see as to how much we can give the customers and how much we return to shareholders," Muir said. "Our intention would be to keep some and share some with customers."
Briscoe Group, which stopped hedging against currency movements in November, is counting itself as one of the winners in the kiwi's rampant run.
Financial director Alaister Wall said the firm had taken a calculated risk which had paid off.
But the firm imported only about 20 per cent of stock, limiting the gains it could make. Wall estimated the company had benefited from its lack of hedging by up to $100,000.
Other sectors studied by ABN Amro include:
* Agriculture: a strong kiwi will reduce agricultural export receipts.
* Forestry: the sector is highly exposed to currency movements with most products (logs, lumber, pulp) traded in US or Australian dollars. But both Carter Holt Harvey and Fletcher Forests have at least some currency hedging in place.
* Energy: the effect will be minor.
* Transport: the sector is exposed through its inputs (fuel, equipment and so on) and financing, which is denominated in foreign currencies.
* Property: no direct financial impact as most revenues and costs are in New Zealand dollars.
Competition hits dollar gains
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