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Up to 100 jobs are in jeopardy as Skellerup Holdings becomes the latest manufacturer to restructure because of the high dollar.
The listed rubber products company said yesterday that because of slower trading conditions and the New Zealand dollar's strength, it expected to make a net profit after
one-off costs of $9 million this year, compared to $13.4 million a year earlier.
The latest result will be hit by $4.7 million of currency costs.
The profit downgrade comes as the company starts a restructuring process aimed at making it more competitive internationally.
Chairman Keith Smith said yesterday that because of the volatility and strength of the dollar, Skellerup would continue to grow by acquisition, but would invest in larger, higher-growth markets overseas.
That would result in the sale of some operations, and the Christchurch factory would be hardest hit by the process.
Managing director Donald Stewart said the loss of 100 jobs - about a third of the workers at the factory - was the worst-case scenario as the company looked to streamline its product pipeline and concentrate on manufacturing operations overseas.
The company would not be shifting its own manufacturing operations overseas, but would look to outsource some work to other foreign companies.
Skellerup has factories in Australia, Britain, the US, Italy and China.
The dollar was one of a range of factors which meant New Zealand was no longer competitive when it came to manufacturing some products, Stewart said.
"We've got little factories that just can't compete with the big factories overseas," he said.
"It's globalisation, and you couple that with the distance we are from markets and the size of our homemarket."
It was probably too late for any sudden drop in the currency to make a difference, he said.
Skellerup shares fell 12c to close at $1.11 yesterday.
The restructuring process would have a one-off cost of $16 million, including non-cash asset writedowns.
That meant Skellerup would post a bottom line loss of about $7 million for the year to June 30.
While the restructuring meant taking a hit this year, it was crucial for the future strength of the business, Stewart said.
The company is forecasting a return to profits of about $12.5 million next year.
The business would be simplified, focusing on a narrower range of products, Stewart said.
The company would largely specialise in "global technical polymers" - higher margin products made for the hightech and industrial sector.
The Christchurch plant makes a range of rubber products including conveyor belts, roof coverings, and polythene foams.
Production of the classic Skellerup gumboot - now made in China - would not be affected by the restructuring, Stewart said.
Canterbury Manufacturers Association chief executive John Walley said this latest blow to manufacturing was sad but inevitable because of the economic climate.
In the past few weeks, the country had lost jobs in a range of export businesses, from a sawmill in Wanganui, to electronics companies such as Dynamic - a manufacturer of electronic controls for power wheelchairs and scooters - and F&P Appliances.
"So we've got high-tech that can't make it, we've got low-tech that can't make it and we've got the tech in the middle that can't make it."
Companies were no longer able to look at the dollar in terms of a business cycle.
"There was some hope again after it started to track back from the last post-float highs [in April] but it has jumped back up again," he said.
"Unless things change substantially, you can only expect to see more of the same.
"The problem we've got with inflationary behaviour driven by the Government and by house prices is the domestic economy is going like a steam train.
"The exporters are the only ones who suffer directly through the exchange rate."
Too hard to compete
* Skellerup says the high dollar is making its Christchurch factory uncompetitive.
* Up to 100 people - a third of the factory's workers - may loss their jobs.
* The company says its net trading profit will be down from last year's $13.4 million to $9 million this year after currency costs of nearly $5 million.