KEY POINTS:
The New Zealand Rugby Union is poised to almost certainly announce another substantial loss.
Last year the union returned a loss of $4.8 million.
This year's shortfall will likely at least match that, and could be considerably greater.
The NZRU will reveal its financial position at its annual meeting on Wednesday week.
The financial struggle of the national body is another blow for rugby, which is already dealing with declining spectator numbers, shrinking television audiences, falling player numbers and a failing national championships that is pushing some provincial unions to the brink of bankruptcy.
Another big loss may force the union to take some tough decisions on the direction of the game.
The union forecast this year's likely loss in last year's annual report. Former chief executive Chris Moller warned the high New Zealand dollar could eat into the union's $77 million of reserves, much of which was held overseas.
Moller's report said most of the reserve fund would have to be repatriated to New Zealand and the Kiwi dollar would have to drop to 66c against the US dollar if the 2006 "paper" loss was to be reversed.
"For cash-flow reasons the NZRU will not be able to continue to hold most of its reserves offshore beyond the first quarter of 2008," Moller said in his report.
"Consequently, if the currency has not significantly depreciated by that time, the as yet unrealised losses may be converted into realised losses."
The Kiwi dollar is currently worth over US79 cents and has remained well above 66c over the last year.
Economist Brian Gaynor, executive director of Milford Asset Management, said the union would have almost certainly recorded a significant loss.
"It's hard to know but I would imagine you are probably talking in the vicinity of $5 million and $10 million," Gaynor said. "It all depends on whether they did bring [the $77 million] back, whether they had to or whether they kept some of it offshore.
"You really aren't going to know until they tell you. You can make all kinds of summations as to what they did, but they gave a clear indication at that last annual report that they were going to bring it back and they will certainly have made a loss [if they did]."
Two thirds of the NZRU's revenue _ mainly from the News Ltd television and adidas apparel contracts _ is received in foreign currency, making it particularly vulnerable to market fluctuations.
The union forecast the current hard times as early as July 2006, when it introduced a new funding policy for its provincial unions.
Favourable exchange rate mechanisms had expired, broadcasting revenues were static and the $34 million pocketed from the 2005 Lions series was a one-off, a provincial funding review warned.
"As a consequence, the NZRU is forecasting significantly poorer financial performance through to 2011."
The extremely strong New Zealand dollar is the nightmare scenario for the union, which had amassed much of its surplus through foreign currency gains.
There may be some relief ahead, however, with some economists predicting the Kiwi dollar to weaken during the second half of this year.
"They may make a loss this year but if the dollar does drop, because the TV money in particular is in US dollars, they will get some real benefits," Gaynor said. "Their revenue will increase and could increase dramatically."
Such a turn of events was not assured, however. "It is forecast to drop but no one can say for certain."
A weakened NZ dollar would be a double-edged sword, warned Gaynor, as overseas offers to players would become more attractive.
A side effect might be that the NZRU would have to pump any gains into boosting its salary structure to retain players.
BY THE NUMBERS
Loss last year: $4.774M
Likely loss this year: Over $5M
