ARN

Channel tries to stay calm as dollar plummets

Just when they thought it couldn't get any worse, Australian importers and distributors reeled last week as they watched the Australian dollar fall to an all-time low against the greenback.

Obviously, such drastic fluctuation in the exchange rates affects some businesses more than others, but in an industry almost exclusively reliant on trading in US currency, everyone faces some sort of impact.

The bottom line is that where just 12 months ago the Aussie dollar could buy around 75 US cents, during last Wednesday's trading in New York it dipped to as low as 55.3 cents. That represents a huge fall in one year and according to channel representatives ARN contacted last week, there has to be some fallout.

Bruce Lamb, managing director of Sydney distributor Software Suppliers, says he has found his suppliers are often sympathetic as a good part of their business is export related and they can't price themselves out of the market.

Maintain business

"All American vendors are going to have to be sensitive to exchange rate issues in their export markets if they want to maintain business," said Lamb. "There is some correlation between the competitive issues and the financial ones. We might be just about to fall over a cliff because of a currency crisis, but they run the risk of running into a brick wall if their export markets die.

"The biggest fear I have is that the whole world economy might go into meltdown," he added.

Interestingly, exchange rate falls represent an opportunity for local software authors, according to Ian Mackay, managing director of Brisbane-based software licence republisher and distributor, Manaccom.

"We export some local product in US dollars. This means both we and the local authors receive greater returns from exports," Mackay said.

In the emerging global economy, Mackay also points out the time is right for take-overs from US companies. He suggests anyone interested in selling their business to US raiders will find it easier in the current climate while others who are not so keen should be wary of the circling vultures who are now even further empowered.

Doing it tough

Mackay also felt subsidiaries of American companies having to report their profits to a head office in US dollars, may also be doing it tough. "When the budget is done at corporate level, the board wants to get a certain result out of their investment. If the Australian dollar has plunged, that return on investment will be severely compromised," he said.

Peter Atton, marketing and planning manager for LG Electronics Australia, a sales and distribution subsidiary of the Korean parent hardware (monitors and CD drives) manufacturer, said it is now taking some action to negate the impact of a 56-cents exchange rate.

"In a very tight margin environment such as we are in, every few cents is critical. We buy on a long window, but will definitely have to look at something now," said Atton. "I don't know what sort of action we will have to take at this stage, but there will have to be some counter-measures. It's time to burn the midnight oil and keep a close eye on what happens."