Imports & Exports

Imports & Exports


Heavy Machinery Imports Case Study

For this client, their hedge book of simple product imports model had become excessively difficult to manage due to a wide array of small leveraged option structures across multiple brokers.

The main challenges were:

  • A lack of a clear hedging policy, which meant overall hedging requirements were not certain.
  • The diversity of their leveraged option products and current Excel administration processes made isolating overall exposure, highly ad hoc and variable, without active consideration of potential downside impact.
  • The option structures made transaction costs highly ambiguous.

Rochford’s solution included:

  • Firstly, we input cash flow forecasts and outstanding hedges into a Rochford-built model, to isolate and clearly visualise current exposure, taking immediate hedging actions based on prevailing market conditions.
  • We included a scenario analysis to monitor changes in hedging based on movements in foreign exchange spot markets.
  • We also designed and implemented an updated hedging policy, whitch in turn, simplified the hedge book over future months using FECs aligned to clear required hedge amounts.

Outcomes:

  • A consistent, practical and appropriate product mix is now providing heightened clarity on future CoGS commitments, enabling flexibility in sales pricing and forecasted earnings.
  • Drastic reductions have been achieved in transactional pricing, particularly on option structures, due to Rochford’s product and pricing knowledge, increasing competition amongst dealing counterparties.

Plastic Importer Case Study

A plastics importer operated a lean finance team, but lacked treasury experience and access to financial markets data to ensure management and oversight of its foreign exchange hedging programs on an ongoing basis.

The main challenges were:

  • The underlying business was highly commoditised and competitive, requiring the company to be agile and proactive when using FX rates to cost AUD sales prices.
  • While senior managers recognised the problem, they had limited FX market risk experience, very low visibility to market moving data (often at least 24 hours behind actual market moves) and no clear view of key market levels and changes in trends.

Rochford’s solutions included:

  • We assisted in the design of a process that captured and summarised the USD unhedged position as each new AUD sale was closed.
  • We collaborated with senior managers to identify the appropriate risk appetite for the underlying business model.
  • Rochford’s advice and tactics included, limiting and stopping loss market orders, key level and major trend identification, intra-day event risk, pre-emptive hedging of highly probable new sales.
  • Our advice extended to foreign currency denominated CAPEX and on-going freight cost management.

Outcomes:

  • Rochford’s expertise and knowledge on transfer and constant market watch provided senior managers the time to concentrate on the underlying business needs i.e. sales, competitive advantage and supply chains.
  • Rochford’s day-to-day participation in hedging decisions turned a history of losses (often sizeable) from currency exposure into a source of profit generation/margin enhancement that has been consistent and constant over 8+ years.