Sanford Earnings FC effected by FX changes

[forest]

SAN exports practically all its produce and will therefore significantly benefit from
a lower exchange rate. A 1c movement in the NZD versus either the USD or JPY
will boost after tax earnings by NZ$2m.

The above quote is from Aspect Huntly research 4 Dec 08.

I like to state a few facts : Average exchange rate in San 2008 financial year (to 30 Sep).
1NZ$ approximately US 0.75
1NZ$ approximately Jap Yen 81

First 8 months 2009 financial year
1NZ$ approximately US 0.56
1NZ$ approximately Jap Yen 54

San NPAT in the 2008 Fin year was NZ$31.5 mil.

English is not my first language and I fail to be able to work out what San NPAT will be in 2009 fin year (assuming everything else stays the same).With other words I do not get the above sentence 'A 1 cent movement in the.....'.

Would be great if somebody can put some light on this.

Thanks in advance.

Forest

[macduffy]

SAN exports practically all its produce and will therefore significantly benefit from
a lower exchange rate. A 1c movement in the NZD versus either the USD or JPY
will boost after tax earnings by NZ$2m.

The above quote is from Aspect Huntly research 4 Dec 08.

I like to state a few facts : Average exchange rate in San 2008 financial year (to 30 Sep).
1NZ$ approximately US 0.75
1NZ$ approximately Jap Yen 81

First 8 months 2009 financial year
1NZ$ approximately US 0.56
1NZ$ approximately Jap Yen 54

San NPAT in the 2008 Fin year was NZ$31.5 mil.

English is not my first language and I fail to be able to work out what San NPAT will be in 2009 fin year (assuming everything else stays the same).With other words I do not get the above sentence 'A 1 cent movement in the.....'.

Would be great if somebody can put some light on this.

Thanks in advance.

Forest

The report is saying that if the NZD/USD rate were to average .56 for the full year, as it has for the first 8 months of the financial year ( and if all SAN's earnings were USD exports - which of course they are not ) then the impact on SAN's after tax earnings would be an additional NZD 38m - 19c exchange difference at NZD2m per 1 cent movement.
The Yen effect is a bit more complicated but you will get the idea. The main point is that a decidedly weaker NZD increases SAN's earnings considerably when the USD and YEN receipts are converted to NZD.

[forest]

Thanks macduffy. Yes I get the idea. It would have been nice if there would have been a bit more info so the change in FX could have been quantified in NPAT.

[macduffy]

We can't be too exact about this.
We don't know what volumes/values of product are sold from month to month and of course the exchange rates are moving constantly. We also don't know how much forex forward cover the company is taking, or not taking from time to time so the revenue as it converts to NZD is also unknown. You may have some idea of how the price of product (fish) has moved in USD terms in this period. I don't.
What we can be sure about is that the lower NZD is beneficial to SAN.

[tobo]

anyone following SAN?
is the sustained downtrend just due to the exchanges rate, or is there something else?
- declining fishstocks?
- declining demand? (declining prices?)
- efficiency? (but cost of oil has dropped!)

[Casa del Energia]

anyone following SAN?
is the sustained downtrend just due to the exchanges rate, or is there something else?
- declining fishstocks?
- declining demand? (declining prices?)
- efficiency? (but cost of oil has dropped!)

I follow SAN - but not that closely - only opinion: it's the strong kiwi although I wonder if buying the mussel farm off sealard was a trigger for the sp slide - -or just a coincidnece.
At any rate - SAN is a long term hold becuase the planets fish stocks are going belly up but NZ econ zone is comparitively well managed - and Sanford owns a lot of quota.
The sp slide is just an opportunity to buy into something that the world is running out of.

[tobo]

Thanks, Casa,
Yes it makes sense that NZ fish stocks will be under relatively good control and will be valuable into the future, hence a good LT industry to be in.

I'd better take Phaedrus's general advice and wait for the downtrend to turn, first, before buying

[iceman]

Interesting to see that the CEO has spent just under $ 1.8 million buying shares in SAN, in the last 2 months and the Marketing GM just over $ 200k. They continue to buy so must think current SP is good value. I agree with them, despite the ridculously strong NZ$, and keep adding to my holding.

[winner69]

AAron - you mentioned long term investment

Just for you the returns from holding SAN over multi time frames are in the table below (rainig today and a bit bored but enough to convince me SAN not for me). Since 2001 and includes dividends (not reinvested and no taking into account tax benefits)

RED is negative returns .... pinkish is less than 5% and yellow highlighted the only periods when returns have been above 10% pa - minimun return in investing in equities i use (equity risk premium and all that sort of stuff)

Note that you only get good (even if not all that good) returns when the investment period starts at a low point for the share price ...... so you have the right idea in waiting until SAN is more reasonably priced.

Except for traders and a few clever (or lucky) people who picked the lows SAN has generally bad investment this century

But don't let me put you off .... you seem keen and have an investment thesis of sorts so stick to it

[Aaron]

Thanks Winner, appreciate the response, probably not a good time of year to ask questions with everyone on holiday.
Returns are pretty poor. If they can't impove earnings then dividend and shareprice will remain poor. History would say they have had the chance to improve earnings over a number of years and not done so. I guess that is a more reliable indicator/guide of future expected earnings/returns than optimistic hoping for improvement next year.
I will continue to hold and would still consider buying more if it goes below $3.80.

I will get back to you on this in a years time when the next annual report comes out. You can tell me that "you told me so" if SAN continues in the same fashion and I appreciate your views as they all help me to form my own opinion.