Agritech company Tru-Test is understood to have been forced to lay off senior managers as the high value of the New Zealand dollar continues to hurt local technology companies, especially manufacturers.
One of those affected by the lay-offs is understood to be the company’s group IS manager, Claudia Vidal. However, repeated calls to the company for comment were not returned.
The Auckland-based company’s latest annual report, lodged last month with the Companies Office and covering the seven months through March due to a change in accounting period, also shows Tru-Test has moved some of its manufacturing operations to Asia to improve margins.
The report notes these transformation initiatives have “not been able to match the seemingly relentless increase in the value of the New Zealand dollar (NZD).
“The currency has regularly been trading at post-float highs with the US dollar, and given that by far the majority of the company’s business is transacted in other than NZDs, in common with all other NZ domiciled exporters, Tru-Test has been significantly affected,” the report says.
Tru-Test recorded an EBITDA loss of $4 million for the seven months, including a foreign exchange loss of $1.9 million, despite increasing sales by $1.7 million compared with the same period in 2006.
Tru-Test develops hardware and software, as well as other products aimed at the farming sector. As part of its drive to improve margins, it has developed a weighing and database program called Pinnacle, which began to ship in August 2007, after the company’s reporting period.
The report says the high currency problem manifests in numerous ways, with farmers receiving less and spending less, especially in the sheep and beef markets, which “have fallen on very hard times”.
Tru-Test also receives less for its offshore sales. While sales were up for the period, year-on-year, gross margins were down, the report says. In the year to August 2006, Tru-Test posted sales revenue of $96.3 million while in the latest seven-month period it recorded $50.9 million.
The high dollar also affects the value of Tru-Test’s foreign investments in Australia and the United States.
“Most NZ-based exporters do not operate wholly-owned subsidiaries overseas and are therefore not subjected to this non-cash fluctuation in their income statement,” the report says.
Tru-Test puts the overall effect of the high and fluctuating currency at $3 million, at the EBITDA level.
In addition, the cost of feed has increased, especially as farmers move to growing for alternative fuel production.
This is also damaging the margins of the company’s customer base.
In December 2006, Livestock Improvement Corporation bought 19.9% of Tru-Test in two tranches, the second of which saw it pay $2 a share.
That would value the company at $68.5 million.