Today we have learnt of the sale of Sistema Plastics to US multinational Newell Brands, in addition to the recent sale of Compac Sorting Equipment, another highly successful New Zealand manufacturing company, to Norwegian company TOMRA in October, say the New Zealand Manufacturers and Exporters Association (NZMEA).
NZMEA Chief Executive Dieter Adam says, “These sales, alongside the recent announcement of the closure of the General Cable plant in Christchurch, may well leave some wondering what is happening to manufacturing in New Zealand. In reality, the situation is ‘steady as she goes’, with manufacturing continuing to be the second-largest contributor to GDP and showing moderate long-term growth rates with less of the huge swings in export revenue, for example, that characterises the commodities part of our economy.
“Within the manufacturing sector there is constant change, with companies closing down and new ones arising, and others growing their business. Most of our manufacturers are fully exposed to the rough winds of global competition, whether that’s in exporting, or in competing with importers in our domestic market, not to mention the effect of an overvalued currency hitting margins and competitiveness.
“Our manufacturers have made big changes, especially post-GFC, to get and stay fighting-fit in tough markets, and sometimes conditions change to an extent that makes it unsustainable to continue.
“While each story needs to be examined on its own merits, there are common elements between Compac and Sistema. Both have been built into large successful New Zealand manufacturing companies over the past three decades by owners who have put a lot of hard work and money into it. They now want to exit the company while ensuring the new owners will keep it on a steep growth path, and preserving jobs in New Zealand.
“One might have preferred for the business to ‘stay in New Zealand hands’, but the reality is that not only are our capital markets thin as we collectively prefer to invest in real estate rather than the productive parts of our economy, but the deals also make a lot of commercial sense, as the new owners in both cases provide access to their resources, including vast marketing, sales and distribution networks.
"As Brendan Lindsay says “Newell has the expertise and market access that will enable them to take the business to the next level and create new opportunities for the company, especially in North America.” Add to that a huge investment in a new production facility in Auckland and an employment guarantee for its 700 staff and you have a reasonable prospect of this deal working well for New Zealand, with the only possible downside being the common international business practice to minimise local tax obligations leading to a loss of tax revenue for New Zealand.
“It is vital that we keep building our manufacturing base and capability to produce more high-value products, especially when the manufacturing eco-system relies on a network of capable manufacturers making up each other’s supply chains and building the industry’s general ability to produce complex goods and skills. Our focus needs to be on building an environment where manufacturing can grow and prosper. The availability of suitable skilled staff, keeping up with changes in manufacturing technology, and a less punishing exchange rate especially with Australia, our main trading partner, will be critical for that.
“We hope to see quality discussion on how to make the most of our manufacturing base to grow exports and jobs going into the next election.” Says Dieter.