Around the Top 200 sectors

There was wide variation in performance from the business sectors covered by our Top 200 list again this year but, generally there were few signs of increased optimism until well into the year. Cash flow remained tight through 2010, with domestic consumers reluctant to take their hands out of their pockets. Among industries that experienced some lift in 2010 were the dairying, forestry, energy, food and packaging.

Agriculture
Primary production, the biggest sector of our economy and in our Top 200, was substantially helped by international commodity prices which, while still volatile, were at or close to record levels for much of the year. The dairy industry, well led by Fonterra, had very strong year and most of the big New Zealand subsidiaries of multinational forestry companies recovered from their losses of the previous year. Our top five businesses in this sector boosted revenue by $1 billion while profitability almost trebled. While global prices for sheep, beef and wool also reached historically high levels, farmers in these sectors are still struggling to achieve acceptable returns. Agricultural servicing is competitive market and it did not get any easier in 2010.

Automotive
The automotive repair business was reportedly the worst it has ever been through much of 2010. Car sales, however, were reasonable ahead of the GST increase, although many second hand car sale operators fell out of the nest. New cars, particularly the more expensive lines, continued to sell though not at the old levels. Revenue in the top five companies in this sector fell $150 million but profitability improved slightly.

Communications and media
It was hell of year in the comms industry, with revenue from the 13 companies in this sector slipping over half billion dollars while profits dived from $700 million last year to cumulative loss of $166 million in 2010. Only Telecom, Vodafone and Sky Network TV reported profits, and only Sky recorded an increase. Telecommunications continues to be challenging, competitive business with the only certainty being constantly changing technology. Print-based media suffered, in some cases seriously, while the printing industry felt the pain of the transition to online communication. Advertising bookings were down across all media until television ad sales started to lift as the year progressed. Classified advertising continued its electronic migration.

Energy
Our energy sector, encompassing oil, gas, electricity, water and mineral companies, turned in much improved profit performance. While sales from its collective 21 companies were down by over $3 billion to $23.3 billion, tax paid profits jumped from just under $1 billion to $1.6 billion. New Zealand subsidiaries of the multinational petroleum behemoths have always featured highly in the Top 200 list in terms of turnover. And for this year’s list, while their revenue was down, they turned in much improved profit performances at their December 09 balance dates. Shell NZ led the way, turning small loss the previous year into $331 million profit, although that included $175 million gain from selling out of Fulton Hogan. It was an up and down year for our electricity suppliers, with some like Meridian showing big profit increases while others had their bottom lines severely pinched.

Processed Food / Beverages
The wine industry’s hangover really came on in 2010. The wine glut savaged prices, profits and land values. However, others in the food industry continued to benefit from consumers’ basic need to be fed and watered. Food manufacturing, however, came under pressure from record high commodity prices, particularly for sugar. Across all 25 companies in this sector, revenue was up $400 million while profitability increased by $80 million.

Manufacturing
Despite challenging exchange rate regime, the manufacturing sector started something of bounce back in 2010. Exports to Australia had climbed 20 percent on last year by September, helped by an Aussie dollar that has strengthened – in contrast to the currencies of many of our other major trading partners. Sales of specialist industrial electronics were strong and hi tech manufacturing generally returned to better times. Overall, manufacturing is still some way from healthier levels of two years ago and continues to lose ground in more traditional industries to cheaper labour markets in other parts of the world. While profits for our top five manufacturing companies edged up, revenue and profit performance from the total sector continued to decline.

Retail and Wholesale
The FMCG market started to pick up little in 2010 but generally retailing was tough in an economy and domestic market that was going nowhere, very slowly. Some major retail clothing, sporting goods and homeware chains improved their efficiency through cost cutting and enhanced management but margins were slim, revenue static or down and profit improvements hard to come by. While profits for some of our larger retailers increased, these were the exception and overall profits for the 32 companies in this sector halved, down almost $200 million.

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