December 16, 2019

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Not everyone in Manitoba is unhappy about a 70-cent Canadian dollar

Business is brisk for manufacturers that export to the U.S.

Sinan Leylek, President and CEO of Spark Rentals, a lighting equipment rental company, is fielding orders from as far away as Georgia and California.

TREVOR HAGAN / WINNIPEG FREE PRESS

Sinan Leylek, President and CEO of Spark Rentals, a lighting equipment rental company, is fielding orders from as far away as Georgia and California.

Hey there, time traveller!
This article was published 23/1/2016 (1423 days ago), so information in it may no longer be current.

Sinan Leylek's new specialty lighting and effects rental business, Sparks Rentals, is getting orders for weekend rentals of black lights for sweet 16 birthday parties from as far away as Georgia and California.

And Leylek had no intention of expanding south of the border.

Acrylon Plastics is getting calls out of the blue from U.S. customers CEO Craig McIntosh says the company hasn't dealt with for seven or eight years.

That's what a 70-cent Canadian dollar will do.

The loonie is at its lowest point since April 2003. It's down about 10 per cent since October.

Manitoba manufacturers learned how to survive when the Canadian dollar was at par with the U.S. dollar, briefly in the fall of 2007 and then again in the spring of 2011, so it's not like the volatility is anything new.

Ron Koslowsky, head of the Manitoba division of the Canadian Manufacturers and Exporters, said the weak Canadian dollar doesn't mean an automatic bonanza of orders for Manitoba exporters, but it definitely shuffles things up.

"Lots of companies are already locked into agreements at fixed rates," he said. "In the short term, often there is not a whole lot of difference in premiums. But it's not a perfect system."

Some Canadian suppliers will even increase prices, just because they can.

Most Manitoba exporters incur at least some of their input costs in U.S. dollars, many as high as 50 per cent or more. And with historic lows in commodity prices and other vagaries of the global market, it's not like Canadian exporters get to run the table against U.S. competitors just because of the exchange rate.

A recent RBC report found Manitoba's non-energy exports increased by 5.8 per cent in the first 10 months of 2015, with the dollar having declined 7.5 per cent during that period.

Many Manitoba companies like to keep tactics and strategies under wraps, but the dollar is certainly shuffling things up.

Controlled Environics Ltd. (Conviron)


John Proven of Conviron with some of their commercial grow equipment.

BORIS MINKEVICH / WINNIPEG FREE PRESS

John Proven of Conviron with some of their commercial grow equipment.

 The specialized manufacturer of controlled-growth chambers ships around the world. While the slump in commodity prices has caused some of its big agri-science customers to cut back on spending, chief operating officer John Proven said academic and private foundation customers are forging ahead.

"We're experiencing decent volumes," he said. "We're a project-oriented business. We're more impacted by the nature of the product than we have been by currency fluctuations."

It also helps that only about 20 per cent of its manufacturing inputs are in U.S. currency.

Proven said the company is using the Canadian currency leverage to bid on high-volume work it might have passed on in the past because of its premium price.

It was recently able to ship a major project to the U.K., showing off its latest technologies. Proven said that might have been curtailed were it not for the favourable exchange rate versus the British pound.

New Flyer Industries

 

Paul Soubry, President and CEO of New Flyer, the largest urban bus manufacturer in North America.

MELISSA TAIT / WINNIPEG FREE PRESS

Paul Soubry, President and CEO of New Flyer, the largest urban bus manufacturer in North America.

One of the highest-profile exporters to the U.S. in the province, New Flyer has been living in a Buy American environment for a long time.

That means the company is locked into some hefty U.S. input costs — as well as U.S. production facilities.

Its newly acquired Motor Coach Industries division, also a big exporter, is not quite as reliant on U.S. parts.

Paul Soubry, New Flyer's CEO, said, "We've worked hard over the last number of years to manage our overall Canadian dollar inflows and outflows and continue to work to a position of a natural hedge." He acknowledges the significant U.S. input costs mean Canadian customers are impacted with a weakened loonie, which is offset somewhat by U.S. bus contracts — a much larger percentage of its total business — that have a certain level of Canadian costs.

"The bottom line is we do not operate our business to gain (or lose) on foreign exchange movement," he said. "Further, the product and customer base is not elastic to currency moves."

That means New Flyer's sales volumes are not affected.

Spark Rentals


Sinan Leylek, President and CEO of Spark Rentals

TREVOR HAGAN / WINNIPEG FREE PRESS

Sinan Leylek, President and CEO of Spark Rentals

  Sinan Leylek started his lighting and effects rental business part time while he was still a student at the Asper School of Business four years ago by launching a website.

He was able to buy about $50,000 worth of specialty equipment such as LED floors and curtains, black lights and lasers and has been at it full time for about a year.

At first, he ignored the U.S. market and turned down U.S. interest until he started getting young girls from the southern U.S. ordering weekend rentals with their parents' credit cards.

He found out he didn't have to pay duty to ship to the U.S. — "Rentals are considered temporary exports" — and he also found out his prices were significantly lower than the competitors.

"I think I might need to raise my prices because there's some kind of gap in the market," he said.

Sparks posts its prices in Canadian currency, and even with the conversion to the higher value U.S. dollar, those customers south of the border are still getting a bargain.

Acrylon Plastics

Like many local manufacturers, Acrylon turned itself inside out to be able to survive parity when the Canadian dollar spiked and the U.S. economy tanked a few years ago.

CEO Craig McIntosh, the former chairman of the national board of the Canadian Manufacturers and Exporters, said the company did a pretty good job of approaching a natural hedge with a mix of U.S. inputs and U.S. exports along with Canadian sales of its range of specialized plastic parts and products.

The lay of the land is quite different now.

"The more interesting thing now is we're getting calls from people who had been buying outside Canada who now want to buy 'made in Canada', " he said.

That means Canadian companies are getting a new look-see along with the traditional Chinese suppliers.

After Acrylon repositioned itself after the financial recession, it stopped doing business with some American customers.

"Now people we dealt with years ago in the U.S. are calling, and we have made no effort to go after them," McIntosh said. "They recognize what's going on with the exchange rates. Canada looks like a better deal for them."

Monarch Industries Ltd

Roy Cook, CEO of Monarch Industries, said bluntly the low Canadian dollar will help Monarch, a company that makes custom castings and hydraulic cylinders.

But if he had his choice, Cook would prefer longer-term stability.

"It's very difficult to deal with the volatility," he said. "You need to have something to base your plans on."

But he echoed what many said, that there is a give and take.

"A weaker Canadian dollar will be helpful, however a significant portion of our input costs are in U.S. dollars," he said. "So it's not as helpful as might be apparent on the surface."

On top of that, Monarch is a major supplier to original equipment manufacturers in the agricultural implements field. And since agricultural commodity prices are also hitting rock bottom, their sales are down and so are Monarch's.

Decor Cabinets Ltd

Before the U.S. housing market crashed from 2007 to 2009, Decor Cabinets of Morden was selling about 80 per cent of it high-end, semi-custom kitchen and bathroom cabinets into the then-booming U.S. market.

But after the crash, it regrouped, opened new markets in Eastern Canada and now sits with about 35 per cent of its production volume being shipped to the U.S.

Decor's chief financial officer, Dave Schellenberg, said that accounts for about 40 per cent of the company's revenue.

He said he thinks the company may have over-shot on that geographic sales mix. "I think longer term, we're better off with about 50 to 60 per cent of sales to the U.S."

Schellenberg said the company is looking to boost U.S. sales, but the problem is it's got such a big back order on the books already that existing customers are going to be keeping them busy for a while.

Food Trucks International

Things are cooking at the Food Trucks International plant in Dugald. The plunging Canadian dollar is sending its U.S. sales soaring.

"Last year, our U.S. sales were up 25 per cent," said company president Otto Kemerle. "This year, we're expecting them to go up at least 100 per cent."

While it clearly benefits from a weaker Canadian dollar, Kemerle said there's also a downside. About half the parts it buys are priced in U.S. dollars.

While its U.S. customers still come out ahead when the exchange rate is factored in, its Canadian customers end up paying more for a truck.

With a growing demand for its trucks south of the border, Kemerle said the U.S. is expected to account for about 80 per cent of the company's sales this year, compared with 40 per cent in 2015.

 

— with files from Murray McNeill

martin.cash@freepress.mb.ca

Martin Cash

Martin Cash
Reporter

Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.

Read full biography

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