Turning the business around
When New Zealand’s largest manufacturer and exporter of premium pine products - Claymark - was placed into receivership in 2019, one group saw this as a business opportunity.
Despite Claymark’s name being tainted by the receivership, a consortium led by Paul Pedersen bought it out, turned it around into a thriving business, and increased its sustainability accreditation.
“I’ve got 40 years’ experience in processing, saw milling and wood manufacturing in New Zealand, Australia and Fiji, so I felt comfortable navigating Claymark as a business,” Pedersen said.
Pedersen said the company still made money throughout the receivership, but needed to make some core changes. “The team was exceptional, but we evaluated every product line and cut out the products that weren’t making money,” Pedersen said.
“Some people were nervous due to the receivership, and it took us months to get things back on track and create stability with the employees, key customers and our creditors. We’d also just come out of Covid lockdowns, where we had to shut down numerous times. At that time banks struggled to see our value because they wanted to see three years of financials.”
Seeing as 65% of Claymark’s business is exported offshore, foreign exchange (FX) hedging is extremely important to protect currency fluctuations when the business pays bills and is being paid from overseas.
“Hedging foreign currency, means locking in FX rates today for settlement in the future, and therefore smoothing out future NZ Dollar revenue expectations,” Kiwibank’s Senior FX Dealer, Hamish Wilkinson, said. Wilkinson works with Claymark on its foreign exchange and interest rate risk management.
“In Claymark’s case, hedging allows the business to mitigate foreign exchange risk, given its forecastable orders from a diverse and high-quality customer base. As a trading nation, a number of New Zealand businesses face the volatility risks associated with selling products in foreign currencies, so Kiwibank’s Financial Markets team provide specialist products such as FX hedging services to these import and export businesses,” Wilkinson said.
“Kiwibank was our bank for FX and they traded foreign currency very well, so we migrated all our banking over to them after an 18-month relationship with them on the currency side,” Pedersen said.
“Even though Kiwibank is smaller than its big Australian competitors, they took on our big, complex company and stepped up to the plate. We’ve now taken on another sawmill, so we own four mills. We produce and process everything internally and that has increased our customer base. The key to a successful export business is to maintain high quality and keep as much in-house as possible, so you’re not having to rely on anyone else. ‘Ingrained precision is our motto’," he said.