Primary Sector: Combat drought and other pressures by successfully planning now

01 May 2013

New Zealand is currently recovering from the most severe drought in 70 years and the impact of this on primary sector businesses is expected to continue for a number of years to come. If businesses in this sector are to thrive, it is vital that they have sound financial planning and good systems in place.

According to the latest MYOB Business Monitor, in the first quarter of 2013 almost one third of the primary industry businesses (32%) expect revenue to rise in the year ahead. 51% expect revenue to remain the same, and only 10% of businesses expect a decline.

MYOB New Zealand executive director, Scott Gardiner, says these results highlight the sector’s positive expectations for the year ahead. However the ongoing effects of the drought are likely to have tempered these projections.

“As the drought dragged on, farmers and other business owners within the sector may have had to reassess the ongoing impact – which places more importance on financial planning.

“In addition to the drought, other pressures such as the high dollar and sluggish export markets, have also posed big challenges for the sector. MYOB recommends SME operators in the primary industry seek the help of an accountant or financial advisor to assist in planning for the new financial year,” says Mr Gardiner.

“Accountants can provide expert knowledge of the industry that will help businesses gain a clearer view of their business and performance. They can benchmark business performance against others within the industry, and build a picture of how other factors could affect the bottom line. They can also apply the lessons of history – for example, from the 2007 drought – in developing strategies to cope.”

72% of SMEs anticipated some level of pressure from price margins and profitability, 61% from interest rates. Fuel prices and cash flow also ranked highly as key pressures the primary sector faces.

The high dollar has continued to be a roadblock for many businesses. However there is optimism that higher international prices for the dairy sector may offset the average $100,000 fall in income that experts are predicting for dairy farmers.

“With this in mind, profitability and cash flow pressures are likely to increase. However, your accountant or financial advisor can assist in creating effective business models and implementing strategies to reduce pressure and allow for a more targeted approach,” says Mr Gardiner.

“Farmers have already begun spending more on feed, and less on items such as fertiliser and maintenance. Implementing strategies around these changes will ease pressure down the road.”

“Employing efficient and up-to-date management systems will also help to alleviate pressures. With the right financial management tools, businesses can take back control in this new financial year.”

“Above all else, carefully planning the year ahead will give you an edge in the recovery. You’ll be better prepared, well organised and ready to make the most of the advantages and opportunities that arise.”

-ENDS-

For further information or immediate comment, please contact:

Kristy Sheppard

MYOB

Tel: 09 925 3560

Mob: +61 407 450 860

Email: kristy.sheppard@myob.com

Gerard Blank

The Agency Communications Limited

Tel: 03 341 5841

Mob: 0275 243 629

Email: gerard@theagencynz.co.nz

About MYOB New Zealand

Established in 1991, MYOB is New Zealand's largest business management solutions provider. It makes life easier for approx. 1.2 million businesses across New Zealand and Australia, by simplifying accounting, payroll, tax, practice management, CRM, websites, job costing, inventory and more. MYOB provides ongoing support via many client service channels including a network of over 40,000 accountants, bookkeepers and other consultants. It is committed to ongoing innovation, particularly in cloud computing solutions, and now spends more than NZ$35 million annually on research and development. In 2013, MYOB expanded its offerings with the acquisition of accounting solutions provider BankLink. For more information, visit myob.co.nz.

About the MYOB business monitor

The MYOB Business Monitor is a national survey of 1,000+ New Zealand small and medium business owners and managers, from sole traders to mid-sized companies, representing the major industry sectors. It has run since 2009, commissioned to independent market research firm Colmar Brunton. This most recent survey ran late January/early February 2013. The Monitor researches business performance and attitudes in areas such as profitability, cash flow, pipeline, technology usage and the government. The weighting of respondents by both geographical location and sector is based on overall market proportions as established by Statistics New Zealand and is drawn from an independent survey group, which includes both MYOB clients and non-clients.