This Pro Talks live interview is made with the support of Spark and BNZ
The chief executive of one of NZ's oldest banks says he is talking with businesses facing new challenges
Kiwi businesses are showing bravery as they tackle these tough times, says BNZ's boss.
Chief executive Dan Huggins, who grew up in Taranaki, says he has been travelling up and down the country talking to customers feeling the pain of high inflation, high interest rates, supply chain delays, labour shortages, and just general uncertainty. Increasingly, the BNZ sees firms struggling for working capital.
He spoke with Newsroom Pro managing editor Jonathan Milne on a live episode of Pro Talks. Huggins tells of visiting companies like Syft Technologies in Christchurch and Whitehall packhouse in Waikato. Both firms are investing to grow their companies, in the face of difficulties like workforce shortages.
"Whitehall Fruit Packers have just invested in quite a lot of automation through their packhouse facilities because they were struggling to get labour, struggling to get the right people to continue their operations. So they've invested to automate, which has allowed them to increase throughput, but also do that with fewer staff.
"I think that's a familiar topic that comes up when I'm speaking with customers: this challenge of staffing. Clearly, there's uncertainty in the market. I think businesses are cautious at the moment. And that's right, in the economic cycle we're going into."
But it's important those of us in business don't talk ourselves down, he says. "They're also really innovative and are finding ways of growing their businesses and in many cases, thriving in this environment. They're cautious. But also brave."
"When I talk to customers who are running restaurants or hospitality businesses, those staffing shortages are much more acute. Because actually they can't open when they want to open." – Dan Huggins, BNZ
The latest Xero small business index shows sales in July fell 1.5 percent year-on-year, dropping into the red. At the same time, inflationary pressures continued with wage growth above 6 percent – and construction and hospitality leading the growth.
BNZ and other banks are talking with their business customers about what their forward earnings look like and how certain they are. "You never want to put yourself in a position where you're growing but putting the business under stress – that doesn't help anybody. But these guys have a great business, they saw the path, they saw what that automation was going to be able to do for them and ... have thrived because of it."
So how realistic is it for companies to invest in growth at times when they face so many headwinds? It's case by case, Huggins says, depending on the business you're meeting with.
"When I talk to customers who are running restaurants or hospitality businesses, those staffing shortages are much more acute. Because actually they can't open when they want to open, they just don't have the staff available to do it.
"Other businesses are expecting to see discretionary spending come off as households are seeing their interest rates going up. We've still got well over half of our portfolio, and I know that's true of other banks, of people who are still to roll from those lower mortgage rates into higher mortgage rates. That'll impact discretionary spending.
"One of the things we've seen lately as a trend is working capital has been a bit challenging – we've started to see payment cycle increase a little bit. So people have needed a bit more funding for working capital." – Dan Huggins
"When I talk to businesses that are more exposed to discretionary spending, people are cautious about what that's going to mean."
For those businesses that are doing it tough, the bank's advice will vary from one to the next. "Generally you're saying, let's understand the cash flow positions, let's understand what's happening. One of the things we've seen lately as a trend is working capital has been a bit challenging – we've started to see payment cycle increase a little bit. So people have needed a bit more funding for working capital."
An increase in the payment cycles means that some businesses are pushing out when they pay their bills, as a way of managing their constrained working capital.
But with the New Zealand dollar low, there are others that are seeing great growth opportunities, particularly where they've got exposure to international markets.
"Then it's, what do we think about those business cases? What markets are you going into? How certain are they? What's that going to mean for cash flow positions? So it just depends on the business."
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