An interim report by the regulatory Apple & Pear Marketing Board has posed an interesting question mark over the right of fruit exporter Enza to pass on NZ$54m (US$22.3m) in foreign exchange (forex) losses to aggrieved growers.
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Some of the forex options entered into by Enza before it underwent corporatisation early last year were actually in breach of regulations, said the report, because they involved non-core operations. Enza could in fact have capped the losses at NZ$28m if it had not taken out further options in the misguided belief that the exchange rate would become more favourable.
The report concluded: “The package contained sold call options that increased exposure rather than reduced risk and were therefore not a hedging instrument. They were therefore not necessary to the core business and, as they represented more than a minimal risk for suppliers, they represent a breach.”
Enza, who wants to repay the losses by debiting growers’ accounts by NZ$4.50 per carton, is adamant that the report only confuses the issue. The company may make submissions to the board during the next fortnight.
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