Business case study: P&M Metals

P&M Metals have been clients since 2008, frequently making exchanges from euro to Sterling. As a UK exporter of metals, the pound’s weaker position against the euro has been in their favour for the last few years. But since hitting a low point in 2013, Sterling has managed to claw back 11% against the euro, bringing it to a two-year high against the euro.
 
While this may have been good news for importers, it could have spelled disaster for exporters like P&M Metals if they hadn’t handled their currency risk so effectively. It’s not just SMEs that need to manage their currency exposure to effectively protect themselves against fluctuations, top UK multi-nationals have lost £1.5 billion due to the soaring pound.
 
Burberry recently became the latest FTSE 100 company to warn that the currency markets were going to crimp its results, joining a long list including retailer Mothercare, WPP, Pearson, chemicals group Croda, defence group Smiths, Rolls-Royce and brewer SABMiller.
 
In the face of the climbing Sterling, P&M Metals took advantage of the situation and used forward contracts to protect their income derived from exports. As MD Phil Radcliff says, "The business is risky enough, it’s such a comfort to have the added risk of exchange rates fluctuations taken away by hedging."
 
P&M hedged €605,000 into GBP in the first part of 2014 in five separate forward contracts, this meant they achieved an average rate of 1.2130. Over the year the pound continued to steadily climb to hit a two-year limit of just under 1.27. During this period the overall risk on the €605,000 was £19,500, by hedging the risk P&M Metals managed to save £7,000.
 
For SMEs exporting to multinationals with overseas currency exposure it is clear that a focus on foreign exchange risk should be taken seriously. We offer a number of services to help customers hedge their risks such as forward contracts and options.

 
We’d love to hear about your business and how you’ve profited from forward contracts, or limit orders or maybe how multiple payments have streamlined your international operations. So if you’d like your business to feature as a case study, please get in touch.