Boating Industry

February 2016

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February 2016 | Boating Industry | 27 [ Big money ] aluminum from a mine in Canada. It may then form the raw aluminum into a cleat, seat base or other piece of boat component, then sell it back to a Canadian boat manufacturer like Princecraft, Kingfisher or Campion Marine. The boat subsequently built with that product might, in turn, wind up being sold to a dealer in the U.S., meaning that original piece of aluminum will have crossed the same border three times before it even arrives on the showroom floor. In each of those three instances, its price will be directly impacted by currency exchange rate fluctuations. Prior to NAFTA, it would have been taxed three different times as well. The same scenario exists for product manufactured in Mexico, which might be built from raw materials sourced from the U.S. or Canada, and ultimately sold back to American or Canadian dealers. The potential for currency exchange rates to impact margins compounds if those products are subsequently exported to customers in Europe, Asia, the Middle East or South America. Every time a product crosses a jurisdictional line, its profitability will be slightly enhanced or eroded by currency exchange rates. A global currency Because the U.S. economy yields such massive economic clout, the U.S. dollar long ago became the de-facto currency for a number of businesses worldwide, regardless of where they're located. Operating in U.S. currency on both sides of the balance sheet is one way for companies located abroad to help protect their margins from higher costs associated with exchange rate variations. Because the dollars on the sale side are always larger than on the purchase side, the theory is that one will still be able to realize a profit regardless of any currency shift. While it may be tempting for foreign distributors to monitor daily currency rates and try to buy when the exchange is most favorable, the cost of warehous- ing and carrying goods in inventory for long periods of time may negate any actual savings. It also increases the risk of loss to obsolescence, when a new product lowers the value of existing inventory. The year ahead Economically speaking, 2015 was a good year, both in the U.S. and for the most part, worldwide. In October, the International Monetary Fund (IMF) released its World Eco- nomic Outlook, which forecasts the global economy to expand by 3.6 percent in 2016, up from 2015's 3.1 percent growth. Growth in Europe is expected to rise from 1.8 percent in 2015 to a healthy 3.4 percent in 2016 as those economies continue to rebound. Increases on a similar scale are forecast for Latin America and the Caribbean. The Organization for Economic Cooperation and Development (OECD) is also showing a positive global growth forecast of 3.6 percent, even in light of growing concerns over volatility in China's stock market. OECD is fore- casting softer growth in Europe, at 2.0 percent, and notes that the higher value of the U.S. dollar should be offset in trading to some degree by contin- ued low interest rates. Closer to home, Mexican economic growth is solid, with low inflation and low unemployment. And in spite of oil prices currently sagging in the range of $42 a barrel, Canada is forecast to exhibit stronger growth in 2016 on the strength of a growing manufacturing sector. Here in the U.S., importers will continue to enjoy the strong purchasing power of the U.S. dollar, while manufacturers who export should see price sen- sitivity begin to decline as a result of overall economic growth in key markets. U.S. COMPANIES REPORT STRONG METS With the European boating market in recovery, the 2015 METS show set records for attendees and exhibitors in November. And even with a strong dollar making exports more challenging, U.S. exhibitors at the Amsterdam show reported strong activity. Show organizers announced a final attendance of 21,953, representing a 4 percent increase over the 21,083 who attended METS in 2014. The figure marks an all-time attendance record for the show, in its 28th year. METS also opened with a record number of exhibitors, with 1,385 companies exhibiting a diverse range of components and accessories. This figure included more than 200 first-time METS exhibitors. Charles Sweet, CEO of Deerfield Beach, Fla.-based Bennett Marine, said the show was very busy and "overwhelmingly positive." "It gives us an opportunity to see many of our international partners in person, under one roof, but [was] a wonderful opportunity to meet with new customers as well," he said, noting that his staff never even had time to take a lunch break. Aquatic AV's Robert Fils described this year's METS as exceeding expectations. "With everything you hear about the European economy still lagging we didn't expect the level of activity" we saw, said Fils. "We're quite surprised, really. There's been a lot of interest from prospective new customers." Jason Gardner, CEO of Melbourne, Fla.-based SeaDek, said the company had a "great show." "[We spoke] to customers from literally every continent," he said. "Even if the economy in Europe hasn't returned to full strength, people are genuinely excited and positive, and they're looking forward to growing their business." The largest U.S. pavilion – with more than 80 companies – in the show's 27-year history attracted unprecedented levels of traffic, according to exhibitors and show organizers alike. "We do a lot of work to help our members grow their export business, and it is gratifying to see them achieve success," said NMMA and ICOMIA President Thom Dammrich. "METS is obviously an important event for manufacturers who export, and the fact we have about 180 American exhibitors at the show this year speaks to that. There are buyers here from throughout Europe, South America, the Middle East, South-East Asia, and all around the world."

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