A Welsh glass recycler, whose unique process means its output is in demand all over the world, is confident that its business objectives will not be put on hold in light of political and economic uncertainty, as a result of establishing a robust foreign exchange (FX) strategy.
GlassTech Recycling Ltd, an exporter that has developed an innovative technique to remove contaminants from used glass so it can be remelted into new glassware, sought the help of currency market experts Godi – previously OSTCFX – to ensure its bottom line will not suffer as a result of market volatility.
The dynamic and growing business is based in a custom-built plant in Swansea Docks, perfectly situated to export to the world. Yet GlassTech, like many British exporters, has been faced with immense uncertainty of late, making pricing exports difficult to manage.
Political developments such as the triggering of Article 50, followed by Prime Minister Theresa May’s surprise announcement of a snap general election set for June, have amplified the ambiguity surrounding what Brexit will mean for British businesses – especially those that export to EU countries.
GlassTech exports to countries including Portugal, Spain, Italy and the Netherlands. But it has also started to export beyond Europe, with enquiries from Dubai, Chile, India and China.
Although promising for the business, exporting means managing FX, and the higher the volumes, the greater the risks. As Godi highlights, if the value of the pound should rise, or the other currency fall, between the price being agreed and the goods delivered, GlassTech could take a major hit, with potentially devastating implications for the company.
Karen John, managing director of GlassTech, said she was not willing to gamble the future of the company on an uncertain FX market:
“I know all there is to know about glass, but foreign exchange is a different matter. It’s completely alien to me. People just assume their bank will offer them the best rate but it was not so forthcoming in my experience,” Karen commented.
Upon seeking a second opinion from Godi, she discovered not only were better rates available, but Godi helped her understand which products and strategies would be most beneficial for GlassTech.
Brett Thomas, head of dealing at Godi, explains:
“Like all exporters, GlassTech faces a degree of foreign exchange exposure in the window between taking an order from abroad, manufacturing the goods and actually shipping them. That’s why a robust foreign exchange strategy is advisable to hedge against the risk of fluctuation.
“We suggested Karen use a time-option forward, which secures an exchange rate for a future date, but with the flexibility to draw down any value up to the settlement date. That gave her the ability to budget with certainty about the costs of shipping and the money coming in.”
Paul Langley, managing director of Godi, added:
“Unlike a bank, which deals with one transaction at a time, Godi consider its clients’ long-term interests. We also educate clients through taking the time to explain how foreign exchange works. GlassTech now has the confidence to price exports globally, secure in the knowledge there is a strategy available that will protect it from adverse currency fluctuations.”