Views on the foreign exchange market trends in 2020

Views on the foreign exchange market trends in 2020 

Turbulence on the foreign exchange market can shake the cableway industry. Bartholet Maschinenbau AG knows how much risk they can bear and when they would rather take advantage of currency hedging – an interview with Roland Bartholet, Chairman of the Board of Directors.

In 1962, Anton Bartholet opened a small workshop in Flums for the repair and refurbishment of agricultural machinery and equipment in the surrounding area. Swiss quality, innovation, and design have led the company to continual growth. Today, Bartholet Maschinenbau AG carries out projects around the world, including in China, South Korea, Russia, France, and Norway. As a result, the company finds itself confronted with numerous currency risks.

Mr. Bartholet, your father started a one-man operation. Today, Bartholet Maschinenbau AG employs over 300 people and distributes its products across the globe. What is your company's recipe for success?

Roland Bartholet*: The continual development of products. However, the most important factor for our success is that we have very skilled experts on site and have been able to hire motivated employees who understand change.

Your chairlifts and cable cars can even be found in South Korea. What was particularly exciting about these projects?

South Korea is one of the most advanced countries in Asia, roughly on par with Switzerland. We met very good and respectable business partners here and that's exactly why it's so exciting to work with South Korea. Moreover, the price level in South Korea is similar to that in Switzerland. That makes it all the more attractive for us to export to South Korea.

Despite your many international projects, you have kept your headquarters in Flums. What makes Switzerland such an appealing location for your company?

Globally, the "Swiss Made" brand is the largest driver for foreign clients to purchase products from Switzerland. With Swiss Made comes the reputation of being precise in both quality and delivery time. We can draw on this good name, the distinction of which even outweighs the disadvantage that we are relatively expensive on the market.

Have you ever thought about outsourcing some of your production abroad?

We operate some production locations in Poland, France, and of course China. We need these locations to complete manual labor that would be too expensive to carry out in Switzerland and so would not be economical in Flums.

How much importance do you ascribe to your projects abroad, relative to the company's total business?

By itself, Switzerland is not a market that we can live from. There are simply too few new projects. That is why we have to look to the international market and see where the economy is currently booming. We want to sell our products where they are needed. Currently, that's Asia.

So in which currencies does your company operate most often?

Preferably in Swiss francs. Or in euros, because we do so much business in the euro zone. But there are also public invitations to tender, which focus on the respective national currency. We often operate in local currencies and must therefore know how to handle them. Accordingly, we attempt to hedge possible currency risks.

How strongly is your company affected by currency risks?

In general, we want to accept as little risk as possible. The degree of currency risk in a given project depends on how quickly we receive payment. That's easier to estimate with a project that takes three months. But if a project is going to take two or three years, the risk is relatively high. The risk is so great that we even have to turn down business sometimes. So currency risks play a significant role when deciding whether to carry out a project.

Assuming you accept an order, how do you hedge your foreign transactions?

If we determine there is a risk, we try to cover the risk using cross trades within the country itself if possible. China, for example, where we sell our products in yuan renminbi and simultaneously purchase other products in the same currency. But that isn't always possible. Russia, for example, is a flourishing country, but they are still unprepared to pay in euros. If we want to cover the risk in Russian rubles, it would be infinitely expensive. Moreover, these are real risks which are difficult to compensate for, since Russia does not offer any products for which we could establish cross trade.

So how have you decided to operate when it comes to Russian transactions?

To bear the risk as a company. We have not hedged our currency risks in Russia at all because it is virtually impossible to do so in the short term. Not over the period of time during which we are supposed to carry out the order, at any rate.

Why not?

The project should be carried out over six to eight months. If we need even two to three months for clarifications and financing, it's too late. The competition is faster. That is why we have to bear the risk as a company. However, there are certainly projects and currencies for which we draw on services and resources from the bank.

And how does Credit Suisse support you with currency hedging in these cases?

We frequently use the bank to hedge transactions in euros. For example, we can flexibly exchange euros and Swiss francs to protect our liquidity. In contrast, things are more difficult for more exotic currencies. Here, Credit Suisse supports us by allowing us to request exchange rates and forward transactions before we sign binding agreements. Sometimes, we are able to hedge the margin; other times, we bear the risk ourselves.

Which bank instruments do you use most often?

If we hedge via the bank, we only do it using forward transactions.

What do you value in your cooperation with Credit Suisse?

Our contacts in the advisory process. Collaboration with our client advisor and the foreign exchange trading specialists functions very smoothly. We have an ongoing exchange. Our CFO is in contact with Credit Suisse on an almost weekly basis. If we have questions, we receive a prompt and knowledgeable response. We feel that the bank is always very stable and is constantly assessing risks. We are glad to count on the experience of Credit Suisse.

Globally, the cableway industry is highly competitive. How does your company manage to remain internationally competitive?

Thanks to our employees. They are prepared to be there for the company and recognize how important it is to give it their all so that high-quality products enter the market in a timely manner. You can sense that they put their whole heart into it. We also work 43 hours instead of 36, which is the custom for our northern neighbors. That's 20 percent more work.

What goals does Bartholet Maschinenbau AG have for the future?

We're very focused on urban transport and hope that our cableway systems will be recognized as competitive products in this field as well. Cableways are a particularly suitable a means of transport in cities, because we can take full advantage of the airspace and free up the streets. Cableway systems are also quite competitive when you look at the investment costs. It is now up to the politicians to think about cableways as an urban means of transport in addition to subways or expensive street car systems.