Working with HSBC's Manchester Commercial Centre, Rowlinson has ensured approximately 90% of its US Dollar requirement is hedged on a 12 month rolling basis, whilst at least three quarters of its currency need is hedged on a two-year outlook.
The company believes the new strategy gives it long-term security against fluctuations to the US Dollar, but also the flexibility to adapt its approach depending on the movement of the currency. As part of the strategy, Rowlinson is using foreign exchange options for the first time to complement its use of forward contracts.
The foreign exchange options used by Rowlinson provides the firm with protection at a specified rate on a specific date in the future, or at a more favourable rate on a proportion of their exposure if exchange rates move in its favour. Under a forward contract, the company must transact at a pre-agreed rate of exchange on a future date.
The company, which switched its full business banking to HSBC last year, worked with Senior International Commercial Manager Neil Ward and Amanda Bradley, Associate Director with HSBC's Global Markets division, on the deal.
Rowlinson Knitwear has been in business since 1935 and prides itself on operating in an ethical way, alongside its unparalleled ability to quickly fill personalised orders across the UK. Today the company holds around 50 per cent of the UK personalised traditional knitwear market, distributing to hundreds of UK retailers, including John Lewis.
The company imports stock from suppliers across a number of countries, including Egypt, Bangladesh and Cambodia and the majority of its import trade is conducted in US Dollars.
Donald Moore, Managing Director of Rowlinson Knitwear Limited, said: "Protecting against foreign exchange risk is a key financial priority for us, particularly given the recent volatility in the currency markets. The US Dollar has been on volatile in recent months and this directly impacts the cost of our imports. As we fix our sale prices 12 months ahead, it's important that our currency needs are hedged alongside that to ensure we can effectively manage costs. This ultimately also benefits the end consumer."
"We worked closely with HSBC to develop this new foreign exchange strategy and I am pleased that we are able to hedge a proportion of our currency requirements as far away as two years from now. That brings certainty to our business and allows us to manage cashflow and planning. HSBC clearly understood our needs and was able to introduce a strategy that met our requirements."
Jason Trigg, HSBC Manchester Area Commercial Director, said: "Establishing a robust foreign exchange strategy is important for any business trading internationally as even slight movements in currency either way can have a significant impact on profits. This foreign exchange strategy reduces Rowlinson's risk and also gives them the potential to increase imports through a larger facility."
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