Tecelagem Kuehnrich, a large Brazilian manufacturer of bed, bath and table textiles, is laying off 499 employees out of 5,000 on grounds the country’s appreciating currency has dented export profitability.
“Today I sell in international markets and receive the same amount in dollars [as in previous years], but I fetch fewer reais,” says Marcello Stewers, director of market relations at Teka, as the company is known in Brazil.
He adds his costs are entirely in reais, while exports make up as much as 38% of Teka’s revenues. Moreover, currency hedging isn’t capable of protecting all of the company’s dollar-denominated revenue and is too extensive a product, Stewers says.
The real strengthened to 2.13 per dollar on January 24, 2006 from 3.59 four years earlier.
Teka exports to riskier customers, when not paid at sight, are backed by letters of credit, while older clients often buy on open account.
Foreign sales are made with an average of 60-day tenors and are frequently financed by adiantamento de contrato de cambio (ACC), or advance payment on foreign exchange contract. ACC is offered by many banks in Brazil and its cost has fallen in recent years, Stewers comments without elaborating.