Case Study
Streamlining Forex Strategies for a Manufacturing Business
At a Glance
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Company Background and Overview
A manufacturing company importing 10% of its turnover from China and exporting 45% of its sales to the USA, Europe, and Africa faced challenges managing currency risk across multiple markets. Timing differences and complex forex requirements often made it difficult to achieve consistent profits.
By partnering with Valufin, the company implemented a tailored forex strategy that provided full visibility and control over currency transactions. Using Valufin’s Forex Risk Manager (FRM) portal, the finance department gained 24/7 access to tools for planning payments, managing exposures, reviewing deals, and reconciling transactions in the Balance Sheet and Income Statement.
Valufin went beyond just managing the forex transactions. They negotiated competitive rates, monitored the market daily for opportunities, and executed transactions at optimal times. With Valufin’s expertise, the company was able to protect margins, optimise its import/export operations, and benefit from favourable exchange rates.
Additionally, Valufin played an integral role in the company’s export pricing strategy and reporting, ensuring that the business had accurate accounting entries and that the Board of Directors received regular, clear reports on currency activity.
As a result, the company improved its net profit by £1,113,552, boosting total profit from £5,833,300 to £6,946,852. This represented a 19.09% improvement in net profit, increasing the net profit margin from 11.67% to 13.89%—a major financial gain that continues to drive the company’s success.
01.
The Challenge
Managing currency risk across multiple markets posed a significant challenge for the finance department. There were currency opportunities to net off common USD values, but due to timing differences and fluctuating market conditions, these opportunities were often missed.
The company struggled to ensure that they were transacting at optimal rates, and forex risks associated with import and export activities were affecting the company’s bottom line. Without a proper forex strategy, currency volatility and inefficiencies in handling foreign exchange transactions were leading to profit losses. The company needed a system that provided full visibility into transactions, allowed for real-time market responses, and minimised currency risks.
02.
The Solutions
Valufin stepped in to provide a tailored, full-service forex strategy that addressed the company’s specific needs. The solution included:
- 24/7 access to Valufin’s Forex Risk Manager (FRM) portal, which provided the finance department with full visibility over transactions, enabling them to plan payments, update exposures, review deals, and reconcile balances with ease.
- Daily monitoring and market analysis by Valufin, which allowed the company to respond proactively to currency market fluctuations. Valufin identified the best times to buy or sell currencies for imports and exports.
- Rate negotiation and transaction management by Valufin, ensuring the company received the most favourable rates by choosing the right providers and products.
- Strategic support for the finance department, helping align export pricing strategies, define risk appetite, and report currency activity to the Board.
- Comprehensive accounting support, ensuring that all transactions were reflected accurately in the Balance Sheet and Income Statement.
03.
The Outcomes
The company significantly improved its financial performance by implementing Valufin’s forex strategies and having full access to the Forex Risk Manager (FRM) portal.
- Profit Increase: The company’s net profit improved by £1,113,552, growing from £5,833,300 to £6,946,852.
- Profitability Boost: The net profit margin increased from 11.67% to 13.89%, representing a 19.09% improvement.
- Improved Efficiency: The finance department gained better control and transparency over forex transactions, saving time and enabling them to focus on other business priorities.
- Risk Mitigation: By timing transactions optimally and using Valufin’s market insights, the company was able to reduce currency risks and protect its profit margins in both imports and exports.
In Summary
Valufin’s proactive, tailored forex strategy provided the manufacturing business with the tools and expertise needed to navigate the complexities of currency risk management. By delivering 24/7 visibility, expert rate negotiation, and strategic market timing, Valufin helped the company achieve a significant improvement in profitability while ensuring full control over forex transactions.