Computer hardware distributors under pressure from volatile rand

[TheMightyQuin]

I actually ASKED you how it worked.

And then apparantly, I commented too soon for you ?
Because there is a time limit ?
I offered to ask you tomorrow rather?

I look at the posts in think 'who hurt you so much?'

Is this all you have now? Just accept it...you know less than me about distro's and forward cover. It's not a bad thing...I'm sure there are things that you know more about than I do.

The problem with MyBB and the internet in general is that there's always someone like you...

 

[Dolby]

you know less than me about distro's and forward cover.

Yea ... that's why I asked you ?
And gave you the scenerios ?
Add questioned how they work?

You're a buyer ... I could never compete with that!

 

[Dolby]

I don't know more "than everybody else"....just you.

Clearly

The ROE has zero NEGATIVE impact on them...

 

[TheMightyQuin]

Yea ... that's why I asked you ?
And gave you the scenerios ?
Add questioned how they work?

You're a buyer ... I could never compete with that!

Clearly

Shame...and you say that I am the one that's upset? Hahaha...jirre. Just listen to yourself.

Here's a challenge Mr Expert...answer me this:

HOW does ROE have a negative impact on a distributor? Since this is what YOU are harping on and on and on and on about....

 

[Dolby]

HOW does ROE have a negative impact on a distributor?

Oh it doesn't because forward cover makes everything lovely and magical again

 

[capd]

 

[TheMightyQuin]

Oh it doesn't because forward cover makes everything lovely and magical again

Ok that's settled then. I'm glad you finally came to your senses.

I find it interesting, but not surprising, that you answer my question with sarcasm and snide, instead of an actual counter or proper response.

PS. remember to also take on @quovadis and @rh1 who both confirmed my initial comment with their own posts....I'll wait.

 

[rh1]

@TheMightyQuin

The below are an hour later and they've dropped.

A 3 month forward cover was R19.03 and now R18.99 .


View attachment 1722397

Remember accountants types love certainty, a forward exchange contract gives them that. They can then budget with certainty. I.e. we definitely be certain what they going to pay.

We going to R1500, and not R1200 to R1800.

 

[Dolby]

Remember accountants types love certainty, a forward exchange contract gives them that. They can then budget with certainty. I.e. we definitely be certain what they going to pay.

We going to R1500, and not R1200 to R1800.

I'm with you - they do.

But going on what I said upfront, that locked in rate is still going to be subject to exchange rate. They help - but ROE isn't going to magically disappear.

Order #1 placed today with forward cover locked @ R18.50
Order #2 placed a week later with forward cover locked @ R18.70
Order #3 placed a week later with forward cover locked @ R19.00

And there are other things :

The rate could drop to lower than what you locked in at
The items could be delayed at any point & the locked in date missed / renegotiated
Often, the choice of buying forward cover is related to whether it's general stock or a commited order
Also, whether to absorb costs or pass over is also related to the type of product & even the customer

But look - @TheMightyQuin is an actual buyer ... so I may be totally of the mark

 

[Dolby]

.

Also let's assume that they simply tack on a margin to whatever the landing price is.

In a case where they (a distributor) needs to pay the supplier R5m today - but it will only be recouped in 3-4 months time?
That's an impact on their cash flow

 

[rh1]

I'm with you - they do.

But going on what I said upfront, that locked in rate is still going to be subject to exchange rate. They help - but ROE isn't going to magically disappear.

Order #1 placed today with forward cover locked @ R18.50
Order #2 placed a week later with forward cover locked @ R18.70
Order #3 placed a week later with forward cover locked @ R19.00

And there are other things :

The rate could drop to lower than what you locked in at
The items could be delayed at any point & the locked in date missed / renegotiated
Often, the choice of buying forward cover is related to whether it's general stock or a commited order
Also, whether to absorb costs or pass over is also related to the type of product & even the customer

But look - @TheMightyQuin is an actual buyer ... so I may be totally of the mark

What I tried to explain is

You buy stock @$10 per item. 3 times in a month.

You agree with the supplier, you will pay 60 days after statement date.

So at the month end, they send you a statement you owe them $30k.

Since you forecasted that you buy $30k worth of stock for that month, you enter into a FEC to buy on a specific date $30k from a bank at a specific rate. Thus, all the daily changes are ignored/removed.