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HOW THE RIGHT INTERNATIONAL PAYMENT SYSTEMS CAN BE THE CATALYST FOR ENABLING FAST-GROWING BUSINESSES

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HOW THE RIGHT INTERNATIONAL PAYMENT SYSTEMS CAN BE THE CATALYST FOR ENABLING FAST-GROWING BUSINESSES

Nick Pedersen, Managing Director of EQ Global.

It’s no surprise that the global economy is labelled – at the most diplomatic level – as ‘volatile’, given the uncertain political and economic situation. What is in fact being described is a deformed structure which is caught in a perpetual trap of boom-bust financial cycles, meaning the global economy is causing concern for businesses as debt ratios rise to vertiginous levels.

As economic and political uncertainty continues to rumble on across the globe post-Article 50 Europe and through Trump’s America, the impact on the cross-border payments landscape is substantial.

But few challenges are presented without opportunities too and there is a pertinent need for businesses to remain vigilant during this period of economic turbulence, minimising the potential risks to operating profit and maximising business resilience in an increasingly competitive climate.

 Hidden charges

First and foremost, a business that is planning to transfer money overseas for the first time, or even an organisation reviewing its cross-border payments processes, should always be aware of any potential hidden charges.

Many businesses fail to check the rates they are being charged per transaction, and for high volume transactions, additional fees can cause a significant dent in profit potential.  As different providers offer variable rates and many lack transparency of the charges incurred, it’s worth having clarity over the process. 

Currency fluctuation risk

While there are palpable benefits to having an overseas base of employees, customers and suppliers, it does expose many businesses to the risks of currency fluctuations.  It is important for businesses to partner with a specialist payments provider which is capable of effectively managing the risks associated with these currency fluctuations.

For example, providers that specifically offer Forward Contracts enable businesses to lock in current exchange rates, enabling them to make foreign currency payments at a pre-agreed rate in the future.

This has two significant benefits: protecting profit margins on sales against currency fluctuations and fixing the physical cost of paying overseas employees. While of course it is impossible to rule out the inevitability of continued currency volatility, especially given the current economic environment, it is possible to mitigate these risks with carefully managed processes. 

Paying overseas employees

In recent years, a significant number of businesses have expanded their global employee base overseas – often a cost-effective solution which also presents the opportunity for a business to acquire more expansive skills across its workforce.

It is imperative therefore that a payments provider possesses not only the technical capability to process high volume payments to different countries and in different countries, but also the in-country knowledge and expertise to process these payments in a timely manner with a near-perfect rate of accuracy – to avoid delays, charges, and the potential reputational damage incurred by a missed or incorrect salary. 

The threat of missing payments

For thousands of businesses across the UK, a delay in a payment can sometimes prove lethal. Not only can a late payment hinder an organisation’s ability to grow successfully, it can also damage business relationships.

Partnering with a payments provider which has the relevant technology capable of preventing payment mishaps with processes such as IBAN verification and bulk file uploading (reducing the requirement for manual data input), is a simple solution which can pay dividends in the long term. 

eCommerce

With the rise of the sharing economy and online marketplaces such as Airbnb and Uber, consumers and businesses worldwide now have a plethora of buying options available at their fingertips. As such, online retailers are always looking to improve their commercial edge, including the ability to take payments across global marketplaces in any selected currency.

Fundamentally, the key to facilitating business growth during a challenging economic climate is to partner with a global payments provider which can handle the ever-growing complexities of the cross-border payments process and can streamline operational efficiency with an all-encompassing solution.

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Stellantis sees rebound in 2021, but chip shortage a worry

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Stellantis sees rebound in 2021, but chip shortage a worry 1

By Giulio Piovaccari, Gilles Guillaume and Nick Carey

MILAN (Reuters) – Low global car inventories and cost cuts should boost Stellantis’s profit margins this year, though a shortage of semiconductors and investments in electric vehicles could weigh on results, the newly-formed automaker said on Wednesday.

The forecast came as Stellantis, created by the January merger of Peugeot-maker PSA and Fiat Chrysler (FCA), reported better-than-expected results for 2020 that sent its shares up around 3% in morning trading.

“Stellantis gets off to a flying start and is fully focused on achieving the full promised synergies (from the merger),” Chief Executive Carlos Tavares said in a statement.

Stellantis is the world’s fourth largest carmaker, with 14 brands including Fiat, Peugeot, Opel, Jeep, Ram and Maserati.

It said 2021 results should be helped by three new high-margin Jeep vehicles in North America and a strong pricing environment there. The U.S. market has driven profits for years at FCA and starts off as the strongest part of Stellantis.

The group’s guidance assumes no more significant lockdowns caused by the global COVID-19 pandemic, which shuttered auto plants around the world last spring.

Stellantis should also get a lift as its starts to implement a plan aimed at delivering over 5 billion euros a year in savings, without closing any plants. Tavares has also pledged not to cut jobs.

But a pandemic-related global shortage of semiconductors, used for everything from maximising engine fuel economy to driver-assistance features, could hurt business.

Auto industry executives have said the shortage should ease by the second half of 2021.

Stellantis said its “electrification offensive” could also weigh on results this year. Automakers are racing to develop electric vehicles to meet tighter CO2 emissions targets in Europe and this week Volvo joined a growing number of carmakers aiming for a fully-electric line-up by 2030.

Stellantis plans to have fully-electric or hybrid versions of all of its vehicles available in Europe by 2025, broadly in line with plans at top rivals such as Volkswagen and Renault-Nissan, although Stellantis has further to go to meet that goal.

The carmaker is targeting an adjusted operating profit margin of 5.5%-7.5% this year.

That compares with a 5.3% aggregated margin last year: 4.3% at FCA and 7.1% at PSA excluding a controlling stake in parts maker Faurecia, which is set to be spun-off from Stellantis shortly.

Tavares achieved an improvement in margins at PSA by cutting costs, simplifying its vehicle line-up and delivering synergies on its purchase of Opel/Vauxhall, a model investors hope he can replicate at Stellantis.

Combined adjusted earnings before interest and tax (EBIT) amounted to 7.1 billion euros ($8.6 billion) last year.

At the end of 2020, combined liquidity stood at 57.4 billion euros and free cash flow at 3.3 billion euros.

A Milan-based trader said the earnings and cash flow were both “well above” expectations.

Stellantis proposed to distribute a 1 billion euro dividend to its shareholders.

It is planning a capital markets day for late 2021 or early 2022.

($1 = 0.8277 euros)

(Reporting by Giulio Piovaccari, Nick Carey and Gilles Guillaume. Additional reporting by Giancarlo Navach. Editing by Mark Potter)

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UK’s DS Smith gains from orders packed and shipped in online boom

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UK's DS Smith gains from orders packed and shipped in online boom 2

By Pushkala Aripaka

(Reuters) – DS Smith expects demand for its paper and fibre-based packaging supplies to continue growing in 2021, fuelled by a pandemic-drive boom in online shopping that will help the British firm deliver annual results in line with expectations.

The cardboard maker, which counts e-commerce firms and consumer packaged goods companies as major customers, is benefiting from heavy spending on packaging materials to ensure items are delivered safely.

Chief Executive Miles Roberts said the COVID-19 crisis had accelerated growth in e-commerce and demand for sustainable products, as consumers stuck at home turned to the internet for everything from daily needs to clothing.

“We are very strongly positioned to continue gaining from this momentum,” Roberts told Reuters, after DS Smith reported strong trading over the Christmas holiday period and saw signs of recovery in demand from industrial customers.

The FTSE-100 firm, whose shares were up about 2% in early trade, has been in the headlines after Bloomberg News reported that rival Mondi was considering making a takeover offer.

Roberts declined to comment on “what other companies may be doing” and said DS Smith’s board was “focused on maximising value for shareholders in whatever form that comes in.”

The company has seen a rise in costs as paper prices climbed but made up for that by charging customers more, it said.

DS Smith supplies products to companies such as Amazon, Nestle and Unilever.

Profit in the six months to October more than halved due to lower prices and weak industrial demand, but the company resumed paying a dividend to show confidence in its ability to ride out the crisis.

Roberts said DS Smith intended to continue paying shareholders on the back of an expected strong cashflow performance for fiscal 2020.

(Reporting by Pushkala Aripaka and Priyanshi Mandhan in Bengaluru; Editing by Anil D’Silva and Edmund Blair)

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Asia growth drives 4% rise in Prudential 2020 operating profit

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Asia growth drives 4% rise in Prudential 2020 operating profit 3

By Carolyn Cohn

LONDON (Reuters) – Prudential’s operating profit rose 4% in 2020, Britain’s largest insurer said on Wednesday, driven by strength in its main Asian business, as it prepares to split off its U.S. operations.

Overall adjusted operating profit from continuing operations came in at $5.5 billion, while Asia adjusted operating profit jumped 13% to $3.7 billion, the company said in a statement.

The life insurer said in January it would split off Jackson, its business in the United States, through a demerger and may raise $2.5-3 billion in new equity, following pressure from activist investor Third Point.

It said on Wednesday that it was making “good progress” on the separation.

Jackson’s operating profit fell 9% to $2.8 billion.

“The proposed demerger will complete Prudential’s structural shift from a diversified global group to a growth business focusing exclusively on the unmet health, financial protection and savings needs of people in Asia and Africa,” Chief Executive Mike Wells said.

Prudential said it would pay a second interim dividend of 10.73 cents per share, and a total dividend of 16.10 cents per share.

Prudential shares were up 0.9% at 14.98 pounds by 0853 GMT. Earlier in the session they hit a near two-year high of 15.10 pounds.

(Additional reporting by Muvija M in Bengaluru, editing by Huw Jones and Jane Merriman)

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