The Royal Australian Mint Loses A$4 million In A Year ... By Making Coins...?

The mainstream media covered the recent release of of the Royal Australian Mint (RAM) Annual Report for the 2013 - 2014 financial year, and understandably made some sport of the fact that the RAM “reported a loss, after tax, of $4 million”.

While it seems rather incongruous that an organisation literally in the business of making money might somehow lose money over the course of a year, as always, simplistic headlines don’t always tell the full story.

Although 2013–2014 was described by the RAM as being “a challenging environment”, Australia’s national mint was still able to generate “an underlying operating surplus of $2.5 million before tax.”

How can the past 12 months have been challenging? Apparently the RAM experienced “…a decline in demand for circulating coin in Australia, and a reduction in demand from both the international and domestic market for numismatic and custom minted product.”

Anyone that keeps an eye on numismatic auction results or attends the ANDA trade shows will be well aware that demand for most types of numismatic products (not all, but most) has eased in recent years, so this won’t be earth-shattering news for most folks in the Australian numismatic trade.

I don’t take any comfort from the RAM’s result, however it at least shows that there is some broad cyclical trend at play at the moment, one that at least partly explains our current trading environment.

It isn’t just poor administration, ineptitude, inflexibility, or an outdated business model that is causing the modest results being experienced by professional numismatists in Australia at present!

If a business is able to keep $2.5 million more than they have to pay out, yet still records a $4 million loss, we need to delve a little deeper into the accounts in order to determine where that “loss” occurred.

The Annual Report makes mention of a newly-adopted “Product Life Cycle (PLC) policy.” This policy apparently “…resulted in a higher level of write-offs of slow-moving and obsolete stock … (much of which had been minted in prior years).” In line with the new PLC policy, RAM staff took the following actions:

• any unutilised assets were sold or scrapped; and • the master dies … were independently valued and transferred to the National Coin Collection, … [and] the balance of their value [was] written-off."

The fine details of the annual report don’t reveal anything significant in the new way unsold coins are now treated by the RAM, we can only presume they were held on their balance sheet for longer, and at a higher value, than they will be doing under the new PLC policy.

The CEO commented that there was a lack of “… a significant number of anniversaries and highly engaging themes in 2013–14 …”, clear indication to me that the 50¢ coin struck for the 50th Anniversary of Australian Institute of Aboriginal and Torres Strait Island Studies, nor the $1 coin struck for UNESCO’s International Year of Crystallography were not exactly best sellers…

I look forward to seeing a commemorative coin struck to celebrate at the annual “Clutching At Straws” ceremony that surely takes place in the product development department at the RAM each year. This ceremony is of course most animated in those years when there are no particularly “engaging” historical events to commemorate! Make no mistake, this tendency to try and maintain output in the face of changing market conditions definitely isn’t monopolized by the RAM marketing department, however it is a fairly high profile example nonetheless.

The RAM CEO further stated that “The major numismatic markets of Germany and China were negatively impacted by changes in Government policy…”, which begs the question - just what was that policy change, why was it thought necessary and why did it impact on demand from those two markets?

Unfortunately the Annual Report doesn’t disclose what those changes were unfortunately - I can only think (and this is completely baseless speculation) that it may have had something to do with credit terms, a sale or return policy or some other policy that has been firmed up following the advent of the PLC.

Another notable comment from the RAM CEO was that “In the short term, the outlook for the numismatic product market shows no signs of improvement.” Awesome.

It isn’t unreasonable to presume that a person in charge of an organisation that turns over some $100,000,000 per year and that has assets to a very similar value, is very reliably informed as to the current state of the macro economy and expected levels of disposable income, which indicates that there doesn’t seem to be many rainbows on the horizon for the RAM any time soon, much less for the rest of the numismatic market - fantastic news!

In a move that seems directly in opposition to some suggestions earlier this year that the manufacture of Australia’s coinage be completely outsourced to another country’s national mint, the CEO mentioned that RAM entered into several “additional contracts now signed with a number of Pacific Island nations”. Looks like the outsourcers may have their production outsourced also!

One tidbit of good news for collectors is that the RAM intends to“keep its mintages low” in the coming months. Past times of economic austerity have yielded a number of scarce and even rare Australian coins, and while I don’t believe now is the time to load up on either the 50th Anniversary of Australian Institute of Aboriginal and Torres Strait Island Studies 50¢, nor the $1 coin struck for UNESCO’s International Year of Crystallography, there could well be other decimal commemorative coins that are worth a punt.

Category: Market News