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Negative currency impacts on corporates jumped 31% in Q1

The latest Kyriba Currency Impact Report has shown that North American and European companies experienced an increase in headwinds after the COVID-19 pandemic hit markets in the middle of Q1 2020. North American and European companies reported a combined US$12.21bn in quantified negative currency impacts in Q1 2020, up 37% from the previous quarter.

North American companies accounted for 88% of the impact, reporting US$10.77bn in quantified impacts. European companies quantifying headwinds reported US$1.44bn in negative currency impacts. 

Currency impact on North American corporate earnings 

North American companies reported a US$10.77bn collective loss in Q1 2020, starting a small, but increasing upward trend after a three quarter decline in headwinds. Impacts are likely underestimates as most companies with currency headwinds generally do not report them. The average earnings per share (EPS) impact reported by North American companies in Q1 2020 was US$0.04, four times greater than the industry standard of less than US$0.01 EPS impact and a US$0.01 increase over the previous two quarters. 

After a twelve quarter streak of the euro (EUR) being most referenced as impactful, it moved into second place, with the Brazilian real (BRL) taking its place as 34% of North American companies mentioned it as impactful during Q1 earnings calls. 

In an atypical occurrence, the Mexican peso (MXN) appeared as the third most-mentioned currency in North American earnings calls, and is also the second most volatile G20 currency for the quarter.

Currency impact on European corporate earnings 

European companies reported a 58% increase in negative currency impacts, with companies reporting US$1.44bn in FX-related losses. Again, the impacts are likely underestimates as most companies with currency headwinds generally do not report them. Of the 350 Europe-based multinationals analysed in the Kyriba report, 5% reported headwinds in Q1 2020. Of those, 77% quantified their negative impacts. 

The euro (EUR) and US dollar (USD) traded places in Q1, with the euro being most mentioned as impactful during earnings calls and the US dollar named as the second most impactful by European companies. Similar to North American companies, the Mexican peso (MXN) was also uncharacteristically mentioned by European companies as one of the most impactful currencies. 

Overall, 285 North American and European companies reported currency headwinds in Q1 2020. Of those companies, 252 companies quantified their FX impacts. 

About the report 

The July 2020 Kyriba Currency Impact Report, compiled by FiREapps, a Kyriba company, analyses the reported effects of currencies to North American and European companies’ earnings during the first quarter of 2020. To obtain this information, Kyriba analysed the earnings calls of 1,200 publicly traded North American and European companies as part of a continued effort to provide insight into how FX impacts organisations. The companies included in this data set are large multinational firms doing business in more than one currency with at least 15% of their revenue coming from overseas.

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