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US corporates rack up FX losses of US$11bn in three months

Currency volatility was responsible for significant impacts on the revenues of US-listed multinational corporations, costing them more than US$11.5bn in Q3 2019, according to the new Kyriba Currency Impact Report (CIR), which details the impact of foreign exchange (FX) among 1,200 companies in North America and Europe. This is the fifth consecutive quarter of over US$10bn in losses for North American companies - the longest such stretch in at least a decade.

“Waiting for currency volatility to calm down has been a US$98bn mistake for CFOs of multinational corporations,” said Wolfgang Koester, chief evangelist for Kyriba. “CFOs who dismissed this problem as a temporary wave of market drama have unnecessarily cost their shareholders and need to reconsider their strategy. Unless they utilise the tools now available to gauge and manage currency exposures accurately and in real-time, those that remain exposed to currency movements are at the mercy of currency markets to determine their financial success. CFOs and corporate treasurers should not be playing roulette with corporate cash and equity.”

The average earnings per share (EPS) impact reported by North American companies in Q3 2019 was US$0.03 - three times greater than the industry standard MBO of less than US$0.01 EPS impact. For the eleventh consecutive quarter, North American companies indicated the euro as the most impactful currency, with 46% of companies mentioning it during their Q3 earnings calls, according to the report. Medical equipment and supplies and the business services industries experienced the greatest impact from currencies, as those industries continue to be affected by Brexit and other volatile geopolitical events around the globe.

In Europe, currency impacts are less problematic

Publicly traded European companies that qualified to be monitored in the Q3 2019 report indicated a collective currency loss of US$750m, snapping a streak of eight consecutive quarters of US$1bn impacts. For the first time in three quarters, the euro was not the currency most mentioned as impactful by European companies during Q3 2019 earnings calls. This distinction belonged to the US dollar, which topped the euro, followed by British sterling, and the Brazilian real.

The CIR details the impact of foreign exchange exposures among publicly traded companies. In addition, all companies in the report do business in more than one currency, with at least 15% of their revenue coming from other nations.

 

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