FiREapps: Continuing Global Currency Wars Impact on US Multinationals

The global currency war continued to rage in the first quarter of 2013, with competitive devaluations worldwide continuing to significantly impact US-based multinational corporations (MNCs), according to FiREapps.

The group, which specialises in foreign exchange (FX) exposure management solutions estimates in its latest corporate earnings currency impact research that the cost to them in revenue losses during Q113 was at least US$3.67bn

FiREapps adds that currency battles that began in Asia have incited battles in Latin America, as the ripples from competitive devaluation in the world’s third-largest economy spread. Q1 saw significant negative impacts from the Japanese yen (JNY) and from a number of Latin American currencies. Midcap companies with annual revenue of US$500m to US$2bn were also hard-hit, most significantly by the yen.

While the total negative top line impact was significant at US$3.67bn, even more striking is the impact to companies’ earnings per share (EPS), which averaged three cents. In an environment in which treasurers have performance objectives of no greater than once cent EPS impact, three cents is large and material. Currency impacts alone made companies miss their low end of EPS guidance.

FiREapps adds that the total of those impacts are likely to be underestimates. It is almost certain that companies that faced currency headwinds did not specifically point them out, while of the total number of companies that did report impacts, only 46% of them actually quantified the impact. The research found that in Q113 213 out of 800 US MNCs reported a negative revenue impact from currency fluctuations. Of those, 97 companies quantified negative currency-related revenue impact.

Figure 1: US Companies Reporting Negative Currency Impact.

FiREapps Figure 1 Q113 report

Source: FiREapps.

Figure 2: Size of Reported Negative Currency Impact.

FiREapps Figure 2 Q113 report

Source: FiREapps.

FiREapps Table Q113 Currency Impact Table

Source: FiREapps

Figure 3: Top Five Currencies Mentioned During Earnings Calls.

FiREapps Figure 3 Q113 report

Source: FiREapps.

Figure 4: Midcap Companies Reporting Negative Currency Impact.

FiREapps Figure 4 Q113 Report

Source: FiREapps.

Figure 5: Companies Receiving Analyst Questions on Currency Impact.

FiREapps Figure 5 Q113 report

Source: FiREapps.

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