Report: Currency Volatility in Q313 Caused $3.96bn in Losses

Currency volatility continued to erode significant corporate revenue that could be used for productive purposes during the third quarter of 2013, according to the FiREapps ‘2013 Q3 Corporate Earnings Currency Impact Report’.

The foreign exchange (FX) exposure management solutions specialist reported that the net quarterly impact from currency volatility in the three months to the end of September 2013 totalled at least US$3.96bn in losses. The average currency impact to earnings per share (EPS) was $0.03 – three times higher than the industry standard benchmark of less than $.01 EPS. Currency-related losses for the first three quarters of 2013 totalled US$11.9bn. That figure equates to approximately 319,000 jobs.

Among the key highlights from FiREapps Q3 research:

  • The quantified negative currency-related impact to US-based multinational corporations (MNCs) was US$4.18bn – an average headwind of 1.34%.
  • The top five currencies mentioned as impactful included some ‘usual suspects’: the Brazilian real, the Japanese yen (JPY), and the euro as well as the Australian dollar (AUD) – new to the list in Q2 – and the Indian rupee (INR) – its first appearance in 2013.
  • The top five industries impacted, as ranked by the number of companies in that industry reporting currency impact, were medical equipment and supplies; auto; chemical manufacturing; biotech and drugs; and business services. With the exception of the auto sector, all industries ranked in the top five in previously quarters as well.

FIREapps stressed that there is no reason for corporates to not manage currency risk and repeated its forecast that companies are likely to have to contend during 2014 with a strengthening US dollar (USD).

“In 2014, corporates that don’t take proactive action to manage the consequences of an appreciating dollar will be in the same position next earnings season as companies that haven’t managed the impact of the yen decline: telling investors about the multimillion or even billion dollar earnings losses,” states the report. “Savvy investors take heed: those kinds of impacts are avoidable.”

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