Investor Relations

Multinationals Hit Hard by Currency Volatility in Q3

The U.S. dollar rose 7.7% against the euro in the third quarter, widely affecting North American companies.
Matthew HellerDecember 22, 2014
Multinationals Hit Hard by Currency Volatility in Q3

After a relatively quiet second quarter, currency volatility hit hard in the third quarter, with negative currency impact costing North American and European multinationals a total reported dollar value of $8 billion, according to the latest FiREapps survey.

In FiREapps’ latest “Currency Impact Report,” the technology consulting firm said 23% of 1,200 multinationals mentioned in their earnings calls that they had suffered a negative currency impact in the third quarter. For North American firms, the average reported negative impact amounted to a three-cent reduction in earnings per share.

Euro volatility was most commonly cited as having an effect, followed by the Japanese yen and the Russian ruble. Earlier this week, the Russian central bank hiked interest rates to prop up the ruble.

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“It’s not surprising that a lot of North American CEOs talked about the euro, but the frequency is a bit surprising,” FiREapps CEO Wolfgang Koester told Treasury & Risk. “It was mentioned on 72 earnings calls, whereas the currency in the number-one spot is usually mentioned by 15 to 20 companies.”

“It’s quite amazing that you have CEOs of these very large corporations talking about it,” he added.

In the third quarter, the dollar rose 7.7% against the euro. Companies that “aren’t managing the risk will likely see continued impacts in the fourth quarter,” FiREapps warned, noting that the dollar has been up as much as 2.05% against the euro so far in the fourth quarter.

The five industries in North America most impacted by currency in the third quarter were medical equipment and supplies, electrical instruments and controls, chemical manufacturing, auto and truck, and miscellaneous capital goods.

FiREapps said the $8 billion in quarterly revenue eroded by currency volatility equates to 640,000 jobs. “Currency impacts continue to erode significant revenue that could otherwise be used for productive purposes,” it said.