Currency Volatility Costs Hit Record $33.9B

"Corporates are seeing more significant sustained negative impacts than at the height of the euro crisis," FiREapps says.
Matthew HellerApril 12, 2016

Currency headwinds continue to batter North American multinationals, with the average negative impact on earnings per company reaching a record $217 million in the fourth quarter, according to a new report by FiREapps.

The consulting firm said a record 357 companies reported currency headwinds in North America, a 66% increase on the fourth quarter of 2014 and the second quarter in a row in which more than 40% of those surveyed had negative impacts.

For the 156 companies that quantified negative impact, currency headwinds totaled a record $33.94 billion, a 76% increase on the third quarter. The average impact per share was $0.07, down on the $0.12 impact in the third quarter but still well above the $0.01 objective that multinationals have set for their foreign-exchange managers.

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European companies reported $2.91 billion in negative impact, with an average of $323 million, the second-highest on record.

“Corporates are seeing more significant sustained negative impacts than at the height of the euro crisis” in 2012, FiREapps said.

The five currencies mentioned most often in the North American corporates’ fourth-quarter earnings calls were the euro, Brazilian real, Canadian dollar, Japanese yen, and British pound, with the euro being particularly impactful. In Europe, the U.S. dollar and the Chinese yuan made the list of currency culprits for the second quarter in a row.

The U.S. dollar was up 2.8% against the euro and 3.9% against the Canadian dollar in the fourth quarter.

“Corporates are no longer only (or even predominantly) impacted by the top two or three currencies to which they’re exposed; corporates are now impacted by currencies from every corner of the world,” the report noted.