Kyriba's Currency Impact Report (CIR) showed that $11.98 billion was the total impact on earnings from FX volatility. The quarterly report measures the FX exposure of 1,200 US and European companies.
The companies reported $9.86 billion in tailwinds and $2.13 billion in headwinds in the Q3 of 2021. US companies saw greater tailwinds than European firms, which was a +$9.32 billion positive impact and a decrease of 145% from the previous quarter.
European firms reported a +$541 million positive FX impact, which translated into -20% when compared to the previous quarter.
Wolfgang Koester, the Chief Evangelist for Kyriba, said about the report: “Headwinds and tailwinds combine to reveal the vulnerability North American and European multinational corporations’ revenues and earnings per share have to currency movements.
“As the era of low interest rates and, potentially, the strong US Dollar concludes, these quantified impacts are a troubling warning sign as this next environment will become more challenging for CFOs to achieve the industry standard MBO of less than $0.01 EPS impact and protect their balance sheets and income statements from currency volatility .
“CFOs have a long way to go to mitigate risk and include substantial currency gains as part of their earnings revenue.”
Key Highlights from the CIR Report
The Average Earnings per Share (EPS) of US companies in the third quarter of 2021 rose to $0.04, which is 4 times the recommended $0.01 EPS impact.
Additionally, US companies reported $9.32 billion in positive FX impact. The total of the negative currency impact for US companies reached $929 million.
Moreover, the Canadian dollar (CAD) was the currency that had the greatest impact. 33% of US corporations reported that the Canadian Dollar has the greatest impact on revenues. The Euro (EUR) came in the second spot according to 27% of North American firms.
European companies pointed that EUR had the greatest impact on earnings. The Swedish Krona (SEK) came in second, followed by the US Dollar (USD) at the third place.
On top of that, the top 4 sectors that saw the largest impact from currencies in the US are machinery, trading & distribution, professional services, biotech & pharmaceuticals, healthcare equipment & supplies, electronic equipment, and instruments & components.
“Supply chain disruption, currency volatility and inflation are testing CFOs and treasurers’ enterprise liquidity strategies. For the remainder of 2022, execution of applicable best practices to protect shareholder value will be a large driver for growth and necessary risk reduction.
“CFOs need to demonstrate to their investors and Boards how to best optimize enterprise liquidity in this new economic environment. They are going to be expected to demonstrate strong balance sheet and cash forecasting precision with various cash flow scenarios,” added Koester.
All companies in the CIR report conduct their operations with more than one currency. 15% of the generated revenue is from countries that are located outside of their headquarters.
