FX Volatility Leads to Third Largest Quantified Earnings Impact to Date as CFOs Continue to Struggle with Currency Risk
Kyriba’s Currency Impact Report (CIR), a comprehensive quarterly report which details the impacts of foreign exchange (FX) exposures among 1,200 multinational companies based in North America and Europe with at least 15 percent of their revenue coming from overseas, experienced $32.21 billion in total impacts to earnings from currency volatility. The combined pool of corporations reported $30.22 billion in FX-related headwinds and $1.99 billion in tailwinds in the fourth quarter of 2022. Out of these impacts, North American companies reported $28.94 billion in headwinds, and European companies reported $1.28 billion in headwinds.
“Rising interest rates and continued FX volatility are putting treasurers and CFOs in a very tenuous position”
“Rising interest rates and continued FX volatility are putting treasurers and CFOs in a very tenuous position,” said Andy Gage, SVP of FX Solutions and Advisory Services at Kyriba. “Corporate treasury teams are realizing they don’t have good visibility to what their company’s true exposures are, which costs billions in losses to their earnings and cash flow. It is crucial for CFOs and Treasurers to improve FX risk management practices to protect cash flow and liquidity in today’s striking economic environment.”
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Highlights from the May 2023 Kyriba Currency Impact Report include:
- Publicly traded North American companies reported $28.94 billion in headwinds.
- This is up 84% from YoY.
- Publicly traded North American companies reported $0.59 billion in tailwinds.
- This is up $0.33M from last quarter.
- The average earnings per share (EPS) impact reported by publicly traded North American companies in Q4 2022 was $0.05.
- This is up $0.01 from YoY.
- Publicly traded North American companies indicated the euro (EUR) as the most impactful currency, with 33.3% of companies referencing it as impacting revenues; the Canadian dollar (CAD) was second at 26.7%, and the Japanese yen (JPY) was third with 20% of North American companies identifying it as impactful.
- The dollar was cited as one of the most impactful currencies by publicly traded European companies on earnings calls.
- The top five industries that experienced the greatest impact from currencies in North America were (in ranked order): professional services, biotech & pharmaceuticals, machinery, trading & distribution, chemicals, health equipment & supplies.
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“The bottom line is that multinational corporations must have good analytics to understand where their exposures are coming from. When you have the right technology, you can identify problems and develop the information that CFOs require to reduce the impact of currency on their balance sheets, income statements and cash flow,” said Gage.
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