Latest Kyriba Report Highlights Corporate FX Impact

With the US dollar on a sustained bull run, the latest Kyriba Currency Impact Report (CIR) highlights just how much it is potentially costing corporates with US companies in particular in the firing line.

The report, which details the impacts of FX exposures among 1,200 multinational companies based in North America and Europe with at least 15% of their revenue coming from overseas, sustained $49.09 billion in total impacts to earnings from currency volatility. The combined pool of corporations reported $11.82 billion in tailwinds and $37.27 billion in headwinds in the second quarter of 2022.

North American companies reported $34.25 billion in headwinds in Q2 2022, a 134% increase compared to the previous quarter, and a massive 3,583% increase since Q3 2021. European companies reported a 68% percent increase in negative currency impacts, with companies reporting $3.02 billion in FX-related headwinds.

The average earnings per share impact from currency volatility reported by North American companies in Q2 2022 increased to $0.10. These firms indicated the Russian rouble as the most impactful currency, with 33% of companies referencing it as impacting revenues; the Canadian dollar was second at 26.7%, and the euro was third with 20%.

The euro was the currency most mentioned as impactful by European companies on earnings calls, followed by the dollar and rouble.

The top five industries that experienced the greatest impact from currencies in North America were (in ranked order): machinery, trading & distribution, professional services, health equipment & supplies, biotech & pharmaceuticals, and chemicals.

“FX impacts dramatically increased over the past quarter, with $.10 average impact to EPS for North American companies, as global market volatility created a $49 billion hit to earnings due to currency exposures,” says Wolfgang Koester, chief evangelist of Kyriba. “What is more critical today against this backdrop of volatility and uncertainty is the ability for CFOs and risk managers to leverage best practices in enterprise liquidity management, gaining more sophisticated analytics to make FX programs more effective at combating the effects of currency headwinds.

“Multinational corporations with a major FX hit are likely to see bottom line value, or earnings per share, go down,” he continues. “Companies not monitoring and managing their FX exposures with modern industry best practices will be the ones reporting impacts during earnings calls. With the dollar strength at a 20-year high, CFOs need to eliminate EPS at risk, and CEOs need to understand the vulnerability of their balance sheets and income statements to supply chain risks, inflationary pressures, and currency volatility.”