Kyriba’s Currency Impact Report: Multinationals’ FX Impacts Surge to $24 Billion

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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, reveals $24.03 billion in total impacts to earnings from currency volatility.

The combined pool of corporations reported $7.57 billion in tailwinds and $16.46 billion in headwinds in the first quarter of 2022. North American companies reported $14.66 billion in collective headwinds in Q1 2022, a 221% increase compared to the previous quarter, and 1476% increase since Q3 2021. Conversely, European companies reported a 17% percent decrease in negative currency impacts, with companies reporting $1.80 billion in FX-related headwinds.

“A strong US Dollar may reduce inflationary pressures over time, but currently FX volatility is wreaking havoc on the overseas revenues of multinationals,” said Wolfgang Koester, Chief Evangelist of Kyriba. “The combination of a strong dollar and continuous increased currency volatility are clear signals to CFOs and Treasurers, indicating the need for faster, more refined financial controls. Any company that has currency impacts in excess of 1 cent EPS should resolve the underlying exposures with best applicable practices. While the CIR focuses on the largest US and European corporations, they are not the only corporations who feel the effects of a strong US dollar.”

Highlights from the July 2022 Kyriba Currency Impact Report include:

  • The average earnings per share (EPS) impact from currency volatility reported by North American companies in Q1 2022 decreased to $0.03 — three times greater than the recommended standard of $0.01 EPS impact.
  • Publicly traded North American companies that qualified to be monitored in the Q1 2022 CIR reported a combined $14.66 billion in headwinds, and $522 million in tailwinds.
  • North American companies indicated the Russian ruble (RUB) as the most impactful currency, with 33% of companies referencing it as impacting revenues; the euro (EUR) was second with 27% of North American companies identifying it as impactful and the Chinese yuan ranking third.
  • The ruble was the currency most mentioned as impactful by European companies on earnings calls, followed by the Swedish krona and the U.S. dollar ranking third.
  • The top five industries that experienced the greatest impact from currencies in North America were (in ranked order): machinery, trading & distribution, & healthcare equipment & supplies, professional services, life sciences tools and services and electronic equipment, instruments & components.

“An increasing number of equity analysts and board of directors recognise that CFOs actually can manage currency risk properly. Since the turn of the century, many corporations have been leveraging technology to gain accurate and faster visibility to their currency risk and the underlying exposures. However, the July 2022 CIR data, shows that many corporations still do not. CFOs need to think about valuations and create more confidence in earnings by eliminating EPS at risk,” Koester said.