FRANKFURT (MNI)- The following is the text of a press release
issued by rating agency Fitch Ratings on Monday.
Further losses on the euro taking the currency towards parity with
the dollar would, in isolation, be mildly positive for the profitability
of European corporates. But only a minority would see a material gain —
including some carmakers and the aerospace industry.
While our corporate forecasts do not anticipate a sharp drop for
the euro, recent falls for the currency mean it is worth highlighting
our view on the exposure of European corporate performance to a
weakening single currency. This analysis focuses on the mismatches
between the currency mix of corporate issuers’ costs and revenues.
A weakening euro would generally be positive for manufacturers, as
they tend to have a larger proportion of euro-denominated costs than
revenue. In particular, aerospace and defence companies such as EADS and
MTU Aero Engines, would benefit from the industry’s convention of
pricing export contracts in dollars.
In the auto sector, premium manufacturers such as BMW and
Volkswagen’s Audi unit would be the main beneficiaries of a falling
euro. These companies have retained a large production base in the
eurozone, while many of their customers are in Asia and the US. French
manufacturers Peugeot and Renault would see a smaller impact because
they still sell most of their cars in Europe.
At first glance, some oil majors such as BP would appear to be
significantly exposed to euro depreciation, since the firm sells around
40% of its products in the eurozone, while costs in the region are very
low. However, euro markets are used to absorbing changes in the
dollar-based oil price and increases would therefore be passed on to
customers. The main negative impact from a falling euro for oil
companies would therefore be the secondary effect of lower demand
stemming from higher oil prices.
This scenario does not factor in the underlying causes of a weak
euro — which could include a slowdown in the eurozone economy negating
some of the currency effects — but it does give a broad order of
magnitude sense of eurozone corporates’ resilience to currency
movements.
–Frankfurt newsroom +49 69 72 01 42; e-mail: frankfurt@marketnews.com
[TOPICS: M$$FX$,M$$EC$,MR$$$$,M$$CR$,MGX$$$,M$X$$$]
