Kyriba, the provider of cloud treasury and finance solutions, has released its Q3 2023 quarterly CIR (Currency Impact Report). The comprehensive report studies foreign exchange (FX) exposure effects on 1,200 multinational North American and European companies.
The CIR indicates that FX-related impacts reported by these companies totalled $30 billion in Q3 2023, comprising $16.01 billion in headwinds and $13.92 billion in tailwinds. The data, derived from the earnings calls of 1,700 publicly traded entities across North America and Europe, is a part of Kyriba's ongoing effort to illuminate how FX impacts the revenues, earnings and cash flow of global organisations.
Interestingly, the currency impact hasn't considerably changed since the prior quarter. Despite this, market volatility persists. According to Kyriba's Chair and CEO, Melissa Di Donato, "the global organisations must understand the impact that currency can have on their bottom line." She goes on to highlight the need for diligence in managing FX risk due to the looming prospect of interest rate reductions expected later this year.
While the USD has staged a comeback in Q3, Andy Gage, the senior vice president of FX Solutions and Advisory Services at Kyriba, pointed out that this was not sufficient to wipe out the headwinds experienced by many UK and European-based companies. He expects that the strong performance of the GBP and European currencies against the USD at the end of 2023 lends itself to a potentially significant strengthening of European currency headwinds, which could set European multinationals up for record currency headwinds in 2024.
The Kyriba CIR for Q3 2023 detailed the following key takeaways:
Publicly traded North American companies reported $16.01 billion in headwinds, a 20% decrease quarter-over-quarter, and $13.92 billion in tailwinds, up $6.4 million from the last quarter. The average earnings per share (EPS) impact reported by these North American companies in Q3 2023 was $0.05, five times greater than the industry standard MBO of less than $0.01 EPS impact. Most impacted industries include healthcare equipment and supplies, machinery, trading and distribution, life sciences, chemicals, biotech and pharmaceutical.
The currencies most often mentioned were the Euro, Chinese Renminbi, Great British Pound, Canadian Dollar, and the Japanese Yen. Among these currencies, the Chinese Renminbi emerged as the third most volatile currency, weighted by GDP.
Furthermore, European companies reported $8.96 billion in FX-related impacts, approximately 56.6% higher than the previous quarter. Out of the 850 Europe-based multinationals analysed, 12.4% reported headwinds in Q3 2023. Of these companies, 61.9% quantified their negative impacts.
Kyriba's latest Currency Impact Report aims to provide a detailed look at trends in foreign exchange impacts across various industries, offering important insight for organisations navigating the increasingly complex realm of international business.