Dollar appreciation benefits Spanish firms

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The US dollar has increased by 18% from the average exchange rate for 2014 to the present level. BekaFinance analysts expect the trend to continue to 1.1 EUR / USD, and should the Fed raise interest rates in the summer, parity could be reached. Markets rarely stop at theoretical valuation levels,” explain the experts.

The Spanish companies with most direct exposure to the US (more than 10% of operating income or EBITDA) are Santander, Acciona, ACS, Iberdrola, Acerinox, FCC, Ferrovial, Ebro Foods, Viscofán, Arcelor, CAF, Carbures, Gamesa, Tubacex, Amadeus, Zeltia, Almirall, and Abengoa Grifols.

The pound has also appreciated by 7.5% against the euro.  Due to the increased interaction between the UK and the EMU, it is logical that the assessment is approximately 50% that of the dollar.

“We hope the trend will also continue in this currency with a similar proportion to what we have seen leading the shift to EUR / GBP 0.7” said BekaFinance experts. Companies with most exposure to the UK are Santander, Iberdrola, Ferrovial and FCC, (excluding Telefonica´s agreement for the possible sale of O2).

There are more doubts about emerging currencies, due to a lack of buoyancy in their respective economies. However the decline in the profitability of the euro could cause some investors turn around in some instances. For example, the Brazilian real- after some hesitation- also looks sets to continue the trend of appreciation. Comparing the current exchange rate, the average appreciation in 2014 of the carioca currency was 7%. Companies with the greatest exposure to Brazil are Telefónica, Santander, Mapfre, Arcelor, Ezentis, Day, Natural Gas, Gamesa, Abengoa, CAF and Viscofán. This currency movement will be important in the quarterly results 2015, assuming that the trend continues or is accentuated.

This development is positive for Spanish companies in three ways: increased competitiveness in exports, rising imports and the effect of consolidation in particular in operating profits of companies that are directly in the markets of those currencies. The last point highlights the fact that any benefit will depend on how firms are funded in these countries and the type of assets they hold, with particular consideration needed as to whether or not the currency risk is covered.  Almost all Spanish companies have significant debt tied to assets, but it will be interesting to analyze the diversification in operating results of Spanish companies in light of these developments.

A mid-level Spanish stock has a high correlation with external factors, as the Spanish market has been repeatedly penalized for the risks affecting peripheral countries. However, in this case, it may prove beneficial.


About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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