A report from NCB Stockbrokers has looked at the effects of a 10% drop in the fall of the US dollar against the euro on companies listed on the Irish Stock Exchange. The dollar has so far fallen by 6.5% against the euro this year.
NCB says some companies will be affected by what it calls translation exposure, which means they will report lower earnings but will not see any impact on their underlying cash flows.
It says the greatest impact of the dollar fall would be felt at companies such as CRH, which could see earnings drop 4-5% as a result. It says Glanbia, IAWS and Kerry would also be affected by 3-4%.
Other companies would be hit by 'transaction exposure', where underlying trading is affected by a weaker dollar. NCB says Waterford Wedgwood's earnings could be lowered by 11% as a result of a 10% dollar drop.
But NCB says other companies would benefit from the lower oil prices which result from a weaker US currency. It says earnings at Aer Lingus and Ryanair would benefit by 15% and 20% respectively from a 10% drop in the dollar, though this could be offset by a further rise in oil prices. Fyffes would also incur lower costs from a weaker dollar.
NCB's report points out that Waterford, Aer Lingus, Ryanair and Fyffes have dollar hedges, but these would only delay the effects of a weaker dollar for a period of time.
