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Strong Dollar Six

March 28, 2016

The strong U.S. dollar can be joyous or full of despair, depending on your point of view.

For vacationers, the strong dollar is great because it goes further overseas.

 

But what does the strong U.S. dollar mean for businesses? This is where the despair can set in. The dollar, which has appreciated 15 percent against foreign currencies, is killing profits for many large U.S. multinational companies.

 

A strong dollar makes it more expensive for domestic firms to export because the foreign currency doesn’t buy as much U.S. stuff. And it’s hurting some very well-known companies.

Kimberly-Clark, which makes diapers and bathroom supplies, is down 6 percent in 2015 and expected to fall further, despite saying it had organic sales growth!

 

The bulk of Proctor & Gamble’s total revenue is made outside the North America, 60 percent in fact. The firm experienced a 9 percent drop in 2015 revenues because of a strong American dollar.

 

Johnson & Johnson, maker of several children’s products is crying because its revenue decreased 7.5 percent as a result of currency values.

 

The world’s largest seed company Monsanto earns 43 percent of its revenue outside the U.S. Its Q4 2015 loss was because of currency values and the firm subsequently reduced its 2016 profit forecast.

 

Dupont posted a quarterly loss of 29 cents per share and sales slid 9.3 percent overall. But without the currency effect, the company would’ve been down only one percent.

 

And 3M, the maker of post-it notes and other products, earns two-thirds of its revenue outside the U.S. Because of the strong dollar, it’s experienced an 8.3 percent drop in profits and expects currency effects to account for a further 5 percent loss in profits for 2016.

 

When it comes to the strong dollar – enjoy your travels while you can!

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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