Weaker currency welcome event for some
Resource companies are those expected to benefit from the decline because they earn much of their revenue in US dollars, while their costs are largely denominated in Australian dollars.
Among companies expected to receive the biggest benefit are Atlas Iron, Alumina, and Yancoal, according to Credit Suisse. But Fortescue Metals, BHP Billiton, and Rio Tinto are among those that receive the least benefit.
But it is not just mining companies that will welcome a weaker currency. BlueScope Steel says a 1 per cent fall in the dollar will lead to a $2 million upward adjustment in earnings before interest and tax. "A US105¢ to US95¢ decline would have led to a $20 million EBIT benefit to the company," a spokesman said.
Watermark Funds Management director Justin Braitling said fund managers were becoming concerned about a recession next year, and this would make it "very tough" for cyclical industrial stocks.
Frequently Asked Questions about this Article…
A weaker Australian dollar can boost resource companies that earn much of their revenue in US dollars while incurring most costs in Australian dollars. The currency move effectively increases their Australian-dollar earnings when US-dollar income is converted back into local currency, which can lift reported profits.
Credit Suisse highlighted Atlas Iron, Alumina and Yancoal as the companies expected to receive the biggest benefit from a weaker Australian dollar.
According to the same Credit Suisse commentary in the article, Fortescue Metals, BHP Billiton and Rio Tinto are among those that receive the least benefit from a weaker Australian dollar.
Yes. The article notes that some industrials also welcome a weaker currency. For example, BlueScope Steel said a 1% fall in the dollar would add about $2 million to earnings before interest and tax (EBIT), and a drop from US105¢ to US95¢ would have delivered roughly a $20 million EBIT benefit.
Sensitivities vary by company, but the article gives BlueScope Steel as a concrete example: a 1% fall in the Australian dollar = approximately $2 million uplift in EBIT, while a 10 US-cent decline (US105¢ to US95¢) would have meant about a $20 million EBIT benefit for the company.
Watermark Funds Management director Justin Braitling said fund managers are becoming concerned about a potential recession next year, and that outlook would make things "very tough" for cyclical industrial stocks—suggesting currency benefits may be offset by broader economic weakness for some companies.
No. The article shows the impact differs by company: Credit Suisse identified some names (Atlas Iron, Alumina, Yancoal) as likely to benefit most, while others (Fortescue, BHP, Rio Tinto) would see the least benefit. Investors should note company-specific currency exposure rather than assuming all resource stocks gain equally.
Look for company disclosures or analyst notes about revenue currency mix and cost base. The article gives two useful references: Credit Suisse’s list of winners and losers among miners, and BlueScope Steel’s explicit EBIT sensitivity (1% fall ≈ $2m; US105¢→US95¢ ≈ $20m), which illustrate how to quantify currency effects where data is available.
Call 1300 880 160
Start a chat
Schedule a call
