Venezuela Hits Corporate Profits at These US Companies (Reuters)
Reuters has a lengthy article about how the growing economic mess in Venezuela along with the weakness of its Bolivar and restrictive currency controls have hurt US corporate profits for the fourth quarter of 2014 and will continue to cause more pain this year. Without going into the details of why the country is imploding (other than to say that socialism isn’t working out too well….), here is a quick summary of the situation certain US companies now find themselves according to Reuters:
- American Airlines Group Inc (NASDAQ: AAL) had $721 million held in Bolivars at a weighted average exchange rate of 6.41 Bolivars to the dollar. At the current blackmarket rate of 184 Bolivars per US dollar, its worth $25 million and they will provide guidance about how they are going to deal with that problem with their earnings report this week (Its probably safe to assume that no one will exchange that many dollars for bolivars…)
- Clorox Co (NYSE: CLX) decided last year to exit Venezuela altogether (“We saw no hope that we could create a sustaining business in that country” according to the CEO).
- Ford Motor Company (NYSE: F) will take a pre-tax charge of $800 million for its Venezuela business.
- Kimberly Clark Corp (NYSE: KMB) is taking a fourth-quarter charge of $462 million for its Venezuelan business.
- Procter & Gamble Co (NYSE: PG), General Electric Company (NYSE: GE), Baker Hughes Incorporated (NYSE: BHI) and Brink’s Company (NYSE: BCO) have already reported Bolivar related financial hits over the past year.
Moving forward, its likely that more US MNCs with operations in Venezuela will deconsolidate their Venezuelan subsidiaries in order to isolate them from the parent company’s financials – a move that Ford Motor Company has already taken.
To read the whole article, Venezuela’s currency woes an increasing threat to U.S. corporate profits, go to the website of Reuters plus check out our list of the few remaining Venezuela ADRs here.
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- In No Good Hands: The Venezuela Crisis and Consequences for South America (Moody’s Analytics)
- Venezuela is Borrowing Money at Any Cost (WP)
- Why Venezuela Can’t Be Like Colombia (RealClear World)
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