The currency effect on reporting season

This week’s view from Smart Currency looks at the end of the financial year and the corporate reporting season.

With the end of the financial year comes the corporate reporting season, and already there are suggestions of profits being affected by turmoil in the currency markets.

In the plastics industry, RPC Group has reportedly indicated its profits will be slightly lower in 2012/13 than the previous financial year due to Sterling's strength against the Euro – which remained bullish for a large portion of the year, during which time it hit a four-year high of €1.28 over the summer.

While the weakness in Sterling early in 2013 helped to reverse some of these effects, clearly the industry is concerned there will still be significant impacts on the bottom line. Oil prices have also fluctuated wildly in recent times, compounding the costs for British plastics manufacturers.

There are, however, means of managing the exposure to such volatility. A forward contract, for instance, can be agreed while the exchange rate is favourable and locked in for a period of up to 12 months – so even when the rate drops away again, your business is protected when purchasing oil and other raw materials, or repatriating sales income from the continent.

Alternatively, a stop loss order will safeguard your business from being exposed to rates that drop below a pre-determined rate, keeping a floor under the rates you receive.

As with all areas of business success, the key to managing currency risk is to be proactive so get in touch with Smart Currency Business today on 020 7898 0500 or find out more at http://www.smartcurrencybusiness.com/BPRTreasury/