- The Washington Times - Tuesday, January 27, 2015

Some of America’s biggest and best-known companies are paying the price for the country’s economic strength, as the surging U.S. dollar is cutting into foreign sales and profits across of a slew of industries.

Chemical giant DuPont, global pharmaceutical firm Pfizer Inc. and commercial products specialists Johnson & Johnson on Tuesday were among the latest companies to acknowledge a hit from the stronger dollar, which has the immediate effect of raising the price and lowering the competitiveness of U.S.-made products in markets overseas. The impact of the dollar is being felt in the latest quarterly income statements and in lowered estimates for sales and net profits this year from companies across the spectrum.

The Procter & Gamble Co., maker of consumer products such as Tide detergent and Colgate toothpaste, offered a particularly dramatic illustration of the dollar’s impact Tuesday in announcing fourth-quarter 2014 earnings per share of $1.06, 7 cents per share below analyst expectations.

The company said in its earnings statement that core earnings per share would have been up 6 percent had the dollar not soared in value in the latest quarter. Instead, falling sales abroad led to a 5 percent decline.

“The October-December 2014 quarter was a challenging one with unprecedented currency devaluations,” said P&G President and CEO A.G. Lafley, noting that virtually every foreign currency in the world fell in value compared with the dollar, with the plunging Russian ruble “leading the way.”

Things don’t look to improve this year, he said: “Foreign exchange will reduce fiscal 2015 sales by 5 percent and net earnings by 12 percent, or at least $1.4 billion after tax.”

Blame for the stronger dollar, ironically, can be laid at the foot of the American economy, with a rebound of strong growth in recent quarters while major trading partners such as Japan and Europe continue to struggle. Even in China, an engine of global growth in recent years, the economy’s growth rates have cooled to levels not seen since the 1990s.

The dollar has been bid up as international investors seek U.S. assets amid rising expectations that the Federal Reserve will boost interest rates sometime during the year.

As a result, major foreign currencies have plummeted compared with the dollar. The euro, which was trading at $1.38 in March, was down to $1.14 this week. The yen was just under a dollar in March and now is worth about 85 cents.

With the companies of the S&P 500 generating half of their revenues from non-U.S. markets, the impact has been profound. Analysts and investors are scrambling to recalculate U.S. corporate profits and share forecasts for the year.

In recent days, Kimberly-Clark Corp. announced sales were 4 percent below forecasts in the 2014 fourth quarter because of the stronger dollar, McDonald’s Corp. said net profits for the quarter took a 20 percent hit, and computer firm Oracle Corp. said the stronger dollar turned a projected 2 percent increase in net profits into a 3 percent decline.

On the other side of the equation, many foreign companies say they are seeing increased sales and export opportunities because of the dollar’s steady rise.

French cosmetics giant L’Oreal has posted share prices approaching record highs as the falling euro has spurred sales. CEO Jean-Paul Agon told The Wall Street Journal last week at the World Economic Forum in Davos, Switzerland, that fourth-quarter earnings will be strong for the company, which sells as much in the North American market as it does in Europe, in part because of the currency shift.

“For us, it is very important because of 10 years we were dealing with a strong euro and a weak dollar,” he said.


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