Alembic Global Advisors

Chemical Industry Reports

US Chemicals: USD strength not a huge concern

02/17/15 -

US Chemicals – USD strength not a huge concern

  • USD strength most negative for DOW, MEOH and PX; least for AXLL and WLK
  • See currency translation related earnings hits of 5-9% for coverage universe
  • Cost curve positioning should insulate US from meaningful trade flow changes


As the USD has recently strengthened relative to a basket of currencies – the BRL, EUR, SGD etc - investor attention has turned to companies with high sales exposure to these countries/regions in general and the EUR in particular or businesses that might see changing trade flow in an attempt to assess the negative earnings impact of these currency moves. Our analysis identifies CE, HUN, LYB, and DOW, in that order, as companies that have the highest European revenue exposure amongst our coverage universe but suggests EUR weakness related earnings downside may not be as significant as some may think at these names.

Conservatively assuming no y-o-y European volume growth in 2015 and a 15% y-o-y decline in the EUR relative to the USD – assuming the EUR stays at current levels through 2015 - points to 5-9% y-o-y EPS declines for the our coverage universe – not egregious in our view. Our analysis which takes into account each companies country and currency specific footprint points to the most negative impact at MEOH, DOW and PX in that order, assuming that the companies have minimal hedges in place in 2015. The least negative EPS impact is at the more US-centric AXLL and WLK.  


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