The predicted slowdown in growth for both Australia and China is a major cause of the recent drop in Aussie dollar against the US dollar. The slowdown could lead to the Reserve Bank of Australia cutting interest rates, and speculation of that occurring has resulted in foreign investors pulling their cash out of Australia, selling Australian dollars and forcing its value down, as seen in the chart below.
But two types of companies are set to win big from a weaker Australian dollar — those with large overseas operations and exporters or companies that earn large chunks of their revenues in US dollars. The following three companies should see a positive jump in earnings as a result:
Source: Yahoo! Finance
Woodside Petroleum Limited (ASX: WPL)
Woodside Petroleum's two key products, oil and LNG, are both priced globally in USD, with dividends being converted to Australian dollars. Woodside reported a net profit after tax of US$2.98 billion for the year in 2012 and is likely to benefit strongly from the 11% decline in the Aussie dollar.
Not only that, but combined with the 17% rise in the price of oil (WTI Crude) over the last month, earnings going forward could be catapulted even higher.
The downside for Woodside is its large exposure to offshore projects like Israel's Leviathan gas field where capital expenditure and contract payments are conducted in USD. This makes the projects comparably more expensive.
BHP Billiton (ASX: BHP)
The resource sector in general, including resource giant BHP Billiton, is set to be a big winner from a lower Australian dollar with most of its commodity products including gold, silver and copper, priced in USD. The falling Australian dollar is likely to help shield BHP from falls in commodity prices like the 19% decline in the price of gold this year.
Resmed (ASX: RMD)
Resmed and other healthcare companies like Cochlear (ASX: COH) could be big winners due to the large portion of sales that occur outside of Australasia. In the third quarter of 2013, 91% of Resmed's revenues were earned outside of the Asia-Pacific region.
Last month Deutsche Bank revised its earnings forecasts of healthcare companies in response to the currency change, with healthcare analyst David Low expecting most healthcare companies to benefit from the rapid fall.
For Resmed the impact is aided by the fact that a large chunk of costs, including research and administration, are conducted in Australia and in Australian dollars.
Foolish takeaway
For many big companies, the high Aussie dollar over the last three years has ebbed at full year earnings and reduced investor returns. However, looking to 2014 earnings the tables look set to turn, adding a nice bonus for investors with long-term investing horizons.
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More reading
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- Perth Mint sales plummet on gold fears
- Why Resmed's 63% gain looks small
Motley Fool contributor Regan Pearson does not own shares in any companies mentioned in this article.
