The Australian dollar is finally coming down! After years of talk, the RBA has managed to bring the dollar back from over US$1 per AUD$1 to below US$ 77 cents per AUD$1 by cutting local interest rates and (unintentionally) via the plunge in the oil and iron ore price.
The central bank is targeting an exchange rate of US 75 cents, however with interest rates still high relative to the rest of the world, a drop to US 75 cents could be short lived.
Tailwind to Australian Companies
Regardless, the 30% fall already helps Australian companies that generate a significant portion of earnings in the US, as those earnings now translate to a greater amount of Australian dollars. In addition, goods produced in Australia are now cheaper for the US to import.
The companies with the largest positive impact however, will be those with sales in US dollars and costs in Australian dollars. In this case essentially every cent move in the Australian dollar versus the US dollar improves margins, and thus profitability.
Here are 10 companies set to benefit from the lower Australian dollar and some details about their operations:
Rigid packaging group Amcor Limited (ASX: AMC) derives 95% of earnings offshore and 30% from the US.
Global blood plasma products companies CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH) are two of the brightest global medical stocks on the ASX. They both generate a portion of sales in the US, however negative exchange rate movements in Switzerland may lessen the impact.
Computershare Limited (ASX: CPU) operates sharemarket registries in Asia, Australia, and New Zealand, Canada, Europe, United Kingdom, Africa and the United States.
Iress Ltd (ASX: IRE) offers financial tools to professionals in Australia, New Zealand, Canada, the UK and South Africa.
Brambles Limited (ASX: BXB) provides container and pallet pooling solutions to companies all over the world.
Fortescue Metals Group Limited (ASX: FMG), BHP Billion Limited (ASX: BHP), Rio Tinto Limited (ASX: RIO), and Santos Ltd (ASX: STO) will all see higher Australian-dollar denominated prices for their commodities, boosting their competitiveness globally, although US-dollar debt will lessen the benefit.
And Westfield Corp Ltd (ASX: WFD) has a portfolio of properties in the US and a development pipeline that will generate profits in US dollars. The group's earnings should receive a boost, however the majority of the group's costs are also in US dollars.
