The Australian dollar is hanging precariously above 77 US cents following the RBA decision to lower rates on Tuesday. Two years ago the Australian dollar to US dollar conversion was closer to $1.04 and just one year ago it sat comfortably above 90 cents.
RBA Intervention
RBA Governor Glenn Stevens has made several comments over the last two years about how he believes the Australian dollar should be lower. The central bank is targeting an exchange rate of 75 cents, and the latest rate cut signals that they're serious about doing whatever it takes to boost Australia's global competitiveness.
Tailwind to Australian companies
A lower Australian dollar 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 impacts margins, and thus profitability.
Here are 10 companies set to benefit from the lower 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 company CSL Limited (ASX: CSL) and hearing device maker 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 of a strong US dollar.
Computershare Limited (ASX: CPU) operates share market registries in Asia, Australia, New Zealand, Canada, Europe, the United Kingdom, Africa and the United States. It will also benefit from rising US interest rates.
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.
Finally, 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.
