Weakening Euro may boost automotive, chemical firms in EU - report

New York - European chemical companies and automakers are likely to benefit from the recent significant weakening of the Euro compared to currencies, including the US Dollar and British Sterling, suggests Moody’s Investors Service.

In a report, New York-based Moody's expects that the weakening Euro will be positive for companies that have the majority of their cost bases in the Euro zone and significant sales outside it.

In addition to auto manufacturers such as BMW, Daimler AG and Volkswagen, Moody’s expects chemicals makers including K+S AG and Lanxess AG to benefit the most, as potash and synthetic rubber are typically US-Dollar markets.

“In general, European chemical companies will benefit from the weakening of the Euro against other major currencies, especially the US Dollar,” said the report adding that a weaker Euro would also add to the competitiveness of the firms that produce in the Euro zone and export overseas.

The EU is a leading exporter of chemicals globally.

EU chemical firms, continued Moody’s, typically have a higher proportion of their costs than revenues in euros so that the weaker Euro should give a boost to their operating margins.

For example, noted the report, BASF has publicly indicated that a 0.01 strengthening in the US Dollar exchange rate against the Euro would result in an increase of around €240 million in values of its sales and a €50 million rise in earnings (EBIT).