RMB keeps rising! Export enterprises emergency settlement of foreign exchange gains and losses distort profits

category:Finance
 RMB keeps rising! Export enterprises emergency settlement of foreign exchange gains and losses distort profits


Export enterprises urgent settlement of foreign exchange

In the first half of the year, some export enterprises have made forward settlement of half of the US dollar income next year, and the remaining half are still waiting to see, because they think the RMB may fall back after the rebound. But now it seems that this expectation has failed, and enterprises are afraid that the RMB will keep rising, so this week, it is urgent to make forward settlement of the remaining exposure The bank said to reporters.

The export business of the above-mentioned enterprises accounts for 90% of the total export business, mainly to Europe and the United States. Because their income is mostly priced in US dollars and other foreign currencies, with the appreciation of the RMB, after the foreign exchange income is converted into RMB, it is equivalent to the companys income shrinking. Therefore, enterprises often carry out forward foreign exchange settlement through banks to lock in the foreign exchange settlement price next year. According to first finance and economics, if you choose to lock all foreign exchange positions in 2021, the price of forward settlement will be about 6.6074-6.7663 from January to December next year, showing a month by month depreciation.

For enterprises, if RMB rises to around 6.3 against the US dollar next year, and the enterprises do not lock in their exposure now, they may only exchange 6.3 million yuan for the same $1 million income next year. Now, after handling the long-term settlement of foreign exchange, it can ensure that they can get about 6.7 million yuan, which is also convenient for enterprises to make financial planning in advance. Another foreign bank foreign exchange strategist told first finance.

However, among many export-oriented enterprises, there are not many such enterprises as this one that urgently lock up foreign exchange. After reviewing the annual reports of Listed Companies in 2019, ifnance found that even those companies which are more sensitive to exchange rate fluctuations and whose exchange gains and losses account for a large proportion of net profits, rarely take exchange rate management and risk measures. Even if they do, they are small-scale trial transactions without hedging awareness, and they have old problems such as insufficient subjective initiative and fear of being held accountable for misjudgment.

Exchange gains and losses distort profits

In view of the obvious expansion of RMB Fluctuation since the third quarter, the distorting effect of exchange gains and losses on enterprise profits has been reflected in the third quarter report, and the third quarter profit of some enterprises is weaker than expected.

For example, Changhai shares, whose business includes glass fiber and products and chemical industry, is a typical one. The companys export accounts for 24%. Despite the recovery of export, the expectation of price increase of products and the expected improvement of profitability, the exchange gains and losses in the third quarter obviously distort the enterprises profits. In the first three quarters, the company achieved revenue of 1.477 billion yuan, which was - 11.3% year-on-year; the net profit attributable to parent company was 196 million yuan, which was - 16.4% year-on-year; the non parent net profit was 184 million yuan, which was - 17% year-on-year. In the third quarter, the single quarter revenue and parent net profit were 571 million yuan and 72 million yuan respectively, which were - 1.6% and - 18.7% year-on-year. The reason why the companys profit in the third quarter fell a lot on a year-on-year basis was mainly due to the increase of exchange loss, in which the sales, management and financial expense rates increased by 0.4, 0.3 and 0.6 percentage points respectively, which led to the failure to realize the profit normalization in the first three quarters as expected.

According to the reporters understanding, the glass fiber industry in which the above enterprises are located has entered the price upward channel since September. With the gradual implementation of the companys price adjustment, the institutions all expect that the profitability of the enterprise is expected to increase. However, in view of the RMB appreciation rate in the fourth quarter, the distortion effect of exchange gains and losses on earnings can not be ignored.

Another more typical enterprise affected by the exchange rate is Fuyao Glass. More exchange losses lead to the companys third quarter performance significantly lower than expected. In the first three quarters, the company realized 13.776 billion yuan of operating revenue, a year-on-year decrease of 11.88%; the net profit attributable to the parent company was 1.723 billion yuan, with a year-on-year decrease of 26.58%. However, in the first three quarters, after deducting exchange gains and losses, the company realized a net profit attributable to the parent company of 1.904 billion yuan (- 9.02%), with a significantly narrowed decline. In addition, after deducting exchange gains and losses, the single quarter performance in the third quarter reversed. According to statistics, the exchange loss of Fuyao us in the first three quarters was 181 million yuan (254 million yuan in the same period of last year), while that in the third quarter was about 310 million yuan (223 million yuan in the same period of last year).

Neutral hedging should not be ignored in the context of increasing volatility

At present, if we look at the time line of one year, the RMB is rarely completely unilateral, and the highest to lowest fluctuation range is also expanding year by year. Therefore, speculative hedging is likely to outweigh the gains and losses, while no hedging at all will lead to drastic fluctuations in performance. As the central bank began to call for last year, it is imperative for enterprises and financial institutions to establish a neutral hedging awareness.

Despite the strong expectation of RMB appreciation, if there are twists and turns in vaccine prospects and geopolitical risks, cant the US dollar rise again? If the U.S. economy recovers next year and Chinas economy returns to normal, how will the exchange rate change under the background of narrowing the growth gap? At the end of the year, Chinese enterprises have a large demand for foreign exchange settlement, which may also lead to a stronger RMB. However, from the beginning of next year, the demand for foreign exchange settlement will decline. At that time, we need to observe the changes in the foreign exchange market. Guan Tao, the global chief economist of BOC securities, told reporters that sometimes when a currency rises too fast, it may also fall back quickly. Mainstream institutions believe that in a wide range of fluctuations, enterprises should regularly carry out hedging on a regular and pro rata basis according to actual needs, which is more conducive to financial planning. Source of this article: Guo Chenqi, editor in charge of first finance and Economics_ NBJ9931

Despite the strong expectation of RMB appreciation, if there are twists and turns in vaccine prospects and geopolitical risks, cant the US dollar rise again? If the U.S. economy recovers next year and Chinas economy returns to normal, how will the exchange rate change under the background of narrowing the growth gap? At the end of the year, Chinese enterprises have a large demand for foreign exchange settlement, which may also lead to a stronger RMB. However, from the beginning of next year, the demand for foreign exchange settlement will decline. At that time, we need to observe the changes in the foreign exchange market. Guan Tao, the global chief economist of BOC securities, told reporters that sometimes when a currency rises too fast, it may also fall back quickly.