02.11.13
The Venezuelan government announced its intention to devalue its currency (bolivar fuerte) last week. Although no official rules have yet been issued, the official exchange rate is expected to move from 4.30 to 6.30 per dollar, effective with the publishing of the next Official Gazette on Feb. 13, 2013.
It was also announced that the currency market administered by the central bank known as SITME that traded at 5.30 bolivar fuertes per dollar will be eliminated.
This, of course, will impact alot of household and personal care companies. Colgate-Palmolive released a statement in regards to the currency devaluation:
"As previously disclosed, under applicable regulations the Company’s Venezuelan subsidiary was not permitted to access this currency market. Since Jan. 1, 2010, Venezuela has been designated hyper-inflationary and as such all foreign currency fluctuations are recorded in income.
This, of course, will impact alot of household and personal care companies. Colgate-Palmolive released a statement in regards to the currency devaluation:
"As previously disclosed, under applicable regulations the Company’s Venezuelan subsidiary was not permitted to access this currency market. Since Jan. 1, 2010, Venezuela has been designated hyper-inflationary and as such all foreign currency fluctuations are recorded in income.
The Company’s preliminary assessment of the impact of the devaluation is that the Company will incur a one-time aftertax loss of approximately $120 million ($0.25 per share) in the first quarter of 2013, related to the remeasurement of the local balance sheet at the date of the devaluation.
"There will also be ongoing impacts primarily related to the translation of the local financial statements at the new exchange rate. It is the Company’s preliminary estimate that these impacts will be in the range of $0.05 to $0.07 per share per quarter in 2013 taking into account both the Company’s ability to take actions in Venezuela and elsewhere to mitigate the effect of the devaluation and ongoing price control regulations in Venezuela.
"The devaluation will not have any impact on the Company’s 2012 results of operations or financial position."