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Monday, May 28, 2018

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International News : Metsä Group benefits from Brexit

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Metsä Group benefits from Brexit

Metsa Group

Finnish forestry companies such as the Metsä Group are benefiting from the exchange rate turbulence following Brexit, Britain's referendum decision to leave the EU. Source: UUTISET

The news comes as a surprise as many Finnish companies were forecast to suffer financially following Brexit, as Britain is an important trade partner.

Stock markets around the world plummeted in reaction to Britain's decision to leave the EU two weeks ago. Some quickly rebounded, with the US dollar coming up strong in the past few days.

Finnish forestry industry shares also plunged following Brexit, but now the market turbulence has actually turned to their advantage.

Tuomas Virtala, Head of Danske Capital Finland, says it was a case of the baby being thrown out with the bathwater.

"Stocks were sold off without thinking about what was being sold off and what actually comprises the price level," said Mr Virtala, referring to decisions to sell stocks of companies that do a lot of business with Britain.

But then people realised that trade is international, not just with Britain and could be compensated for by deals in dollars.

Eero Färkkilä, an equity strategist with Nordea, said that British markets are important for forestry companies such as UPM and Metsä, who are affected by the weak pound and insecurity regarding Britain and Europe's future.

As the strong US dollar has countered the weak pound, the largest dollar beneficiary currently is Metsä Board and its parent Metsä Group.

In addition to doing business in Britain, they have a presence in North America and Asia.

"Companies that sell in dollars benefit," said Mr Färkkilä. "On Helsinki's stock exchange there are more companies that deal in dollars than those dependent on the pound. The changes of the last few days have been a positive sign for many companies."

According to Metsä Group CFO Vesa-Pekka Takala, the company's products are priced in dollars while expenses are incurred in euros.

As such, dollar-denominated earnings will increase, as the dollar strengthens and generates more income, while expenses in euros remain unchanged.

These companies hedge their money in currency derivatives, which are binding on course for several months.

Leading Nordic banks believe that the biggest Brexit currency fluctuations have already taken place.

Source: Timberbiz

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