Sector Snap: Venezuela money move may hurt US cos.

Companies that do business in Venezuela expected to take a hit from currency devaluation

Associated Press

NEW YORK (AP) -- Venezuela's move to devalue its currency will likely raise prices in the country and will hurt operations for some U.S. companies that do business there.

Announced Friday, the devaluation pushed up the price of the dollar against the bolivar by 46.5 percent. The devaluation, the first announced by President Hugo Chavez's government since 2010, could help ease a difficult budget outlook for the government. The move helps Venezuela gain more from its dollar-denominated oil sales. But economists predict higher inflation and a likely continuation of shortages of some staple foods.

Colgate-Palmolive Co., a U.S. maker of consumer goods such as Colgate toothpaste, SpeedStick deodorant and Irish Spring soap, warned that the devaluation will cost it $120 million this year. The company reported $17.1 billion in revenue in 2012.

The situation in Venezuela may keep Colgate-Palmolive and consumer-goods conglomerate Procter and Gamble Co. from reaching their profit targets, said BMO Capital Markets analyst Connie Maneaty in a client note Monday.

The company's revenue from Venezuela won't have as much value when it's converted back into dollars.

Morgan Stanley estimated that about 5 percent of both Colgate-Palmolive and makeup seller Avon Products Inc.'s revenues come from Venezuela. It also represents about 2.5 percent of ketchup company H. J. Heinz Co.'s revenue and about 2 percent of Goodyear Tire & Rubber Co.'s revenue, Morgan Stanley said.

Heinz had $11.65 billion in sales in its latest fiscal year. Avon has not yet reported its fourth-quarter results, but analysts predict about $10.7 billion in annual revenue, and $21.3 billion for Goodyear.

Both Avon and Goodyear are scheduled to report their fourth-quarter results Tuesday morning.

Halliburton Co., an oilfield services company, said Monday that the move would cost it $30 million in the first quarter of this year. The company had $28.5 billion in revenue in 2012.

Sterne Agee analyst Stephen Gengaro said he views the loss as a one-time occurrence and backed his "Buy" rating for Halliburton. He added that fellow oil services companies such as Baker Hughes Inc., Schlumberger Ltd. and Weatherford International Ltd. could also be affected, though it's tough to say how much.

Gengaro noted that when Venezuela devalued its currency in 2010, Weatherford took the most significant hit with a $40 million after-tax charge, while Schlumberger said the move didn't have a significant impact on its finances.

On Monday Colgate-Palmolive shares fell 20 cents to $108.29, while P&G rose 6 cents to $75.81. Avon rose 43 cents, or 2.6 percent, to $17.28; Heinz shares gained 4 cents to $60.95; and Goodyear shares rose 32 cents, or 2.4 percent, to $13.91.

Halliburton fell 39 cents to $40.87; Baker Hughes lost 25 cents to $45.40; Schlumberger dropped $1.14 to $77.93; and Weatherford fell 37 cents, or 2.8 percent, to $12.92.

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