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French pharmaceutical giant Sanofi suffered severe second quarter due to budgetary savings in many European countries and the expiration of patents on two key drug company, writes Financial Times.
Due to the fact that managers of Sanofi defined as “a very sensitive adjustment” of the euro against the dollar and other major currencies, reported sales for the period increased by 6.2%, while profit is only 9.6% lower and amounted to 1.9 billion. Assimilated to currency fluctuations, however, the company’s sales have increased by 0.4% while its net profit fell by 17.7%.
“Only time will tell whether this is due to normal currency volatility or observed structural and longer-term change of the euro against the dollar,” said Sanofi CEO Christopher Vayhbaher.
The French company is not only with similar results. Weaker euro support sales and profits of some leading European corporations. This in turn softens the negative impact of weaker demand in the countries of the periphery of the eurozone.
Although at present the results of this trend are not very prominent due to currency hedges, will prove profitable multinational companies such as Sanofi, whose main costs are in Europe, but a large percentage of sales are realized outside the eurozone. Only about a quarter of sales of Sanofi generated in euros.
Financial Director of Sanofi Jerome Kontamine concluded that “if things continue the same way, the euro exchange rate will have a positive effect on sales and profits of the company in coming quarters.”
Furthermore, pharmaceutical companies rank among the winners and German automakers, chemical companies in the sector, European aviation company EADS and luxury goods manufacturers.
Companies from Southern Europe, however, which are generally more dependent on exports to the eurozone, do not account for such a revival, with the exception of the tourism sector.
“A weaker euro could neutralize some of the negative consequences of the crisis,” says Jean-Michel Karayon, vice president of Moody’s. “But overall, the economic slowdown, damage to European companies.”
“The weak euro will hardly be a panacea for problems in the eurozone,” he said.
For the three months from March to June the euro fell against the dollar by over 5%. Compared to June 2011 the European single currency has lost nearly 13%.
For the same period the euro has become cheaper against the Japanese yen and Chinese yuan by 14%.