Strong dollar hit to GE, Honeywell may bode poorly for other industrials
By Lewis Krauskopf
(Reuters) - General Electric Co (GE.N: Quote) and Honeywell International Inc HON.N said on Friday they will take steps to cushion the impact of a stronger dollar, which hurt first-quarter results at both companies.
Indeed, the impact of currency shifts on U.S. companies will be highlighted further next week with quarterly reports from United Technologies Corp (UTX.N: Quote), which already slashed its 2015 financial forecast in January over currency worries, as well as from 3M Co (MMM.N: Quote) and Illinois Tool Works Inc ITW.N.
GE said foreign currency effects shaved $950 million, or 4 percentage points, off its sales in the first quarter.
Honeywell also reported a 4-percentage-point quarterly drag from a stronger dollar, and projected that exchange fluctuations would weigh down sales by $1.7 billion this year.
The rise in the dollar .DXY - which has surged 22 percent against a basket of major currencies since June 30 - hurts U.S. companies with major foreign sales, because they lose value when translated from weaker currencies into the greenback.
Both companies said they have been taking action to mitigate the currency impact. GE is considering different locations where it can manufacture products or components for businesses, such as its power and healthcare units, said Chief Financial Officer Jeff Bornstein.
"We certainly have thought more deeply and more thoughtfully about our supply chain footprint and our manufacturing footprint," Bornstein said in an interview. "That’s a little bit of a natural hedge that a global company has."
GE shares were down about 1 percent at $27.03 in afternoon trading after posting results. The U.S. conglomerate stood by its full-year industrial profit view despite concerns about its oil and gas business. Continued...