Are Pfizer and These Companies at Risk in Venezuela?


Proctor & Gamble Co. (NYSE:PG) and Pfizer Inc. (NYSE:PFE) are both struggling with their earnings due to Venezuela’s currency restrictions, Bloomberg reports. This led Pfizer Inc. and Clorox Co. (NYSE:CLX) to say that earnings will continue to be impacted in the coming quarters.

As Venezuela’s currency — the bolivar — continues to weaken, companies with foreign headquarters are having difficulty trying to repatriate cash at the official exchange rate. Venezuela has devalued the bolivar five times in the past nine years and will attempt to weaken the bolivar again this year. According to analysts, Venezuela hopes to boost revenue and narrow the budget deficit.

Steve Robb, CFO of Clorox, says that the situation in Venezuela comes with the territory. “That’s the challenge of emerging markets — when it’s good, it’s great, when it gets bad, it can get really bad, and we’re certainly seeing that in Venezuela,” he says. Clorox lost $3 million in three months due to the devaluation, and other companies are also taking a big hit.

In February, P&G said that it might cost up to $275 million to revalue its Venezuelan balance sheet following the devaluation. Clorox is predicting losses in Venezuelan business in its fiscal 2014. Avon Products Inc. (NYSE:AVP), which manufactures beauty products, had it’s revenue dip 15 percent in its first quarter due to the devaluation.

How the devaluation of Venezuela’s currency will affect large U.S. pharmaceuticals companies operating in the country is still unclear. Merck & Co. (NYSE:MRK) said in February that the devaluation had led to $140 million in exchange losses in the first quarter which reduced earnings by 5 cents a share. However, the full-year outlook was unchanged.

On the other hand, Pfizer expects the currency devaluations to continue to make a huge impact on the company’s earnings. So far, it has reported an $80 million loss and they don’t expect the numbers to improve in the near future.

Along with the pharmaceuticals, other companies are also being affected. Venezuela is a key market for BlackBerry (NASDAQ:BBRY) and the currency restrictions have led to a 6 percent decline in Latin American revenue and a 10 cent per share reduction.

Blackberry requires that their carriers in the country pay in dollars which is leading to various logistical issues. “We have strong relationships in the region and are working to improve the cash flows in this government-controlled process,” Chief Financial Officer Brian Bidulka said.

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