Just read through "the" profit update again and one thing they did not throw into the pile of excuses for the downgrade was effect of the depreciation of the AUS vis-a-vis the USD.
Perhaps they are holding this one back for the next earnings downgrade??
In the absence of management comment I have tried to do a few sums myself, based on prior comments that MCP policy is to cover their FX required on a 6mth forward basis.
The average fx rate for the 6mths to Dec13 was 1.0330 - this is the rate one can probably assume was the input cost fx rate for goods delivered/sold in the 2nd half of the 2013 reporting period.
The 2nd half results are all but locked in, but going forward what will be the impact of the depreciation of the AUD?
(a) the average USD/AUD fx rate for the qtr ended 31/3/13 was (approx) 1.0400 (b) the average USD/AUD fx rate for the qtr ended 30/6/13 will be approx. 0.9900 (c) my forecast for the USD/AUD average rate for the next 6 mths is approx. 0.8900
MCP probably import most, if not 100% of their product from offshore. As such, and based on (a) their import value of COGS is probably around 30-35$%, and based on claimed sales of approx $300mio pa, they have an FX risk of approx $100.
Meaning each 1c depreciation in the fx rate will negatively affect NPBT by around $1mio - how much of this can they pass on to the retailer/consumer?
On my guesstimate they willhave a PBT of approx $22.0 mio for FV13.
The impact of the FX rate depreciation on PBT for 2013/2014, could be to increase imports by around $14mio. How much of the cost input increase will they be able to pass on?
Not a pretty outlook. Lucky management decided to splash out and diversify into the whitegoods field (NOT!!)
MCP Price at posting:
$1.35 Sentiment: ST Sell Disclosure: Held
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