The statements by management about exchange rates are entirely plausible, based on the actual hedged rates experienced by MCP. They have previously stated that they hedge between 8 to 12 months for US and EU rates. So, to keep things simple I have assumed a 12 months delay in the impacts of exchange rate changes.
The actual US$ rates in 1H15 averaged around 88cents but were dropping very fast, so the hedging effect meant that MCP's claim to have averaged 78cents in 1H16 strikes me as true (as the actual delay might be more like 8-10 months). As for the 1H17, the average rate one year earlier was around 71 cents, exactly the same as what they claim they are experiencing now (first 4 months of this FY).
The good news is that in FY16, MCP has been able to mostly offset the exchange rate impacts with other cost savings. This was when the exchange rates were dropping faster. So, the amount of the exchange rate impact on profits in 1H17 should be relatively minor, and I believe them when they say that the second half will be better than last year.
It would be extremely foolish and risky for management to intentionally mislead the market by making statements they know to be false. I do not believe they would do this, and the above facts back them up.
MCP Price at posting:
$1.05 Sentiment: Buy Disclosure: Held
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