Partly due to the post-Brexit weakness in the British pound sterling versus the U.S. dollar, companies ended up experiencing more of a currency hit during the quarter than we had hoped. Here are some examples:

  • “All-in sales for the company were down 3%, including a 3-point headwind from foreign exchange and a 2-point drag from the combination of Venezuela deconsolidation and minor brand divestitures.” (Consumer products)

  • “After adjusting for the benefit of the extra week in the prior year, net sales declined 5%, reflecting a 4% decline in volume, flat price mix, and a negative 1% impact from foreign exchange.” (Food producer)

  • “We are anticipating a marked improvement in our September monthly numbers, as we implement our capacity changes, and see benefits from our domestic revenue management initiatives, and easing of foreign exchange headwinds ...” (Airline)

  • “Second quarter revenues were approximately $13.1 billion and reflect year-over-year operational growth of $1.6 billion or 13%, which was partially offset by the unfavorable impact of foreign exchange of $302 million or 3%.” (Drug maker)

Oil Still In The Picture

Oil’s rise from the February 2016 lows in the mid $20s per barrel to a current price in the high $40s (as of August 26, 2016) has eased concerns about the negative impact of low prices on energy companies and energy-sensitive companies. However, as shown in Figure 4, the topic has not stopped getting airtime on conference calls. Some of the discussion has been about the rebound and the positive impact, but much of it reflects the challenges and wide-ranging impacts of the low commodity price environment.

Should oil stay at current levels (as of August 26, 2016), crude prices would average a 1% year-over- year decline in the third quarter and a 13% increase in the fourth.

Comments from oil and gas producers reflect the still challenging environment:

  • “Our financial performance was challenged, like the rest of the industry, but did improve sequentially in line with prices.”

  • “The business is performing well operationally and we grew production 3%, but the low commodity price environment continues to impact financial results.”

  • “We are focused on maximizing value, not volume, and have reduced our drilling program to levels that allow us to manage near-term cash flow, while maintaining our operating capabilities in the current low price environment. When oil prices approach $60 per barrel, we will begin to ramp up activity, starting with the Bakken.”

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