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Strong forint could slash blue chip profits

The strong forint could shave billions in profits of two of Hungary's blue chip shares, oil and gas company MOL and drug maker Richter, business daily Napi Gazdaság reported.

The forint has firmed from 260 to the euro at the end of March to around 235. During the same period, it strengthened from 165 to 150 against the dollar.

Though the stronger forint could save MOL Ft 5 billion on its crude purchases in Q2, it is likely to cost its Exploration and Production division Ft 4 billion and its Refining and Marketing division more than Ft 9 billion compared to the first quarter. The net effect is about Ft 8 billion off MOL's bottom line, Napi Gazdaság wrote.

Richter started accounting its sales in Russia and Ukraine, two of its biggest export markets, in euros, rather than dollars, last year. Less than one-fifth of the company's revenue is now accounted in dollars - about the same as its dollar-based costs - and 68% is accounted in euros. The weaker euro could reduce Richter's Q2 revenue Ft 3.5 billion – Ft 4 billion and increase costs the company pays in euros by about Ft 3 billion. Napi Gazdaság noted that Richter has stopped making hedge deals against exchange rate risks because of the hectic movement of rates.

Egis, the bourse's smaller pharma share, has hedge deals against all of its euro exposure and $110 million - $120 million of its dollar exposure, the daily wrote. Still, the dollar exposure that is not covered could reduce annual revenue Ft 1.7 billion – Ft 1.8 billion, cutting profit as much as 15%.

Hedge positions automotive industry supplier Rába has taken out - it had short positions for €93 million and $63 million at the end of March - could boost the company's Q2 profits Ft 3.3 billion.

The stronger forint will hurt Danubius Hotels not only because it calculates its room rates in euros but because of its big stock of foreign currency-denominated loans, Napi Gazdaság wrote. (MTI – Econews)