It's not a wash for me.
imagine you owned all of COS. the share price doesn't matter since it doesn't trade anywhere--all that matters is how much you make, converted to USD at the end of the day because you are presumably US-based. operationwise, what you make is determined by the price of oil, which is denominated in USD, minus NG used (also denominated in USD), minus labor (denominated in CAD, so it's bad for you if CAD is stronger), interest (denominated in CAD, so it's bad for you if CAD is stronger), etc. a strong Canadian dollar is not going to improve your USD returns. (OTOH, if you are a Canadian retailer and you sell goods exclusively from the US, and the USD-based cost remains the same and the CAD selling price remains the same while CAD rises, then your returns will improve both in Canada and in the US. precisely because you are selling something with an input price--USD--which is growing cheaper relative to the output price--CAD. of course, in this case your margins are coming out of the hide of Canadian customers, who will eventually demand lower CAD prices to reflect the stronger CAD)
South African gold miners are another case where the strong local currency hurts returns, because the end product is denominated in USD. |
