Another currency exchange exampleIf Verde Agritech was a domestic Brazilian company trading in the local currency, it financial statements would present a very different picture. The income statement Revenues would look like this:
2020 Q3 Results (Cdn $) 2020 2019 Change %
Tonnes of product sold 105,789 62,855 42,934 68.3%
Sales (in Cdn $) $3,956,341 $3,054,874 $901,467 29.5%
Revenue per tonne $37.40 $48.60 ($11.20) (23.1%)
2020 Q3 Results (Brazil R$) 2020 2019 Change %
Tonnes of product sold 105,789 62,855 42,934 68.3%
Sales (in R$) R$14,815,411 R$8,918,122 R$5,897,289 66.1%
Revenue per tonne R$140.06 R$141.87 ($1.81) (1.2%)
In Brazil we would be cheering sales revenue growth of 66%, and a marketing department that had managed to hold the price per tonne realized on 66% more volume at almost the same level as in 2019.
Instead, when looking through the Canadian dollar lense, we see a company that sacrificed it product pricing in order to grow its sales volume, dropping its price per tonne by 23.1% to achieve a 29% increase in dollar sales on a 68% growth in volume.
The average exchange rate in Q3 2020 was $1 Canadian = 3.745 Reals.
The average exchange rate in Q3 2019 was $1 Canadian = 2.919 Reals.
That works out to be a 28.3% depreciation in the value of the Real in one year.
Ouch!