Getting ready for the 2020 ResultsHello fellow Verde investors,
With the long awaited 2020 audit results due for release next week, I have been dusting off my spreadsheets, sharpening my pencils and recharging my calculator in anticipation of some diligent analysis of the numbers.
With the financial statements covering operations primarily in Brazil conducted in the local currency, but reported in Canadian dollars, we know that changes in the exchange rates between the two countries can significantly impact the reported numbers, and their comparative figures from prior periods.
So here are the exchange figures for 2020 and the comparative 2019 year:
December 31 2020 4.0799 R = $1 Canadian
December 31, 2019 3.0978 R = $1 Canadian
December 31, 2018 2.8566 R = $1 Canadian
Average for 2020 3.845 R = $1 Canadian
Average for 2019 2.974 R = $1 Canadian
Unfortunately these are large swings the wrong way.
The same $10 million of assets reported at December 31, 2019 will now show up as $7,593,000 at December 31, 2020 having suffered a 24% drop in apparent value due to the falling value of the local Brazil currency.
If the Company reported $10 million in sales in 2019, it would have to have achieved a 29.3% growth in sales in local currency terms to be able to report the same $10 million gross sales in Canadian dollars.
On the other hand, expenses would see the same impact. If local currency expenses were the same year over year, you should expect to see a 29% drop in the Canadian dollar equivalent.
Let's see what the financial statements report next week.
Cheers,
S.