Small cap exposures to a falling Australian dollar

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Small cap exposures to a falling Australian dollar. Several of the stocks we own will enjoy a translation benefit from a falling currency. The overseas earnings they generate will be translated back to Australian dollars at a lower rate making their overseas earnings more valuable in AUD. Companies that we own in this category include Ansell, Recall, Mayne Pharma and Hansen Technologies. All of these businesses generate a substantial portion of their earnings overseas and so the reported AUD earnings will increase with a lower AUD. We also own companies, such as Orora and Colorpak which supply domestic manufacturers that should benefit also from a lower AUD as these customers are now more competitive against imported goods. Orora is also an exporter of recycled paper from their Botany B9 mill to the US, a lower AUD benefits these export earnings as the USD received on these sales increases with a lower AUD.

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