Swiss Franc Woes Threaten Nestlé Exports

16 Jan 2015 --- The decision by the Swiss Central Bank to abandon its policy of capping the Swiss Franc against the Euro could hit Swiss multinationals like food giant Nestlé hard, analysts have warned.

The value of exports to European markets could fall sharply, following the move, and during yesterday’s trading millions of francs were wiped from the value of Nestlé.

Exports to European markets are threatened because the SCB, which has previously capped the franc at CHF1.20 per Euro, abolished this convention without warning.

The Eurozone buys around half of Switzerland’s exported goods and is a key market for the Swiss economy. Yesterday the franc ‘s value increased from 1.20 to 1.03 against the Euro. The minimum exchange rate was introduced in 2011 to protect the Swiss market and keep it competitive.

Swiss companies said yesterday that they may have to increase prices to compensate for potential lost earnings as a result of the move. This would put a very real pressure on production output and jobs in the region.

Last summer Nestlé reported falling earnings and sales in the first six months of 2014, blaming a strong Swiss Franc for the fall of 9.5 percent from the same period in 2013.