Heinz’s profits with currency hedging

Due to an economic depression, many people do not tend to eat outside. They prefer to eat in their houses. Heinz ketchup made huge profits in the economic depression season. The reason is that when people eat in their houses, they would probably consume more ketchups than the past. The most food companies’ biggest expenses are their ingredients cost. Therefore, the big food companies import their ingredients from other countries, which costs lower than in the United States. However, if the food companies were not aware of currency rates between the United States and counterparties, and then their profits could go down in case of the currency effect negatively. Nevertheless, Heinz had a good ability on forecasting the world’s currency market, and they hedged the currency. Thus, they would not get in any troubles in case of fluctuation currency market. I think this case is a little different case with an ASPEN technology case. For Heinz perspective, if the U.S dollar value is higher than Japanese yen, they could buy more ingredients or buy same amounts cheaper. However, ASPEN would make fewer profits if Japanese yen is higher than the U.S dollar because ASPEN made profits from Japan, and need to cash out into the U.S dollar. I think if companies hedge on their uncertainty factors, they would not make huge profits, but their probability of losing their assets in case of economic depression is very less.

http://www.forbes.com/2008/11/22/heinz-ketchup-closer-markets-equity-cx_lal_mlm_1121markets32.html