Paper Topic:

Case Study: Xian-Jassen Pharmaceutical (China) and the Euro

Xian-Janssen Pharmaceutical (China ) and the Euro - Case study

How significant an impact do foreign exchange gains and losses have on corporate performance at XJP ? What is your opinion of how they structure and manage their currency exposures

Foreign exchange gains and losses could have a significant impact on the corporate performance of any firm . XJP faces foreign exchange risks in form of transactional and operational exposures in the course of its procurement of raw materials and finished products from its J J Europe unit . In to minimize this risk , XJP has followed

a hedging policy In spite of XJP hedging a minimum of 80 of its anticipated currency exposures , it was subjected to huge quantum of translational exposure

XJP made huge foreign exchange losses in 2003 which of was balanced by gains from housing fund adjustment and inventory valuation reversal . If XJP continues to make foreign exchange loses even in 2004 as it made in case of 2003 , it would not be able to reach its annual targeted revenue .If XJP starts making losses , due to foreign exchange losses , then it will have to increase the prices of its drugs . This would reduce its sales and especially in case of the tender sales which accounts to around 80 of the the profitability and thus the future growth of the company . Similarly gains through foreign exchange could help the company perform better by supplying the products in the domestic market at...

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