How a Swiss machinery exporter used forward contracts to protect their profit margins
The company was vulnerable to volatility between the US dollar and Swiss Franc as an important proportion of their revenue was in USD. Explore how they gained certainty over their budget in uncertain times.
Before vs After
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When the currency an exporter is selling products or services in weakens, it can leave the business with less profit than they expected. Currency volatility in either direction makes it much harder to be able to budget or forecast for the future.
In this example, we explain how we supported a Swiss machinery exporter bring greater certainty to its CHF budget. You’ll see how the business benefitted by using an FX risk management strategy and the lessons you can apply to review your own currency exposure.
What happens when revenue is in US dollars, but costs are in Swiss francs
Our client exports specialist tools to international customers, including buyers in the United States. They had confirmed customer contracts and therefore they had a good overview of expected payments in US dollars.
Their situation can be summarised as follows:
CHF 28 million average annual turnover.
Approximately USD 9 million due over six months under agreed customer contracts.
Local costs in CHF, including salaries and supplier payments.
On April 2nd 2025, the US government announced “Liberation Day tariffs” which led to a period of uncertainty over what additional taxes would need to be paid. The dollar also fell over 9% in 2025, both of which added to the pressure on Swiss exporters.
Against this backdrop, the company needed to get clarity on their confirmed sales revenue, in order to support forecasts for the rest of the year and beyond.
Before: USD/CHF movements put the expected profit margin at risk
The exporter had calculated customer prices using the exchange rate available when the contracts were signed. Once those prices were agreed, the company were exposed to volatility between the US dollar and Swiss franc.
For the May–July 2025 period covered by this case, a fall from CHF 0.84 to CHF 0.80 per USD could have reduced the CHF value of USD 9 million in customer receipts by CHF 360,000.
Assuming costs of CHF 7.2 million, those sales would have generated an expected profit of CHF 360,000 at the budget rate. The fall in USD/CHF could therefore have wiped out the entire expected profit margin on these sales. The customer invoices could have been paid in full and the business would only have enough francs to cover those costs.
After: Forward contracts provide certainty over USD revenue
We worked with the company to fix the exchange rate in advance for its expected revenue. The forward contracts set the rate at which USD would be exchanged into CHF, for the amounts and settlement dates or periods agreed.
For the finance team, knowing the CHF value of US sales provides a firmer basis for planning salaries and supplier payments. Fixing the rate in advance can offer a certain peace of mind: it brings the ability to plan around an agreed exchange rate, when wider trading conditions remain uncertain.
The comparison below assumes that the full USD 9 million is converted into CHF and that the costs associated with these sales remain unchanged at CHF 7.2 million. In the hedged scenario, the entire amount is covered by forward contracts at CHF 0.84 per USD.
Illustrative comparison
For the same USD sales | Without intervention | With |
|---|---|---|
Receipts to convert | USD 9,000,000 | USD 9,000,000 |
Rate in CHF per USD | 0.80 | 0.84 |
Revenue in CHF | CHF 7,200,000 | CHF 7,560,000 |
Assumed cost base | CHF 7,200,000 | CHF 7,200,000 |
Profit on these sales | CHF 0 | CHF 360,000 |
Profit margin | 0% | 4.8% |
The comparison excludes separate fees, cost changes and payment delays. It does not establish the client’s actual net saving. The table compares the same customer receipts with and without forward cover, rather than two successive trading periods.
In this illustration, forward contracts allow the company to match its budgeted CHF revenue, preserving the expected profit of CHF 360,000 and the corresponding profit margin of 4.8%.
Budget rate vs forward rate
A forward rate is quoted for a future exchange and is not automatically the spot rate used in the budget. This distinction is important when assessing how much CHF revenue the hedge will secure. Forward cover also leaves other uncertainties, such as future sales, tariffs and customer payment delays, to be managed separately.
Three lessons you can take from this case
Review currency exposure when the sales price is agreed
The risk was already present once the exporter had committed to the prices in US dollars. Reviewing at this point gives a business time to identify the receipts, their expected dates and the CHF costs they need to cover.
Test the expected profit margin against possible currency movements
Compare the CHF effect of a plausible exchange-rate movement with the expected profit on the sales. US dollar receipts that can reliably cover dollar expenses may reduce the amount requiring conversion, provided the amounts and timings align. This gives a more useful basis for deciding how much exposure to cover.
Good to know: The same budget check applies to emerging market currencies, where liquidity, convertibility and the available hedging tools may also influence the response.
Ensure the hedging strategy is in alignment with underlying commitments
A forward contract creates an obligation even if an order changes or a customer pays late. Review the covered amount and settlement dates as the commercial position evolves and assess that against the required budget.
The purpose of a risk management strategy is to create certainty that can be used to budget; it does not guarantee the best exchange rate available.
More: The same themes can apply when hedging an existing business loan.
Explore hedging strategies in detail
For a broader comparison of risk management tools, including forward contracts, read our FX risk management guide. For a complete overview of the different hedging options available, please visit our risk management overview.
This case is provided for general information and is not financial advice. FX risk-management products are subject to eligibility, credit assessment and agreed terms. Outcomes depend on the underlying transactions and the contract used.
Review your FX exposure
SwissFx offers a complimentary FX audit to get a complete overview of your current processes and where you have currency exposure. Explore what services are available to enable you to plan ahead.