P&G, Avon fall on Venezuela devaluation

President Hugo Chavez cuts the value of the bolivar in half.

Shares of Procter & Gamble (PG), Avon Products (AVP) and Colgate-Palmolive (CL) were feeling the effect of Venezuela President Hugo Chavez's decision late Friday to devalue the bolivar.

Chavez devalued the currency by 50%, to 4.3 boliva per US dollar from 2.15 per dollar, for most imports and transactions. The new rate for food and essential items is now 2.6 per dollar.

Devaluation "will give a boost to the productive economy, will stop imports that are not strictly necessary and will stimulate exports," Chavez said, according to The Wall Street Journal.

Shares of P&G were down 55 cents to $59.89, while Avon shares were lower by $1.14, or 3.6%, to $30.33. Colgate was down $1.16, or 1.4%, to $80.35.

BMO Capital Markets analyst Connie Maneaty downgraded the entire personal and household product sector to "market perform" from "outperform," saying that many companies were ill prepared for Venezuela's currency devaluation.

Colgate now expects charges of 4 cents to 6 cents per share each quarter this year, as its products "are expected to fall into the nonessential classification." Analysts believe that Venezuela makes up about 6% of Colgate's sales.

Avon said it is "looking closely" at the change, and P&G said it is reviewing the situation.

Avon had as much as $135 million in local currency in Venezuela at the end of the third quarter, Maneaty said.

P&G derives a greater amount of sales from Venezuela than its peers, but they account for a smaller, undisclosed percentage of its total sales.

Venezuela's devaluation is "important on the headline for many of the multinationals," David Lutz, managing director of equity trading at Stifel Nicolaus, told Bloomberg News. "Bottom line, the market hates uncertainty."