MOST Malaysian companies reported weak financial numbers recently, highlighting the many ways a global economic downturn can hit earnings.

Apart from sluggish demand from consumers abroad, currency movements are also becoming a more important reason for lower profits.

"Foreign exchange (forex) losses are certainly one of the main themes for most companies in this reporting season. However, at the end of the day, it is just accounting losses," ECM Libra Investment Research head Ching Weng Jin told Business Times.

Companies must deal with the effects of a stronger or weaker foreign currency in their accounts immediately, due to accounting rules. However, they are unrealised, which means that no payments were made and it won't change a company's cash position.

Big companies, mainly those with international presence or have borrowed in the US currency, were badly hit in the final quarter of 2008.

A weaker ringgit against some major currencies has made debt payments more expensive for these companies.

The quarter's worst two performers, Tenaga Nasional Bhd and TM International Bhd, were mainly hit by a weak ringgit. IOI Corp Bhd was partly hit by currency losses too.

But analysts said investors should pay attention to a company's business.

"The main thing for us is still the company's operations, because a company which suffered forex losses last year could bounce back this year as soon as the economy recovers and ringgit strengthens," Ching said.

Still, most companies reported worse-than-expected numbers.

"Overall, companies performance were slightly below my expectations. So many rapid developments the effects of which were difficult to quantify," said Jupiter Securities Sdn Bhd's head of research Pong Teng Siew.

Only six of the top 20 companies posted better quarterly results, they include, PPB Group, Hong Leong Bank Bhd, British American Tobacco (Malaysia) Bhd, RHB Capital Bhd, Public Bank Bhd and Malayan Banking Bhd.

"The banks did much better than I had expected," said Pong.

This year, analysts expect earnings to fall further, mainly due to a weaker economy, with forex translation continuing to hurt.

"(Currency) volatility is going to be quite evident this year, with economies still trying to find their footing in the current environment. So reported earnings could be affected somewhat," Ching explained.

Analysts added that corporate earnings may also be hit due to higher provisions, money set aside to cover potential losses, and write- downs.

"Any strong sets of earnings numbers would probably be lost in a market like this where sentiment is poor and interest is weak. So, it may be a good time for companies to take all these hits now," said an analyst who declined to be named.