LISI 2012 FINANCIAL REPORT
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Risk factors
2.6 Other risks
2.6.1 Rawmaterials risks
The LISI Group is potentially exposed to changes in the
costs of the raw materials (steel, alloys, plastics, aluminum,
and titanium) used in the course of its business activities.
Nevertheless, the Group estimates that such price increases
are unlikely to impact negatively on its profit margins. Indeed,
some commercial contracts include price-revision formulae
which allow selling prices to be varied in accordance with
changes to raw material costs. Suppliers work to limited time
frames based on guaranteed-price contacts. At December
31, 2012, the LISI Group uses no financial instruments to
manage its future exposure to changes in the costs of such raw
materials. It can still benefit from agreements with suppliers to
hedge against annual or multi-year periods to limit the impact
of fluctuations in ore prices.
2.6.2 Energy-related risks
To cover its energy costs, the Group entered into a supply
contract with electricity company EDF for its French sites (due
to expire in 2015).
For foreign sites, similar contracts have also been entered into,
particularly in Germany and the UK.
2.6.3 Commercial risks
For the record, the Group manufactures several thousand
different items using various raw materials (steels, alloys,
aluminum, various plastics, titanium, etc.) and employing
a range of technologies (cold and hot forming machines,
forming, machining, die trimming and stamping, plastic
injection, thermal processes and surface treatment). As a result,
the commercial risk is spread over a considerable number of
products manufactured at the 38 LISI sites around the world.
The main product families are developed in collaboration with
customers, and the proportion of turnover from patented
products plays only a secondary role in total consolidated sales.
2.6.4 Customer-related risks
Looking at the figures for 2012, only 7 clients accounted for
more than 5% of the LISI Group’s consolidated sales. Our
10 largest customers accounted for 51.5 % of total sales;
this list includes clients of all 3 divisions, LISI AEROSPACE,
LISI AUTOMOTIVE and LISI MEDICAL. Our 38 largest customers
accounted for 75% of sales.
Figures for our 3 largest customers have evolved as follows:
2012
2011
2010
CUSTOMER A
15.1% 12.0%
7.8%
CUSTOMER B
8.7 % 8.3%
9.0%
CUSTOMER C
6.1 % 7.1%
6.9%
2.6.5 Product-related risks
The LISI Group is exposed to the risk of actions for liability or
to enforce a guarantee by its customers regarding products
sold. It is also subject to liability actions in the event of product
fault leading to injury or damages. To protect itself against such
risks, as described in paragraph 3 below, the LISI Group has third
party liability cover for use of its products after delivery. The LISI
Group’s liability is often limited to compliance with the original
product specifications or customer-defined specifications; it
cannot be extended to the ways in which products are used.
However, it is possible that the insurance policy taken out may
not be sufficient to cover every possible financial consequence
eventuality linked to such claims, particularly in the USA. This is
why the Aerospace Division has set up an additional provision
for product liability in the amount of 1% of the sales revenue of
the "Fasteners" business.
2.6.6 Supplier-related risks
As a general rule and in view of the nature of its manufacturing
activities, the company does not rely exclusively on any one
supplier or strategic subcontractor. The company’s main
suppliers are those that provide it with raw materials.
Outsourcing is confined mainly to technical applications,
primarily specific thermal treatment and finishing operations
(surface treatment and assembly), since most of the Group’s
activities are integrated. For 2012, the various operations
outsourced by the Group’s sites represented approximately
5.9% of the consolidated sales revenue.
2.6.7 Currency risks
The Group may have certain exposures to variations in
currencies such as the US dollar, the Canadian dollar, the pound
sterling, the Turkish pound or the Polish zloty. In order to reduce
this level of risk, the LISI Group hedges the risk of variations
by using the necessary instruments, such as forward sales at
fixed rates for an estimated amount corresponding to its final
exposure (see note on hedging in the Notes). These risks are
further detailed in Chapter 3, paragraph 2.4.
