LISI FINANCIALREPORT2013 I
41
CONSOLIDATEDFINANCIALSTATEMENTS
3
TheGroupbuys and sellsderivatives and supports financial liabilities in
ordertomanagemarketrisk.
Hedging and market operations on interest rates, exchange rates or
securities using futures instruments are recorded in accordance with
theprovisionsofCRBF rulesnos.88-02and90-15.Commitments relating
to these transactions are posted to off-balance sheet accounts for the
nominalvalueofthecontracts.AsatDecember31,2013, thesumofthese
commitments represented the volume of transactions that remained
unsettledatyear-end.
The accounting principles applied vary according to the nature of the
instrumentsandtheoperator’s initial intentions.
Thecommitmentsaredetailed inparagraph2.7.4.1ofthisannual report.
Interest rate risk
TheGroup’sprincipalexposureintermsofinterestrateriskarisesfromthe
exposureof itsfinancialassetsand liabilitiesatvariableratestovariations
in interestrates,whichcouldhavean impactonthesecash flows.
Within the frameworkof itsoverall policy, theGrouppartly converts its
initially variable rate liabilities into fixed rate liabilities, using financial
instrumentssuchas interestrateswapsand interestrateoptions.
These hedging instruments are negotiated on OTC markets with
banking counterparts, in a centralizedmanner by theGroup's Financial
Department. They are not considered by the Group to be hedging
instrumentsandarerecordedat fairvaluetothe incomestatement.
In2013, theGroupdidnotputanynewhedges inplaceand theamount
of its unexpired instruments at December 31, 2013 covered a nominal
amount of €56.5m. The features of these instruments are presented in
note2.7.4 "Commitments".
As at December 31
st
, theGroup’s net variable rate positionbroke down
as follows:
(In€'000)
12/31/13
12/31/12
Loans–variable rates
71,542 138,900
Short-termbanking facilities
8,224 10,892
Other currentandnon-current financial assets
(35,892)
Cashandcashequivalents
(78,600)
(30,625)
Netpositionprior tomanagement
1,166 83,275
Interest rateswap
56,491 75,353
Hedging
56,491 75,353
Netpositionaftermanagement
(55,325)
7,922
Theapproachtakenconsisted intaking intoaccountasacalculationbasis
forthesensitivitytoratesthenet, lendingandborrowingpositions.
As at December 31, 2013, the impact of the nonhedgedportion of 100
basepointsofvariableratechangestoodat+/-€0.6million.
Commoditiesprice fluctuation risk
This issue isdealtwith inChapters5§4.6.1.
Currency risk
Overall, theGroup issubjecttotypesof foreignexchangerisk:
n
Outside the EUR and USD zones, it has production facilities in a
dozen countries, inwhich themajority of the sales of its subsidiaries
are denominated in EUR or in USD, whereas their costs aremainly
denominated in local currency,which is theGBP, CAD, TRY, CZKand,
to a lesser extent, theMAD, CNY, INR andPLN, giving rise to a cash
requirement in local currencies. A strengthening of these currencies
wouldaffectthebusinessperformanceofthegroup;
n
TheUSDconstitutes thesecond invoicingcurrencyof theGroup, after
the EUR, mainly in the LISI AEROSPACE Division. Invoicing in other
currencies isnotsignificantattheGroupscale.AweakeningoftheUSD
wouldaffectthebusinessperformanceoftheGroup.
Inordertoprotect itsresults,theGroup is implementingahedgingpolicy
aimed at reducing the factors of uncertainty affecting its operational
profitabilityandat giving it the timenecessary toadapt its costs toany
unfavorablemonetaryenvironment.
Hedgingof the foreignexchangeon risk local currencies
TheGrouphas verygood visibilityover its local currency requirements.
Also, it hedging policy is based on themanagement of a portfolio of
financial instruments enabling it not to descend below a parity floor,
whilstenabling itwhereapplicabletobenefitfromapartial improvement
in the underlying parities, without however putting at risk the original
floor.Thehedginghorizon is12-24months.
HedgingofUSDcurrency risk
As indicated above, the generation of USD arises mainly from the
Group's LISI AEROSPACE Division, which benefits from long-term
contracts providing for invoicing in this currency. The hedging policy
is based on themanagement of a portfolio of financial instruments ,
enabling it toobtainanoptimizedhedging rateby reference tonormal
market terms. Thehedginghorizonmayextendoverup to8years. This
strategy enabled theGroup, in 2013, to sell a total amount of USD 10.4
million atanaverageratecloseto1.18.
