84
I LISI FINANCIALREPORT2013
RISKFACTORS
5
2.6.3Commercialrisks
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).
Asa result, the commercial risk is spreadover a considerablenumberof
productsmanufacturedat the 39 LISI sites around theworld. Themain
product familiesaredeveloped incollaborationwithcustomers,and the
proportionof turnover frompatentedproducts plays only a secondary
role intotalconsolidatedsales.
2.6.4Customer-relatedrisks
Looking at the figures for 2013, only 4 clients accounted formore than
5% of the LISI Group’s consolidated sales. Our 10 largest customers
accountedfor50.7%oftotalsales;thislistincludesclientsofall3divisions,
LISI AEROSPACE, LISI AUTOMOTIVE and LISI MEDICAL. Our 35 largest
customersaccountedfor75%ofsales.Figuresforour3 largestcustomers
haveevolvedas follows:
2013
2012
2011
CUSTOMERA
15.2%
15.1%
12.0%
CUSTOMERB
6.0%
8.7%
8.3%
CUSTOMERC
5.6%
6.1%
7.1%
2.6.5Product-relatedrisks
TheLISIgroup isexposed to the riskofactions for liabilityor toenforcea
guaranteeby its customers regardingproducts sold. It isalso subject to
liabilityactions intheeventofproductfault leadingto injuryordamages.
To protect itself against such risks, as described in paragraph 3 below,
the LISIGrouphas thirdparty liability cover for useof itsproducts after
delivery. TheLISIGroup’s liability isoften limited tocompliancewith the
original product specifications or customer-defined specifications; it
cannotbeextendedtothewaysinwhichproductsareused.However,itis
possiblethatthe insurancepolicytakenoutmaynotbesufficienttocover
every possible financial consequence eventuality linked to such claims,
particularly in theUSA. This iswhy theAerospaceDivisionhas setupan
additionalprovision forproduct liability in theamountof 1%of thesales
revenueofthe "Fasteners"business.
2.6.6Supplier-relatedrisks
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 main suppliers are those from which
the Group procures rawmaterials. Outsourcing is confinedmainly to
technicalapplications,primarilyspecificthermal treatmentand finishing
operations (surface treatment andassembly), sincemost of theGroup’s
activities are integrated. For 2013, thevariousoperationsoutsourcedby
the Group’s sites represented approximately 5.8% of the consolidated
salesrevenue.
2.6.7Currencyrisks
TheGroupmayhavecertainexposurestovariations incurrenciessuchas
theUSdollar, theCanadiandollar, thepoundsterling, theTurkishpound
or the Polish zloty. In order to reduce this level of risk, the LISI Group
hedges the riskofvariationsbyusing thenecessary instruments, suchas
forwardsalesatfixedratesforanestimatedamountcorrespondingto its
finalexposure (seenoteonhedging intheNotes).
Theserisksare furtherdetailed inChapter3,paragraph2.4.
2.6.8Interestraterisk
TheGrouphas hedged a significant part of the interest rate risk on its
loansbyswappingvariablerates for fixedrates.
.
3
| INSURANCEPOLICY
The LISI Group has several insurance policies, whichmainly cover the
followingrisks:
3.1
|
PROPERTYDAMAGE INSURANCE
As of January 1, 2014, this policy covered own and others’ installations,
as well as operating losses in the event of a claim. The deductible is
statedbyclaimandamountsto€0.1m,andthisforamaximumcoverage
amount of €1,159,123,610 for the buildings and equipment, €228,982,681
formerchandise,and€683,287,298 foroperating losses.
3.2
|
THIRD-PARTYLIABILITY INSURANCE
This covers personal, physical and intangible damage thatmight occur
during operations, as well as damages that occur after delivery, to the
sumof €15.2millionper claimandper annum inprimary coverage. The
Group isalsocoveredbyanExcesspolicyfortheamountof€7.6million in
addition to theprimary coverage. A civil liability insurancepolicy covers
the specific risks related tomedical devices foranamountafterdelivery
of €5mper loss andper year for the primary coverage. TheGroup also
has anExcess contract forwhich theamount is€10m inaddition to the
primary coverage. The aforementioned insurance policies intervene for
the3rdand4th lines, respectively.
LISI AEROSPACE signed an insurance contract covering its liability
for injury, property damage and consequential damage and flight
disruptionsdue to itsdeliveredaerospaceproducts.Thesum insured for
allsubsidiaries,per lossandper insuranceyear is€500million.
3.3
|
CORPORATEOFFICERS’ LIABILITY INSURANCE
The Group is covered by a directors’ liability insurance policy for all its
subsidiariesupto€7.7millionperyear.
