Risk factors
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LISI 2014FINANCIALREPORT
2.6.2Energy-relatedrisks
To cover its energy costs, theGroupentered intoa supply contractwith
electricity company EDF for its French sites (due to expire in 2015). For
foreignsites,similarcontractshavealsobeenentered into,particularly in
GermanyandtheUK.
2.6.3Commercialrisks
Fortherecord,theGroupmanufacturesseveralthousanddifferent items
using various rawmaterials (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). Business
risk, representing the risk of loss of contracts related to a product, is
thus spread over a considerable number of productsmanufactured in
the Group's 41 global sites. The main product families are developed
in collaborationwith customers, and the proportion of turnover from
patentedproductsplaysonlyasecondaryrole intotalconsolidatedsales.
2.6.4Customer-relatedrisks
Looking at the figures for 2014, only 3 clients accounted formore than
5% of the LISI Group’s consolidated sales. Our 10 largest customers
accountedfor51.9%oftotalsales;this list includesclientsofall3divisions,
LISI AEROSPACE, LISI AUTOMOTIVE and LISI MEDICAL. Our 55 largest
customers accounted for 80% of sales. Figures for our 3 largest
customershaveevolvedas follows:
2014
2013
2012
CUSTOMERA
15.8% 15.2% 15.1%
CUSTOMERB
6.4%
6.0%
8.7%
CUSTOMERC
5.2%
5.6%
6.1%
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 the LISI AEROSPACEdivisionhas set
upanadditionalprovision forproduct liability intheamountof1%ofthe
salesrevenueofthe "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 company’s main suppliers are those
that provide it with rawmaterials. Outsourcing is confinedmainly to
technicalapplications,primarilyspecificthermal treatmentand finishing
operations (surface treatment andassembly), sincemost of theGroup’s
activitiesare integrated. For 2014, thevariousoperationsoutsourcedby
theGroup’s sites represented approximately 6.2%of consolidated sales
revenue.
Thevolumedistributionofthemainsuppliers isas follows:
2014
First supplier
3.1%
First5suppliers
12.2%
First10suppliers
17.2%
2.6.7Currencyrisks
The Group is exposed to the fluctuations of currencies such as the US
dollaragainst theeuro,and toa lesserextent tochanges in theCanadian
dollar, theBritishpound, theTurkish lira, theCzech crownor thePolish
Zloty. To lower this level of risk, the LISI Grouphedges the currency risk
using helpful tools such as forward sales at a fixed rate or structured
products suchasaccumulators foranestimatedamount corresponding
to its finalexposure.
The detail of such currency risk hedging is described in Chapter 3,
paragraph2.4.3.3,aswellasthehedgingstrategy inplace.
2.6.8Interestraterisk
TheGrouphas hedged a significant part of the interest rate risk on its
loansbyswappingvariableratesforfixedrates.Thedetailofsuch interest
rateriskandofthe instrumentsusedtomitigate it isdescribed inChapter
3,paragraph2.4.3.1.
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Insurancepolicy
The LISI Group has several insurance policies, whichmainly cover the
followingrisks:
3.1
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Propertydamage insurance
Asof January 1,2015, thispolicycoveredownandothers’ installations,as
wellasoperating losses intheeventofaclaim.Thedeductible isstatedby
claimandamountsto€0.1M(€0.15MfortheManoirAerospacesites),and
this foramaximumcoverageamountof€1,490,989,194 for thebuildings
and equipment, €270,958,704 for merchandise, and €683,287,298 for
operating losses.
