58
Cash and cash equivalents
Cash equivalents comprise balances with less than three months’ maturity, including cash, bank deposits and other current
securities.
Cash flow statement
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The indirect method is used for flows from operating activities.
The changes during the year in operating assets and operating liabilities have been adjusted for the effects of changes in
exchange rates. Acquisitions and disposals are recognized under investing activities. The assets and liabilities that acquired
and divested companies had at the time of the change are not included in the analysis of the changes in operating capital, nor in
changes to balance sheet items recognized under investing and financing activities. These items are reported separately under
investing activities.
Earnings per share
The calculation of earnings per share is based on the consolidated profit attributable to the Parent’s shareholders and the
weighted average number of shares outstanding during the year.
When determining earnings per share after dilution, a company must base its calculations on the company’s shares and
stock options which could result in dilution being exercised. Compensation from these instruments will be deemed to have been
received from the issuing of ordinary shares at the average market price for ordinary shares during the period. The difference
between the number of issued ordinary shares and the number of ordinary shares that should have been issued at the average
market price for ordinary shares during the period shall be treated as an issue of ordinary shares without consideration.
According to paragraph 47 of IAS 33, options and stock options only have a dilutive effect when the average market price for
ordinary shares during the period exceeds the exercise price for options or stock options.
Transfer pricing
Pricing between Group companies is carried out on market terms.
Dividend
The dividend to shareholders in the Parent is recognized as a liability in the consolidated financial statements in the period when
the dividend was approved by the shareholders.
Accounting policies – Parent
The Parent company has prepared its financial statements in accordance with the Swedish Annual Accounts Act and the Swedish
Financial Reporting Board’s recommendation RFR 2 “$FFRXQWLQJIRUOHJDOHQWLWLHV´1RGLIIHUHQFHVZLWKWKH*URXS¶VDFFRXQWLQJ
policies have been identified.
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Financial risk management
The AAK Group’s operations are exposed to various financial risks, including market price risks (on raw materials, currencies and
interest rates), liquidity risk and credit risk. Since our products are sold throughout the world, our sales revenues are exposed to
market fluctuations in the exchange rates of the currencies involved. Moreover, the Group buys its raw materials on international
markets, so its cost of raw materials is exposed to market fluctuations in both the price of the raw materials and the exchange
rates of the currencies involved.
Exposure to such significant financial risks makes managing these risks a significant factor in successful operations. We
believe that we are largely successful in managing risks owing to the policies and procedures established for the Group.
The Group’s management of price risk and other risks related to purchasing of raw materials is regulated by AAK’s policy and
principles on the management of market risk for raw materials, while currency risks and other financial risks are regulated by
AAK’s financial policy and principles. Policies and principles are established by AAK’s Board of Directors, which also monitors,
evaluates and updates these policies and principles annually.
Raw material price risks
The Group’s annual costs for raw materials are two-thirds of the sales value of the finished products. AAK hedges both operational
raw material price risk and the underlying operational currency risk when sales agreements are signed with customers.
Raw material prices fluctuate, so the Group has assigned a high priority to raw material procurement and to managing this
exposure. Raw material procurement is managed by the Group procurement organization, which continually monitors and
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organization is permitted to take limited price risks within the framework of our trading policy established by the Board of
Directors. Since these raw material positions are managed appropriately, AAK’s profitability is affected only marginally by
price changes. The effect on total sales and requirements for working capital is, however, significantly larger.
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futures traded on commodity exchanges, or using OTC hedge contracts or physical purchase contracts.
Exotic raw materials (of which shea is by far the most important) must be sourced when they are available right after the harvest
season. No efficient hedge market exists for exotic raw materials. Therefore the Group is typically left with a significant unhedged
volume of exotic raw materials in the months following the harvest season. The Group endeavors to limit this exposure by
entering into new exotic-raw-material-based sales contracts during the months in which the exotic raw materials are sourced.
AAK uses fair-value hedge accounting on stocks of oils and fats.