Note Financial risk management and hedge accounting
Sensitivity analysis – raw materials (excluding exotic
raw materials)
With the stocks and commercial contracts hedged by raw
material hedge contracts, leaving a very limited net exposure,
changes in raw material prices have no significant effect on
the Group’s profit margin. A 10 percent change in all raw
material prices would therefore have a negligible effect on
Group operating profit.
Gross contribution for rapeseed
As explained above, our policies and procedures for risk
management in general imply that our profit margin is not
affected by changes in raw material prices. However, AAK
cannot eliminate its exposure to market price fluctuations
in relation to rapeseed crushing. The crushing margin (oil
plus meal value less seed price) can vary over time and
can thereby directly affect profitability within the Technical
Products & Feed business area.
Exposure to foreign currency
A significant portion of the Group’s buying and selling of raw
materials is denominated in foreign currency. Moreover, most
of the Group’s operational subsidiaries are located outside
Sweden. Changes in exchange rates therefore affect AAK in
several ways:
Exposure to transaction risk, December 31, 2018
SEK million Assets Liabilities Sales contracts Purchase contracts
Currency contracts
Sold Bought Net exposure
USD 3,265 -3,999 -759 170 -2,105 3,332 -96
EUR 1,768 -717 2,172 -699 -3,222 681 -17
GBP 37 -474 45 0 -452 845 1
Other 382 -251 554 -332 -3,032 2,692 13
Total 5,452 -5,441 2,012 -861 -8,811 7,550 99
Exposure to transaction risk, December 31, 2017
SEK million Assets Liabilities Sales contracts Purchase contracts
Currency contracts Net
Sold Bought exposure
USD 3,326 -4,791 -558 16 -1,509 3,539 23
EUR 1,564 -786 1,392 -188 -2,395 417 4
GBP 45 -461 40 -2 -444 824 2
Other 468 -1,049 440 -231 -2,350 2,724 2
Total 5,403 -7,087 1,314 -405 -6,698 7,504 31
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Sales contracts and raw material contracts in foreign
currency give rise to transaction risk.
Profits for our foreign subsidiaries are affected by changes
in currency rates when they are translated to SEK.
The Group’s equity is affected when equity in our foreign
subsidiaries is translated to SEK.
AAK hedges all its currency transaction risks. Payment for
all sales contracts is thus hedged in the local currency of
the subsidiaries that have entered into such sales contracts.
Exchange rate risk related to translating equity and profit/loss
in our foreign subsidiaries to SEK is not hedged.
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