Note Financial risk management and hedge accounting
Capital management
AAK defines its managed capital as the Group’s consolidated
equity and net debt. The Group’s objective when managing
capital is to safeguard the Group’s ability to continue as a
going concern and provide an adequate return for shareholders
and benefits for other stakeholders together with
maintaining an optimal capital structure to reduce the cost of
capital. In order to maintain or adjust the capital structure, the
Group may for instance raise new loans, amortize existing
loans, adjust the dividends paid to shareholders, issue new
shares or sell assets to reduce.
AAK’s policy on capital structure is to optimize debt
financing, though not to a level that would threaten the
Company’s position as an investment grade company. When
managing the capital, the Group monitors different measures
including the following target key ratio which is included as
financial covenant under the terms of the major borrowing
facilities. This target level is considered relatively conservative
and contributes to ensuring that AAK will be able to retain its
high credit rating.
Target 2019 2018
Net debt/EBITDA < 3.00 1.10 1.06
The Group’s policy is to allocate total net borrowings per
subsidiary relative to each subsidiary’s share of the Group’s
cash flow. This minimizes the currency risk in relation to the
Group’s ability to pay interest on and amortize its borrowings,
which in turn strengthens the Group’s debt capacity.
Total borrowing reported in the balance sheet,
per currency at balance sheet date
SEK million 2019 2018
SEK 2,795 1,182
DKK 535 780
USD - 399
CNY 216 176
TRY 35 270
BRL - 121
INR 274 241
Other 2 41
Total 3,857 3,212
Liquidity risk
Liquidity risk concerns the Group’s ability to meet its financial
commitments as they fall due.
The following table shows all of the Group’s financial
commitments, listed by the earliest contractual maturity date
at the balance sheet date. All liabilities to banks and credit
institutions are based on variable interest rates, which means
the year-end carrying value reflects the present value of these
liabilities. All liabilities in foreign currency are translated into
SEK at year-end closing rates.
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