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Investor Presentaiton

126 A.P. Møller-Mærsk A/S Annual Report 2020 Financials Parent company financial statements Notes index Note 11 Provisions Table 11.1 1 January 2020 Amount used Amount reversed 31 December 2020 Of which: Classified as non-current Restructuring Other Total Table 11.1 3 78 81 Other includes provisions for unsettled claims, legal dis- putes, etc. 3 3 35 35 43 43 The provisions are subject to considerably uncertainty, cf. note 20. Note 12 Financial instruments and risks The company's derivatives are presented in the balance sheet with the following amounts: Table 12.1 Non-current receivables Current receivables Non-current liabilities Current liabilities Assets/liabilities, net The gains/losses of the derivatives are recognised as follows: 43 43 2020 2019 259 165 317 65 287 324 302 94 -13 -188 Amounts in USD million == Table 12.1 The company's activities expose it to a variety of financial risks: Market risks, i.e. currency risk and interest rate risk ⚫ Credit risk Liquidity risk. The company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise the potential adverse effects on the company's financial performance. The company uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out by a central finance department under policies approved by the Board of Directors. The finance department identifies, evaluates and hedges financial risks in close cooperation with the company's entities. Market risk The sensitivity analyses for currency risk and interest rate risk have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt, and the proportion of financial instruments in foreign currencies remain unchanged from hedge desig- nations in place at 31 December 2020. Furthermore, it is assumed that the exchange rate and interest rate sensi- tivities have a symmetric impact, i.e. an increase in rates results in the same absolute movement as a decrease in rates. The sensitivity analyses show the effect on profit and equity of a reasonably possible change in exchange rates and interest rates. Table 12.2 Hedges comprise primarily currency derivatives and in- terest rate derivatives, which are further described in the following sections. Table 12.2 Hedging interest rate risk Total effective hedging Ineffectiveness recognised in financial expenses Total reclassified from equity reserve for hedges 2020 2019 -25 -26 -25 -26 -12 -4 -37 -30 Derivatives accounted for as held for trading Currency derivatives recognised directly in financial income/expenses Interest rate derivatives recognised directly in financial income/expenses 199 66 59 19 Oil prices and freight rate derivatives recognised directly in other income/costs Net gains/losses recognised directly in the income statement -1 258 84 Total 221 54 Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the company's profit or the value of its holdings of finan- cial instruments. The sensitivity analyses in the currency risk and interest rate risk sections relate to the position of financial instruments at 31 December 2020.
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