Arla Foods Consolidated Annual Report 2021
99
Arla Foods Consolidated Annual Report 2021 / Consolidated Financial Statements / Notes
Funding
4.3 NET INTEREST-BEARING DEBT
Contents
III
abu
INCREASED NET INTEREST-BEARING DEBT
Net interest-bearing debt, excluding pension liabilities,
increased to EUR 2,221 million compared to EUR 2,180
million last year.
Pension liabilities decreased by EUR 2 million to
EUR 245 million. Net interest-bearing debt, including
pension liabilities, amounted to EUR 2,466 million
compared to EUR 2,427 million last year. The UK
pension scheme net assets were EUR 55 million
compared to EUR 40 million last year. These assets
are excluded from the calculation of pension liabilities,
net interest-bearing debt and leverage.
Arla's leverage ratio was 2.6, a decrease of 0.1
compared to last year. This was below the long-term
target range of 2.8 to 3.4, underpinning a strong
financial position.
The average maturity of interest-bearing borrowings
increased by 0.8 years to 5.8 years. Average maturity is
impacted by new facilities and offset by a lapse of time
to maturity and the level of net interest-bearing debt.
The equity ratio increased to 37 per cent, compared to
35 per cent last year.
Funding
The group applies a diversified funding strategy to
balance the liquidity and refinancing risk with the aim
of achieving low financing costs. Major acquisitions or
investments are funded separately.
A diverse funding strategy includes diversification of
markets, currencies, instruments, banks, lenders and
maturities to secure broad access to funding and to
ensure that the group is independent of one single
funding partner or one single market. All funding
opportunities are benchmarked against the three-
month EURIBOR rate, and derivatives are applied
to match the currency of our funding needs. The
interest profile is managed with interest rate swaps
independently of the individual loans.
The credit facilities contain financial covenants on
equity/total assets and minimum equity, as well as
standard non-financial covenants. The group did not
default on or fail to fulfil any loan agreements in 2021.
During Covid-19, governments offered different
programmes to subsidise companies. However, the net
effect on net interest-bearing debt is limited for the
group.
During 2021, the group had a limited need for new
funding. The most significant funding activities during
the year were:
• Five-year EUR 400 million ESG-linked revolving credit
multi-bank facility
Five-year bond issue of SEK 1,500 million
• Seven-year EUR 100 million credit facility from
European Investment Bank
• Arla has a commercial paper programme in Sweden
denominated in SEK and EUR. The programme was
unutilised at the end of the year due to a strong
liquidity position. The average utilisation in 2021 was
EUR 122 million
Net interest-bearing debt
(EURM)
⚫During the year, Arla entered into sale and repurchase
arrangements based on its holdings in listed
AAA-rated Danish mortgage bonds. Refer to Note 4.6
for more details.
3,000
2,500
2,000
1,500
1,000
500
1,636
2017
Leverage
Pension liabilities
1,647 10
2018
2,113
2019
2
2,180
2020
2,221
2021
Net interest-bearing debt excluding pension liabilities
Target range for leverage 2.8 - 3.4
Table 4.3.a Net interest-bearing debt
(EURM)
Long-term borrowings
4
Net interest-bearing debt consists of current and
non-current liabilities, less interest-bearing assets.
The definition of leverage is the ratio between net
interest-bearing debt including pension liabilities and
EBITDA, and expresses the group's capacity to service
its debt. The group's long-term target range for
leverage is between 2.8 and 3.4.
3
2
Leverage
1
2.6
0
2020: 2.7
2021
2020
2,113
1,964
Short-term borrowings
644
766
Securities, cash and cash equivalents
-531
-546
Other interest-bearing assets
-5
-4
Net interest-bearing debt excluding pension liabilities
Pension liabilities
2,221
2,180
245
247
Net interest-bearing debt including pension liabilities
2,466
2,427View entire presentation