Novo Nordisk Annual Report 2021
Contents
Introducing Novo Nordisk
Strategic Aspirations
Key risks Management
Consolidated statements
Additional information
Novo Nordisk Annual Report 2021 70
Credit risk
Credit risk arises from the possibility that transactional counterparties
may default on their obligations, causing financial losses for the Group.
Credit risk exposure to financial counterparties
Credit exposure for cash at bank, marketable securities and derivative
financial instruments (fair value)
Cash at Marketable
bank
Derivative
financial
securities instruments
Total
Poor's, Moody's and Fitch. Furthermore, maximum credit lines defined for
each counterparty diversify the overall counterparty risk. The credit risk on
marketable securities is low, as investments are made in highly liquid bonds
with AAA credit ratings.
Credit risk exposure to non-financial counterparties
Outside the US, Novo Nordisk has no significant concentration of credit
risk related to trade receivables or other receivables and prepayments, as
the exposure in general is spread over a large number of counterparties
and customers. In the US, the three major wholesalers account for a large
proportion of total net sales, see note 2.1. However, US wholesaler credit
ratings are monitored and part of the trade receivables are sold on full non-
recourse terms; see below for details.
Novo Nordisk closely monitors the current economic conditions of countries
impacted by currency fluctuations, high inflation and an unstable political
climate. These indicators as well as payment history are taken into account
in the valuation of trade receivables. The country risk ratings in 2021
have overall remained unchanged from 2020 to 2021. However, despite
the continued COVID-19 pandemic Novo Nordisk has not experienced
significant increases in collectability issues on individual customers nor has it
experienced significant deterioration in the ageing of receivables.
DKK million
2021
AAA range
477
6,765
AA range
3,726
585
A range
5,637
1,105
7,242
4,311
6,742
BBB range
23
23
Not rated or below
BBB range
857
857
Total
10,720
6,765
1,690
19,175
2020
AAA range
AA range
7,296
A range
4,443
989
1,343
8,285
5,786
DKK million
BBB range
212
212
US
Not rated or below
BBB range
806
806
Japan
Total
12,757
2,332
15,089
Trade receivable programmes
At year-end, the Group had derecognised receivables without recourse
having due dates after 31 December 2021 amounting to:
to the capital structure. Non-current debt consists of fixed rate instruments
and the sensitivity towards interest rates on current debt of DKK 12,861
million (DKK 6,153 million in 2020) is countered by the interest sensitivity
on cash and cash equivalents of DKK 10,719 million (DKK 12,226 million
in 2020). Interest rate risk on marketable securities of DKK 6,765 million is
considered low due to a low portfolio duration.
Liquidity risk
The liquidity risk is considered to be low. Novo Nordisk ensures the
availability of the required liquidity through a combination of cash
management, highly liquid investment portfolios and both uncommitted and
committed credit facilities. Novo Nordisk uses cash pools for optimisation
and centralisation of cash management.
Financial reserves comprise the sum of cash and cash equivalents at the end
of the year, marketable securities with original term to maturity exceeding
three months and undrawn committed credit and loan facilities, with a
maturity of more than 12 months, less loans and bank overdrafts classified
as liabilities arising from financing activities contractually obliged for
repayment within 12 months of the balance sheet date.
Financial reserves
DKK million
2021
2020
2019
Cash and cash equivalents
(note 4.6)
10,719
12,226
15,411
Marketable securities
6,765
2021
2020
2019
Undrawn committed credit facility¹
11,526
11,531
11,578
1,313
1,817
3,672
Undrawn bridge facility²
5,577
2,453
2,351
2,149
Borrowings (Note 4.5)
(12,861)
(576)
(595)
Financial reserves³
16,149
28,758
26,394
Novo Nordisk considers its maximum credit exposure to financial
counterparties to be DKK 19,175 million (DKK 15,089 million in 2020). In
addition, Novo Nordisk considers its maximum credit exposure to trade
receivables, other receivables (less prepayments and VAT receivables) and
other financial assets to be DKK 43,425 million (DKK 29,522 million in 2020).
Please refer to note 4.9 for details of the Group's total financial assets.
To manage credit risk regarding financial counterparties, Novo Nordisk only
enters into derivative financial contracts and money market deposits with
financial counterparties possessing a satisfactory long-term credit rating
from at least two out of the three selected ratings agencies: Standard and
Novo Nordisk's subsidiaries in the US and Japan employ trade receivable
programmes in which trade receivables are sold on full non-recourse terms
to optimise working capital.
In addition, full non-recourse off-balance-sheet factoring arrangement
programmes are occasionally applied by Novo Nordisk subsidiaries around
the world, with limited impact on the Group's trade receivables.
Please refer to note 3.3 for the split of allowance for trade receivables by
geographical segment.
Interest rate risk
Novo Nordisk's exposure to interest rate risk is considered to be low due
1. The undrawn committed credit facility comprises a EUR 1,550 million facility
(EUR 1,550 million in 2020 and EUR 1,550 million in 2019) committed by a portfolio of
international banks. The facility matures in 2025.
2. For 2020, the undrawn bridge facility comprises the EUR 750 million (DKK 5,577
million) undrawn portion of EUR 1,500 million bridge facility. The facility was expected
to mature in 2021 but the terms provided that the maturity could be extended,
at the option of Novo Nordisk to June 2022. Financial reserves for 2020 include
amounts undrawn under credit facilities and overdrafts where the repayment is not
contractually required within 12 months. In accordance with IFRS, the DKK 5,577
million (EUR 750 million) drawn loan was classified as current borrowings in 2020 as it
was Management's expectation that it would be repaid in 2021. The loan was repaid
in 2021.
3. Additional non-IFRS financial measure; please refer to 'Non-IFRS financial measures',
which is not part of the audited financial statements.View entire presentation