Getinge 2022 Annual Report

Getinge 2022 Annual Report NOTE 28 Financial risk management Introduction Strategy Corporate Governance Annual Report Sustainability Report Other information Contents Through its global operations, Getinge is exposed to a number of financial risks in the form of currency risks, interest-rate risks, financing risks, and credit and counterparty risks. Risk management is regulated by the finance policy adopted by the Board with an associated Treasury directive decided by the Getinge Executive Team and is revised every year. The ultimate responsibility for managing the Group's financial risks and developing methods and principles of financial risk management lies with the Getinge Executive Team and the finance function. Getinge's financial activities are centralized to benefit from economies of scale, to ensure good internal control and to facilitate monitoring of risk. Currency risks Currency risks comprise exchange-rate fluctuations, which have an impact on the Group's earnings and equity. Currency exposure occurs in connection with payments in foreign currency (trans- action exposure) and when translating foreign subsidiaries' balance sheets and income statements to the presentation currency SEK (translation exposure). Transaction exposure The Group's payment flows in foreign currencies are mainly generated by export sales, with the largest flows in USD, EUR, CNY and JPY. Getinge's finance policy stipulates that forecast net flows in foreign currency can be hedged for up to 24 months. Hedging is conducted using currency forwards, currency swaps and currency options. The market value of financial currency derivative instruments that meet the cash flow hedging requirements amounted to SEK-27 M (-22) on December 31, 2022. Translation exposure-income statement When translating the results of foreign subsidiaries into SEK, a translation difference arises, which affects the Group's earnings when exchange rates fluctuate. Getinge does not hedge this risk. Translation exposure-balance sheet When translating net assets of foreign subsidiaries into SEK, a translation difference occurs, which can affect consolidated other comprehensive income. Although Getinge does not have the specifically stated goal of hedging translation exposure, the Group's lending in foreign currency took place in currencies that limit translation exposure. Impact of exchange-rate fluctuations The effect of exchange-rate movements on earnings and equity below is calculated using volumes and earnings in foreign currency for 2022, taking into consideration currency hedging that has been conducted. In addition, there is the exchange-rate impact on net financial items related to interest expenses in foreign currencies. For a rate movement of 5%, the impact on equity of a remeasurement of the Group's portfolio of currency derivatives held for hedging purposes is about SEK 16 M. At a 5% rate movement, the impact of other translation effects on equity is approximately SEK 1,414 M. The extent to which earnings are impacted by exchange-rate fluctuations is detailed in the following table, based on the exchange rates specified. Impact in SEK M of 5% rate movement Currency: estimated rate in 2023 Net volume in 2022, millions CNY: 1.50 987 +/-74 -199 8,300 343 +/-111 +/- 33 +/- 179 EUR: 11.13 JPY: 0.0792 USD: 10.44 Interest-rate risk Interest-rate risks are the changes in market interest rates that affect the Group's net interest. Of the total loan portfolio of SEK 4,510 M, SEK 289 M was raised with fixed interest and all other loans with variable interest. There were no financial interest-rate derivative instruments at year-end. If the average interest rate for currencies represented in the Group's loan portfolio at the end of the year changed by 1 percentage point, this would affect profits by +/- SEK 41 M on an annual basis. Financing and liquidity risks Financing risk is defined as the risk of the cost being higher and financing opportunities limited as the loan is renegotiated. This also includes not being able to fulfill payment commitments as a result of insufficient liquidity or difficulties in securing funding. Financing risk can arise through disruptions in the financial markets, for example, decisions on new regulations or the imple- mentation of recently enacted laws. Getinge endeavors to have an investment grade credit rating. The Group's existing credit facilities are currently deemed to be sufficient. The Group's sources of financing primarily comprise equity, cash flow from operating activities and borrowing. To reduce financing risks, the Group strives to diversify its sources of financing and maturities according to the Group's finance policy and financing strategy. The single largest loan is a syndicated loan of EUR 490 M with seven banks, of which EUR 70 M falls due in 2023 and EUR 420 M in 2024. In 2022, the Group renewed the existing MTN program from 2012 to issue bonds in the Swedish capital market. SEK 2,544 M was outstanding under this program at the end of 2022, of which SEK 570 M is a three-year social bond in accordance with the ICMA Social Bond Principles, meaning that the proceeds will exclusively be used for increasing production of ECMO equip- ment and DPTE®-Beta Bags. In addition to these credit facilities, the Group has short-term uncommitted credit lines. For further information on these credit lines, refer to Note 18. As of December 31, 2022, the Group's borrowings were in line with the requirements under the finance policy pertaining to diversification of lenders and maturity dates. 104

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