Arla Foods Annual Report 2020
Management Review
Our Strategy
Our Brands and Commercial Segments Our Responsibility
Our Governance
Our Performance Review Our Consolidated Financial Statements
Our Consolidated Environmental, Social and Governance Data
Funding
4.1 FINANCIAL RISKS
Table 4.1.2.a Exchange rates
2020
Closing rate
2019
Change
2020
Average rate
2019 Change
ā Risk mitigation
EUR/GBP
EUR/SEK
EUR/DKK
EUR/USD
EUR/SAR
0.903
0.854
-5.7%
0.889
10.081
10.470
3.7%
10.483
0.877
10.587
7.441
7.472
0.4%
7.454
7.466
1.230
1.120
-9.8%
1.140
1.119
4.616
4.201
-9.9%
4.279
4.199
-1.3%
1.0%
0.2%
-1.8%
-1.9%
Table 4.1.2.b Currency exposure
Balance sheet
exposure
Potential
accounting impact
Hedge of
Open
positions
future
cash flow
External
Income
exposure Sensitivity statement
Other
compre-
hensive
income
The group's external exposure is calculated as external
financial assets and liabilities denominated in currencies
different from the functional currency of each legal
entity, plus any external derivatives converted on group
level into currency risk against DKK, i.e. EUR/DKK, USD/
DKK etc. The same also applies to the group's net
internal exposure. The aggregate of the group's external
and internal currency exposure, represents the net
exposure, which is outlined in Table 4.1.2.b.
Net foreign currency investments in subsidiaries, as well
as instruments hedging those investments, are
excluded.
Risk
The group operates in many different countries and has
significant investments in operations outside of
Denmark, of which the UK, Germany and Sweden,
represent the largest part of the business by net
revenue, profit and assets. A major part of the currency
risk from net revenue denominated in foreign
currencies is offset by sourcing in the same currency.
The currency exposure is continuously managed by the
treasury department. Individual currency exposures are
hedged in accordance with the treasury and funding
policy.
Financial instruments used to hedge the currency
exposure do not necessarily need to qualify for hedge
accounting, and hence some of the applied financial
instruments, i.e. some option strategies, are accounted
for as fair value through the income statement.
Arla Foods amba's functional currency is DKK. However,
the risk in relation to the EUR currency is assessed in
the same manner as for DKK. The Executive Management
Team has the discretion to decide if and when
investments in foreign operations should be hedged
(translation risks) with an obligation to inform the Board
of Directors at the next meeting.
2020
EUR/DKK
-94
USD/DKK*
GBP/DKK
SEK/DKK
-35
SAR/DKK
72918
-10
-104
1%
-1
10
-197
-187
5%
-9
-415
-424
5%
-87
-122
5%
-2
1112
-10
-21
-4
Policy
-187
-179
5%
-9
According to the treasury and funding policy, the
2019
EUR/DKK
-346
0
-346
1%
-3
0
treasury department can hedge:
Up to 15 months of the net forecasted cash receipts
and payables.
USD/DKK*
219
-276
-57
5%
11
-14
Up to 100 per cent of net recognised trade receivables
and trade payables.
GBP/DKK
39
-311
-272
5%
2
-16
SEK/DKK
-24
0
-24
5%
-1
0
SAR/DKK
-165
-24
-189
5%
-8
-1
*Incl. AED
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