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
4.3 NET INTEREST-BEARING DEBT
Increased net interest-bearing debt
Net interest-bearing debt, excluding pension liabilities,
increased to EUR 2,180 million compared to EUR 2,113
million last year. The increase was driven by changed
rules for vacation accruals in Denmark which made EUR
60 million interest-bearing end of September 2020.
Pension liabilities decreased by EUR 2 million to EUR
247 million. Net interest-bearing debt, including
pension liabilities, amount to EUR 2,427 million
compared to EUR 2,362 million last year. The UK
pension scheme net asset was EUR 40 million
compared to EUR 16 million last year. This asset is
excluded in the calculation of pension liabilities, net
interest-bearing debt and leverage.
Arla's leverage ratio was 2.7, 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
decreased by 0.2 years to 5.0 years. Average maturity is
impacted by a lapse of time to maturity, refinancing or
obtaining new committed facilities, and the level of net
interest-bearing debt.
The equity ratio increased to 35 per cent, compared to
34 per cent last year.
Funding
ensure that the group is independent of one single
funding partner or one single market. All funding
opportunities are benchmarked against EURIBOR 3
months and derivatives are applied to match the
currency of our funding needs. The interest profile is
managed with interest rate swaps independent of the
individual loans.
The group applies a diversified funding strategy to
balance the liquidity and refinancing risk with the aim of
a low financing cost. 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
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 2020.
During Covid-19 governments granted different
programmes to subsidise corporates. However, the net
effect on net interest-bearing debt is limited for the
group.
During 2020 the group had limited need for new
funding. The most significant funding activities during
the year were:
An EUR 80 million mortgage loan
Net interest-bearing debt
(EURM)
3,000
Establishment of a new EUR 500 million "Euro
commercial paper" programme and in connection to
this a Covid-19 emergency facility of 300 mGBP from
Bank of England which was never utilised
■■Arla has a commercial paper programme in Sweden
denominated in SEK and EUR. The programme is
unutilised end of year due to a strong liquidity position.
The average utilization in 2020 was EUR 75 million
■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.
2,500
2,000
1,500
1,000
500
1,648
2016
Leverage
Pension liabilities
277
1,636
2017
20
1,647
2018
2,113
2019
2
2,180
2020
Net interest-bearing debt excluding pension liabilities
Target range leverage 2.8-3.4
Table 4.3.a Net interest-bearing debt
(EURM)
Long-term borrowings
Short-term borrowings
4
3
2
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
the debt. The group's long-term target range for
leverage is between 2.8 and 3.4.
Leverage
1
2.7
0
2019: 2.8
2020
2019
1,964
1,951
766
789
Securities, cash and cash equivalents
-546
-622
-4
-5
Net interest-bearing debt excluding pension liabilities
Pension liabilities
2,180
2,113
247
249
Net interest-bearing debt including pension liabilities
2,427
2,362
Other interest-bearing assets
100 ARLA FOODS ANNUAL REPORT 2020View entire presentation