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Consolidated Financial Statements as of December 31, 2015
Notes to the Consolidated Financial Statements
Interest rate risk
12.6.2
Long-term borrowings are generally at fixed rates of interest and do not
therefore give rise to any exposure to rising interest rates.
Interest rate risk is the risk of a change in interest rates leading to an Various financial instruments are nonetheless used to hedge
increase in the Group’s net borrowing costs.
borrowings against the risk of changes in interest rates. These are
mainly basic swaps and options. Hedge accounting is applied in all
It is managed at headquarters level by Corporate Treasury and
cases where the required criteria are met.
Financing, which reports monthly to an Interest Rate Risk Committee
responsible for recommending hedging strategies and methods to be Variable rate long-term borrowings are hedged using financial
used to limit interest rate exposures and optimize borrowing costs.
instruments that cap rises in interest rates over all or part of the life of
the debt.
The following table shows the sensitivity of total borrowings to changes in interest rates over one year:
50-bps decline
50-bps increase
(in millions of euros)
(- =
loss; + = gain)
Impact on Impact on income
Impact on Impact on income
shareholders' equity
statement shareholders' equity
statement
Investments
-
(4.5)
-
4.5
Variable rate borrowings
-
0.4
-
(0.4)
Borrowings hedged by fair value hedges
-
(2.5)
-
2.5
Swaps qualified as fair value hedges
-
2.5
-
(2.5)
Options classified as cash flow hedges
-
(8.5)
-
13.5
Options classified as held for trading
-
(0.6)
-
1.7
TOTAL EFFECT
0.0
(13.2)
0.0
19.3
Currency risk
12.6.3
As a result, the Group’s exposure to currency risk on commercial
transactions is naturally limited and mainly concerns imported
products. Currency risks on import transactions (
i.e.
, goods purchases
Currency transaction risk is the risk of an unfavorable change in
billed in foreign currencies) covered by firm commitments are hedged
exchange rates having an adverse effect on cash flows from
by forward purchases of the payment currency. Currency hedges are
commercial transactions denominated in foreign currency.
generally for periods of less than 12 months.
The Group conducts its international operations through subsidiaries
that operate almost exclusively in their home country, such that
purchases and sales are denominated in local currency.
The following table shows the effect of an increase/decrease in exchange rates on instruments:
10% decline
10% increase
(in millions of euros)
(- =
loss; + = gain)
Impact on Impact on income
Impact on Impact on income
shareholders' equity
statement shareholders' equity
statement
EUR/USD position
-
68.6
-
(68.6)
EUR/HKD position
-
2.1
-
(2.1)
EUR/PLN position
-
3.5
-
(3.5)
EUR/RON position
-
6.7
-
(6.7)
Currency translation risk
is the risk of an unfavorable change in exchange The translation risk on foreign operations outside the eurozone mainly
rates reducing the value of the net assets of a subsidiary whose concerns the Brazilian real, Argentine peso and Chinese renminbi. For
functional currency is not the euro, after conversion into euros for
example, changes in the average exchange rates used in 2015
inclusion in the Group’s consolidated statement of financial position.
compared with those for 2014 reduced consolidated net sales by
794
million euros or 1% and recurring operating income by
The consolidated statement of financial position and income
109 million euros or 4.5%.
statement are exposed to a currency translation risk: consolidated
financial ratios are affected by changes in exchange rates used to Lastly, when financing is arranged locally, it is generally denominated
translate the income and net assets of foreign subsidiaries operating in local currency.
outside the eurozone.
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