Financial risks
| Risk area: | Description: | Management: |
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Credit control failure |
Credit risk pertains to losses owing due to Nobia’s cus- |
Credit risk in accounts receivable Credit risk in accounts receivable is managed through credit checks of customers using credit rating companies. A Group-wide credit risk policy sets the limits for any given customer. The credit limit is set and regularly monitored. Accounts receivable are recognised at the amount that is expected to be paid based on an assessment of the expected credit losses for the remaining lifetime of all account receivables at the closing date. For further information concerning accounts receivable and recognition of expected credit losses, see Note 2 Financial risks.
Financial credit risk Nobia strives to enter into agree- ments that allow net calculation of receivables and liabili- ties. In certain cases, there are also supplementary terms to these agreements regarding the exchange of collateral. Credit exposure in derivative instruments is calculated as the market value of the instrument at the closing date. |
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Currency effects |
A significant portion of the UK operation’s components are purchased in EUR, while finished products are subse- quently sold in GBP. The net effect of this currency pair means that a strong EUR against the GBP is negative for the Group. A proportion of the Swedish operation’s costs for mate- rial purchases are conducted in EUR. A strong SEK against the EUR is therefore positive for the Group. A significant portion of the Swedish production of com- ponents and finished products is sold in Norway. A weak SEK against the NOK is therefore positive for the Group. The Danish unit conducts a significant portion of its sales in Norway, but also in Sweden. A weak DKK against the NOK and the SEK is therefore positive for the Group.
Transaction exposure Transaction exposure is the risk that exchange rate movements in export revenues and import expenses could negatively impact the Group’s operating profit and the cost of fixed assets.
Translation exposure Translation exposure is the risk to which Nobia is exposed when translating foreign subsid- iaries’ balance sheets and income statements to SEK.
Long-term currency sensitivity The table below pres- ents a breakdown of the Group’s net sales and operating expenses by currency, which provides an overview of the Group’s long-term currency sensitivity. The largest expo- sures are denominated in EUR and GBP. |
Transaction exposure, resulting from exports and imports, can be hedged for a period of up to 9 months. Contracted future payments for fixed assets in foreign currencies can be hedged up to the full cost. Most of Nobia’s business is conducted outside Sweden and therefore transaction exposure primarily arises in cur- rencies other than SEK. The largest exposure comprises a purchase requirement for PLN and a selling requirement for EUR and GBP. The significant PLN exposure is a con- sequence of the Group’s sourcing of sheet material that is invoiced in PLN. During the year, primarily accounts receivable and pay- able, as well as future payments of non-current assets were continuously hedged.
Translation exposure Nobia manages translation expo- sure by distributing the liabilities across various currencies where the Group owns assets so that key performance measures that are material for the company’s credit rating are pro- tected in the long term against currency effects. Translation exposure in the income statements of foreign subsidiaries is not currency hedged.
For further information concerning financial risks, see Note 2. |