Consolidated FinanCial statements >
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES
184
| 2012 annual report prysmian group
[b] Interest rate risk
The interest rate risk to which the Group is exposed is mainly
on long-term financial liabilities, carrying both fixed and
variable rates.
Fixed rate debt exposes the Group to a fair value risk. The
Group does not operate any particular hedging policies in
relation to the risk arising from such contracts.
Variable rate debt exposes the Group to a rate volatility risk
(cash flow risk). In order to hedge this risk, the Group can use
derivative contracts that limit the impact of interest rate
changes on the income statement.
The Group Finance Department monitors the exposure to
interest rate risk and adopts appropriate hedging strategies
to keep the exposure within the limits defined by the Group
Administration, Finance and Control Department, arranging
derivative contracts, if necessary.
The following sensitivity analysis shows the effects on
consolidated net profit of an increase/decrease of 25 basis
points in interest rates relative to the interest rates at 31
December 2012 and 31 December 2011, assuming that all
other variables remain equal.
The potential effects shown below refer to net liabilities
representing the most significant part of Group debt at the
reporting date and are determined by calculating the effect
on net finance costs following a change in annual interest
rates.
The net liabilities considered for sensitivity analysis include
variable rate financial receivables and payables, cash and
cash equivalents and derivatives whose value is influenced
by rate volatility.
(in millions of Euro)
2012
2011
-0.25%
+0.25%
-0.25%
+0.25%
Euro
(0.33)
0.33
0.26
(0.26)
US Dollar
0.14
(0.14)
0.03
(0.03)
British Pound
(0.01)
0.01
(0.01)
0.01
Other currencies
(0.34)
0.34
(0.39)
0.39
total
(0.54)
0.54
(0.11)
0.11
At 31 December 2012, the increase/decrease in the fair value
of derivatives designated as cash flow hedges arising from an
increase/decrease of 25 basis points in interest rates relative
to the year-end rates would have respectively increased other
equity reserves by Euro 2.32 million and decreased them by
Euro 2.39 million for hedges of underlying transactions in Euro,
since underlying US dollar transactions were repaid during the
year.
At 31 December 2011, the increase/decrease in the fair value
of derivatives designated as cash flow hedges would have had
the following impact on other equity reserves:
- an increase of Euro 2.91 million and a decrease of Euro 2.69
million for hedges of underlying transactions in Euro;
- no impact for hedges of underlying transactions in US
dollars.
