185
The potential impact shown above is solely attributable to increases and decreases in the fair value of derivatives on strategic
material prices which are directly attributable to changes in the prices themselves. It does not refer to the impact on the income
statement of the purchase cost of strategic materials.
[c] Price risk
The Group is exposed to price risk in relation to purchases and
sales of strategic materials, whose purchase price is subject to
market volatility. The main raw materials used by the Group in
its own production processes consist of strategic metals such
as copper, aluminium and lead. The cost of purchasing such
strategic materials accounted for approximately 57% of the
Group’s total production costs in 2012 (60% in 2011).
In order to manage the price risk on future trade transactions,
the Group negotiates derivative contracts on strategic metals,
setting the price for planned future purchases.
Although the ultimate aim of the Group is to hedge risks to
which it is exposed, these contracts do not qualify as hedging
instruments for accounting purposes.
The derivative contracts entered into by the Group are
negotiated with major financial counterparties on the basis of
strategic metal prices quoted on the London Metal Exchange
(“LME”), the New York market (“COMEX”) and the Shanghai
Futures Exchange (“SFE”).
The following sensitivity analysis shows the effect on net
profit and consolidated equity of a 10% increase/decrease
in strategic material prices relative to prices at 31 December
2012 and 31 December 2011, assuming that all other variables
remain equal.
(in milions of Euro)
2012
2011
-10%
10%
-10%
10%
LME
(20.88)
20.88
(15.04)
15.06
COMEX
0.56
(0.56)
0.41
(0.40)
SFE
(3.27)
3.27
(2.70)
2.69
total
(23.59)
23.59
(17.33)
17.35
