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Prysmian S.p.A. measures and manages its exposure to
financial risks in accordance with the Group’s policies.
The main financial risks are centrally coordinated and
monitored by the Group Finance Department. Risk
management policies are approved by the Group Finance,
Administration and Control Department, which provides
written guidelines on managing the different kinds of risks
and on using financial instruments.
The financial risks to which Prysmian S.p.A. is subject,
directly or indirectly through its subsidiaries, are the same as
those of the companies of which it is the Parent Company.
Reference should therefore be made to Section C. Financial
risk management of the Explanatory Notes to the Group’s
Consolidated Financial Statements.
The principal types of risks to which the Company is exposed
are discussed below:
(a) Exchange rate risk
At 31 December 2012 Prysmian S.p.A. does not have any
significant receivables or payables positions or derivative
financial instruments that are exposed to exchange rate risk.
(b) Interest rate risk
The interest rate risk to which the Company is exposed is
mainly due to long-term financial liabilities, carrying both
fixed and variable rates.
Fixed rate debt exposes the Company to a fair value risk. The
Company does not operate any particular hedging policies in
relation to the risk arising from such contracts.
The Group Finance Department monitors the exposure to
interest rate risk and adopts appropriate hedging strategies
to limit the exposure within the limits defined by the Group
Finance, Administration and Control Department, arranging
derivative contracts, if necessary.
C. FINANCIAL RISK MANAGEMENT
The net liabilities considered for sensitivity analysis include
variable rate financial receivables and payables and cash and
cash equivalents whose value is influenced by rate volatility.
The Company calculates the pre-tax impact on the income
statement of changes in interest rates.
The simulations carried out for balances at 31 December
2012 indicate that, with all other variables remaining equal,
an increase of 25 basis points in interest rates would have
increased financial payables by Euro 1,307 thousand (2011:
increase of Euro 784 thousand) while a 25-point decrease
would have decreased financial payables by Euro 1,307
thousand (2011: decrease of Euro 784 thousand). This
simulation exercise is carried out on a regular basis to ensure
that the maximum potential loss is within the limits set by
management.
(c) Price risk
The Company is not exposed to price risk insofar as it does not
buy or sell goods whose price is subject to market volatility.
(d) Credit risk
The Company does not have significant concentrations of
credit risk insofar as almost all its customers are companies
belonging to the Group.
(e) Liquidity risk
Prudent management of the liquidity risk arising from the
Company’s normal operations involves the maintenance of
adequate levels of cash and cash equivalents, short-term
securities and funds obtainable from an adequate amount of
committed credit lines. The Company’s Finance Department
prefers flexibility when sourcing funds by using committed
credit lines.
At 31 December 2012, cash and cash equivalents stood at
Euro 681 thousand, compared with Euro 1,190 thousand at
31 December 2011. The Company can potentially use the
credit lines granted to the Group relating to the securitization
programme and to the Revolving Credit Facilities. More details
can be found in the Explanatory Notes to the Consolidated
Financial Statements (Note C. Financial risk management).
