ECONOMIC SUS TA INABILITY
for private shareholders which were organised by
third parties. With the placing of the bond loan in the
second half of 2003, a start was made on extending
the investor relations programme to include bond
holders.
2.5 Risk management
Heineken's activities centre around a single product:
beer. Although the resulting consistency, comparabil
ity and standardisation have a positive impact on
Heineken's overall risk profile, its operating compa
nies work in many different environments, markets
and cultures and its activities worldwide are exposed
to varying degrees of risk and uncertainty. Some of
the key risks, as identified by Heineken, are discussed
below.
Net turnover 2003 in billions of euros
Beer
Soft drinks
Wines and spirits
Other
7.3
1.0
0.6
0.3
Reputational risk
Heineken enjoys a sound corporate reputation and
most, if not all, of our operating companies are well
respected in their region. The Heineken brand is key
to Heineken's growth strategy. Anything that adverse
ly affects consumer confidence in the Heineken
Brau Union environmental reporting
Brau Union Austria's transparency earns respect
Brau Union Austria goes well beyond
the minimum legal requirements by
publishing both external and internal
environmental reports.
By comparing the performance of the
various breweries, the internal report
sets a benchmark to which all aspire.
Brau Union Austria also presents
three annual awards, one for the best-
performing brewery, one for the
most-improved brewery and one for
individual effort.
DIETMAR ROHER
brand could have a negative impact on the overall
business. Production and logistics are subject to
rigorous quality standards and monitoring proce
dures. Constant management attention is directed
towards enhancing Heineken's social and environ
mental reputation. A set of standards, including a
crisis management policy, and regular monitoring
procedures have been put in place or are being
established to achieve this.
Currency risk
Heineken has operations in over 170 countries and
reports in euros. Exchange-rate movements can have
a material impact on Heineken's financial results,
particularly movements in the exchange rate be
tween the euro and the US dollar and related curren
cies.
Exchange rate and interest rate hedging operations
are governed by strict rules. Because of the histori
cally low interest rates in 2003, Heineken opted to fix
the interest rates on a large proportion of the con
tracted loans. Transaction risks are limited to some
extent by financing in local currencies. Transaction
risks arise mainly on cash flows in foreign currencies
generated by export activities. The most important
foreign currency cash flow is in US dollars. After
deduction of dollar-denominated costs, a net cash
flow in US dollars remains. This cash flow is hedged
well in advance by means of a combination of forward
contracts and options. This policy reduces the volatili
ty of export results due to short-term fluctuations in
the value of the US dollar against the euro.
Transactions are entered into with a limited number
of counterparties with excellent credit ratings. The
activities are closely monitored, independently of
implementation.
The foreign exchange hedging operations in 2003
produced an average exchange rate of 0.96 US dollars
to the euro on a total of 795 million US dollars. The
expected net cash flow in 2004 amounts to approx
imately 800 million US dollars. As at 31 December
2003, 544 million US dollars of the expected 2004
cash flow had been hedged at an average exchange
rate of 1.09 US dollars to the euro. The expected cash
flow for 2005 was unhedged as at 31 December 2003.
HEINEKEN N.V. SUSTAINABILITY REPORT 2002-2 003
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