Report of the Executive Board
Risk management
Financial risks
Currency risks
Fleineken operates internationally and reports in
Euros. Currency fluctuations, especially relating
to the US Dollar, could materially affect overall
Company results. Fleineken has a clear policy
on hedging transactional exchange risks, which
postpones the impact on financial results.
Translation exchange risks are not hedged. The
sensitivity on the financial results with regard
to currency risks are explained on page 107.
Capital availability and liquidity risks
There could be insufficient capital generated
in order to finance the long-term growth.
Sufficient access to capital is ensured to finance
long-term growth and to keep pace with the
consolidation of the global beer market. Financing
strategies are under continuous evaluation.
Strong cost and cash management and strong
controls over investment proposals are in place
to ensure effective and efficient allocation
of financial resources.
Regulatory risks
Tax
Fleineken and its operating companies are
subject to a variety of local excise and other tax
regulations. The EU Council did not adopt the
Commission proposal to adapt the minimum
excise rate for beer with the rate of inflation.
This adjustment would have lead to increases
in some European markets. The developments
surrounding this issue are continuously
monitored.
In principle, Fleineken's sales prices are adjusted
to reflect changes in the rate of excise duty, but
increased rates may have a negative impact on
sales volume.
Litigation
Due to increasing legislation there is an increased
possibility of non-compliance. Additionally, more
supervision by regulators and the growing claim
culture may potentially increase the impact of
non-compliance, both financially and on the
reputation of the Company. Therefore, various
Fleineken Company Rules and monitoring
measures are in place to enable compliance with
laws and regulations. Every half year all majority-
owned companies formally report outstanding
claims and litigations against the Company in
access of €1 million to Group Legal Affairs,
including an assessment of the amounts
to be provided for.
Fleineken is defending itself against two main
accusations: one from the European Commission
on restricting competition in the Netherlands
during the second half of the 1990s, and one
on unlawfully advertising and marketing products
to underage people in the USA. These two cases
are further explained on page 111.
There may be current risks that the Company has
not fully assessed, and are currently identified as
not having a significant impact on the business
but which could - in a later stage - develop
a material impact on the Company's business.
The Company's risk management systems are
focused on timely discovery of such incidents.
CO Heineken N.V.
3LJ Annual Report 2006
