Beer glasses should
be used for beer only
Risk Management and Control System (continued)
Using beer glasses for other
beverages, like fruit juice or
milk, will leave substances
behind, such as grease. This
will cause the beer to go flat.
A good beer needs the
cleanest glass possible.
Report of the Executive Board
Heineken operates internationally and reports in euros,
which has proven to be a very strong currency over the past
few years. Currency fluctuations, relating to the US dollar,
South African rand, Polish zloty and, to a lesser extent, the
British pound could materially affect overall Company
results, considering the size of exports from the eurozone
to mainly the USA and South Africa.
Heineken has a clear policy on hedging transactional
exchange risks, which postpones the impact on financial
results. Translation exchange risks are hedged to a limited
extent. In 2009, operating results of Operating Companies
in countries with currencies that devaluated versus the
euro are translated into euro at lower rates. Since the Group
attracts funding and pays interest in these currencies as well,
the impact of devaluations of such currencies like the Russian
rouble, British pound and Polish zloty on our results is mitigated
to a certain extent. In addition, Heineken strengthened its risk
management regarding the monitoring and managing of
currency and interest positions.
The Company has a strong focus on cash generation to
reduce its debt levels and to improve its financing ratios.
The Company has a clear focus on ensuring sufficient access
to capital markets to refinance maturing debt obligations
and to finance long-term growth. The Company aims to
further fine-tune the maturity profile of its long-term debts.
Financing strategies are under continuous evaluation. Terms
and conditions of additional refinancing may be impacted by
the changing credit market conditions. Strong cost and cash
management and strong controls over investment proposals
are in place to ensure effective and efficient allocation of
In some of the countries where it operates, Heineken makes
contributions to a number of defined benefit plans that
provide pension benefits for employees upon retirement
(mainly the UK and the Netherlands as per disclosure in
financial statements). The contractual and regulatory
arrangements with these pension funds are such that in
case of shortfalls, no one-off payments are required but the
annual cash contributions would increase, thereby mitigating
the potential cash outflow over a longer period of time.
Heineken and its Operating Companies are subject to a
variety of local excise and other tax regulations. Group
Fiscal Affairs has further progressed in structuring tax risk
management through the roll-out of a Tax Control Frameworl
Beer excise duties could have a strong impact on the financial
results. In principle, Heineken'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, respectively the
coverage of fixed costs.
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. Each half year, all
majority-owned companies formally report outstanding
claims and litigations against the Company in excess of
EUR1 million to Group Legal Affairs, including an
assessment of the amounts to be provided for.
There may be current risks that do not have a significant
impact on the business but which could -at a later stage -
develop into a material impact on the Company's business.
The Company's risk management systems are focused on
timely discovery of such risks.
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Annual Report 2009 -