121
Heineken hedges up to 90 per cent of its mainly intra-Heineken US dollar cash flows on the basis of rolling cash flow forecasts
in respect to forecasted sales and purchases. Cash flows in other foreign currencies are also hedged on the basis of rolling cash
flow forecasts. Heineken mainly uses forward exchange contracts to hedge its foreign currency risk. The majority of the forward
exchange contracts have maturities of less than one year after the balance sheet date.
The Company 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, as the underlying currency positions are generally considered to
be long-term in nature. The result of the net investment hedging is recognised in the translation reserve as can be seen in the
consolidated statement of comprehensive income.
It is Heineken's policy to provide intra-Heineken financing in the functional currency of subsidiaries where possible to prevent
foreign currency exposure on subsidiary level. The resulting exposure at Group level is hedged by means of forward exchange
contracts. Intra-Heineken financing in foreign currencies is mainly in British pounds, US dollars, Russian rubles and Polish zloty.
In some cases Heineken elects to treat intra-Heineken financing with a permanent character as equity and does not hedge the
foreign currency exposure.
The principal amounts of Heineken's British pound, Polish zloty, Mexican peso and Egyptian pound bank loans and bond issues are
used to hedge local operations, which generate cash flows that have the same respective functional currencies. Corresponding
nterest on these borrowings is also denominated in currencies that match the cash flows generated by the underlying operations
of Heineken. This provides an economic hedge without derivatives being entered into.
In respect of other monetary assets and liabilities denominated in currencies other than the functional currencies of the Company
and the various foreign operations, Heineken ensures that its net exposure is kept to an acceptable level by buying or selling foreign
currencies at spot rates when necessary to address short-term imbalances.
Exposure to foreign currency risk
Heineken's transactional exposure to the British pound, US dollar and euro was as follows based on notional amounts. The euro
column relates to transactional exposure to the euro within subsidiaries which are reporting in other currencies.
2010
jns EUR GBP USD GBP
oans and held-to-maturity investments
-
-
-
Trade and other receivables
11
-
6
25
7
Gash and cash equivalents
40
-
6
46
2
Secured bank loans
-
-
-
""(1)
Jnsecured bank loans
-
(349)
-
(57)
Jnsecured bond issues
-
(397)
-
(400)
(50)
-
(2,217)
(100)
(1,492)
Hon-interest-bearing liabilities
-
-
-
(10)
(1)
Sank overdrafts
(4)
-
-
(63)
(2)
Trade and other payables
(46)
-
(2)
(88)
(26)
3ross balance sheet exposure
(49)
129
(746)
1
(2,207)
(190)
(457)
(1,513)
Estimated forecast sales next year
947
140
1
885
Estimated forecast purchases next year
(463)
(1)
(539)
(402)
(1)
(88)
Gross exposure
(383)
(746)
(1,799)
(452)
(457)
(716)
Eash flow hedge accounting forward exchange contracts
73
395
392
61
427
(375)
Ither hedge accounting forward exchange contracts
(988)
1
1,056
(945)
1,061
'let exposure
(1,298)
(350)
(351)
(1,336)
(30)
(30)
Included in the US dollar amounts are intra-Heineken cash flows. Within the other hedge accounting forward exchange contracts,
the cross-currency interest rate swaps of Heineken UK forms the largest component.
Heineken N.V. Annual Report 2010
