124
Financial statements Notes to the consolidated financial statements
32. Financial risk management and financial instruments
Other market price risk
Management of Heineken monitors the mix of debt and equity securities in its investment portfolio based on market expectations.
Material investments within the portfolio are managed on an individual basis.
The primary goal of Heineken's investment strategy is to maximise investment returns in order to partially meet its unfunded
defined benefit obligations; management is assisted by external advisors in this regard.
Commodity price risk
Commodity price risk is the risk that changes in commodity price will affect Heineken's income. The objective of commodity price
risk management is to manage and control commodity risk exposures within acceptable parameters, whilst optimising the return
on risk. The main commodity exposure relates to the purchase of cans, glass bottles, malt and utilities. Commodity price risk is
in principle addressed by negotiating fixed prices in supplier contracts with various contract durations. So far, commodity hedging
with financial counterparties by the Company is limited to the incidental sale of surplus C02 emission rights and to aluminium and,
to a limited extent, gas hedging, which is done in accordance with risk policies. Heineken does not enter into commodity contracts
other than to meet Heineken's expected usage and sale requirements. As at 31 December 2010, the market value of aluminium
swaps was EUR12million.
Cash flow hedges
The following table indicates the periods in which the cash flows associated with derivatives that are cash flow hedges,
are expected to occur.
lillions of EUR
Carrying
amount
Expected
cash flows
6 months
or less
6-12 months
1-2 years
2-5 years
2010
More than
5 years
Interest rate swaps:
Assets
89
1,902
65
30
90
715
1,002
Liabilities
(105)
(1,921)
(84)
(74)
(118)
(690)
(955
Forward exchange contracts:
Assets
10
1,093
412
393
288
-
-
Liabilities
(18)
(1,117)
(439)
(394)
(284)
-
-
Other derivatives used for hedge accounting:
Assets
26
27
7
1
18
1
-
Liabilities
(33)
(33)
(7)
(8)
(15)
(3)
(31)
(49)
(46)
(52)
(21)
23
47
The periods in which the cash flows associated with forward exchange contracts that are cash flow hedges are expected to impact
profit or loss is on average two months earlier than the occurrence of the cash flows as in the above table.
