O A
Notes to the Consolidated Financial Statements (continued)
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Introduction Report of the Executive Board Report of the Supervisory Board
2018
In millions of
Carrying
amount
Contractual
cash flows
Less than
1 year
1-5 years
More than
5 years
Financial liabilities
Interest-bearing liabilities
(14,986)
(18,119)
(2,687)
(5,305)
(10,127)
Trade and other payables and returnable
packaging deposits (excluding interest
payable, dividends and including
non-current part)
(7,331)
(7,332)
(7,223)
(84)
(25)
Derivative financial assets
and (liabilities)
Cross currency interest rate swaps
2
(38)
(14)
(24)
Forward exchange contracts
(18)
(24)
(23)
(1)
Commodity derivatives
(18)
(18)
(21)
3
Other derivatives
1
1
1
Total 2018
(22,350)
(25,530)
(9,953)
(5,401)
(10,176)
2017
Financial liabilities
Interest-bearing liabilities
(15,378)
(18,549)
(3,580)
(5,274)
(9,695)
Trade and other payables and returnable
packaging deposits (excluding interest
payable, dividends and including
non-current part)
(6,577)
(6,577)
(6,505)
(38)
(34)
Derivative financial assets
and (liabilities)
Cross currency interest rate swaps
61
61
129
10
(78)
Forward exchange contracts
46
28
29
(1)
Commodity derivatives
77
78
46
32
Other derivatives
(7)
(7)
(7)
Total 2017
(21,778)
(24,966)
(9,888)
(5,271)
(9,807)
For more information on the derivative assets and liabilities refer to note 11.6.
Financial Statements
Sustainability Review
Heineken N.V. Annual Report 2018^10
Other Information
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates,
commodity prices and equity prices, will adversely affect HEINEKEN's income or the value of its financial
instruments. The objective of market risk management is to manage and control market risk exposures
within acceptable boundaries.
HEINEKEN enters into derivatives and other financial liabilities to manage market risks. Generally,
HEINEKEN seeks to apply hedge accounting or establish natural hedges in order to minimise the impact
of market risks in profit or loss. Foreign currency, interest rate and commodity hedging operations are
governed by internal policies and rules.
Foreign currency risk
HEINEKEN is exposed to:
- Transactional risk on (future) sales, working capital, (future) purchases, deposits, borrowings
and dividends denominated in a currency other than the respective functional currencies of
HEINEKEN entities.
- Translational risk, which is the risk resulting from the translation of foreign operations into the reporting
currency of HEINEKEN.
The main currencies that give rise to this risk are the US dollar, Mexican peso, Brazilian real, Nigerian naira,
British pound, Vietnamese dong and Euro. In 2018, the transactional exchange risk was hedged in line with
the hedging policy to the extent possible. The negative translational impact was more profound.
In managing foreign currency risk, HEINEKEN aims to ensure the availability of foreign currencies and
to reduce the impact of short-term fluctuations on earnings. Over the longer term, however, permanent
changes in foreign exchange rates and the availability of foreign currencies, especially in emerging
markets, will have an impact on profit.
HEINEKEN hedges up to 90% of its net US dollar export cash flows on the basis of rolling cash flow
forecasts of sales and purchases. Material cash flows in other foreign currencies are also hedged on the
basis of rolling cash flow forecasts. For this hedging HEINEKEN mainly uses forward exchange contracts.
The majority of the forward exchange contracts have maturities of less than one year after the balance
sheet date.
HEINEKEN has a clear policy on hedging transactional exchange risks. 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 hedging of translation risk, using net investment hedges is recognised in the
translation reserve, as can be seen in the consolidated statement of comprehensive income.
HEINEKEN's policy is to hedge material recognised transactional exposure like trade payables, receivables,
borrowings and declared dividends. For material unrecognised transactional exposures like forecasted sales
in foreign currencies, HEINEKEN hedges the exposure between agreed percentages according to the policy