tiï O Q, Notes to the Consolidated Financial Statements (continued) Introduction Report of the Executive Board Report of the Supervisory Board It is HEINEKEN's policy to provide intra-HEINEKEN financing in the functional currency of subsidiaries where possible to prevent foreign currency exposure on a subsidiary level. The resulting exposure at Group level is hedged by means of foreign currency denominated external debts and by forward exchange contracts. Intra-HEINEKEN financing in foreign currencies is mainly in British pound, US dollar, Swiss franc and New Zealand dollar. In some cases, HEINEKEN elects to treat intra-HEINEKEN financing with a permanent character as equity and does not hedge the foreign currency exposure. HEINEKEN has financial liabilities in foreign currencies like US dollar and British pound to hedge local operations, which generate cash flows that have the same or closely correlated functional currencies. The corresponding interest on these liabilities is also denominated in currencies that match the cash flows generated by the underlying operations of HEINEKEN. In respect of other monetary assets and liabilities denominated in currencies other than the functional currencies of HEINEKEN, 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 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. Included in the amounts are intra-HEINEKEN cash flows. 2018 2017 In millions of EUR USD EUR USD Financial assets 164 4,919 85 4,997 Financial liabilities (1,969) (5,422) (2,284) (6,657) Gross balance sheet exposure (1,805) (503) (2,199) (1,660) Estimated forecast sales next year 157 1,428 153 1,321 Estimated forecast purchases next year (1,924) (2,479) (1,578) (2,011) Gross exposure (3,572) (1,554) (3,624) (2,350) Net notional amounts foreign exchange contracts 348 596 411 1,670 Net exposure (3,224) (958) (3,213) (680) Sensitivity analysis Equity (121) 7 (149) 1 Profit or loss (10) (1) (13) (9) A 10% strengthening of the US dollar against the Euro or, in case of the Euro, a strengthening of the Euro against all other currencies would have the above impact on equity and profit as at 31 December 2018. This analysis assumes that all other variables, in particular interest rates, remain constant. In case of a 10% weakening, the effects are equal but with an opposite effect. Heineken N.V. Annual Report 2018! 10 Financial Statements Sustainability Review Other Information Interest rate risk Interest rate risk is the risk that changes in market interest rates affect the fair value or cash flows of a financial instrument. The most significant interest rate risk for HEINEKEN relates to borrowings (note 11.3). By managing interest rate risk, HEINEKEN aims to reduce the impact of short-term fluctuations on earnings. Over the longer term however, permanent changes in interest rates will have an impact on profit. HEINEKEN opts for a mix of fixed and variable interest rate financial instruments like bonds and bank loans, combined with the use of derivative interest rate instruments. Currently, HEINEKEN's interest rate position is more weighted towards fixed than floating. Interest rate derivative instruments that can be used are (cross-currency) interest rate swaps, forward rate agreements, caps and floors. Swap maturity follows the maturity of the related borrowings which have swap rates for the fixed leg 2.3% (2017: from 2.3 to 6.5%). Interest rate risk - profile At the reporting date, the interest rate profile of HEINEKEN's interest-bearing financial instruments was as follows: In millions of 2018 2017 Fixed rate instruments Financial assets 121 75 Financial liabilities (13,214) (13,002) Cross currency interest rate swaps 437 417 (12,656) (12,510) Variable rate instruments Financial assets 3,020 2,599 Financial liabilities (1,771) (2,376) Cross currency interest rate swaps (463) (463) 786 (240)

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