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Notes to the Consolidated Financial Statements (continued)
11.6 Derivative financial instruments
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Introduction Report of the Executive Board Report of the Supervisory Board
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates constantly applied during the reporting period would have
increased (decreased) equity and profit or loss by the amounts shown below (after-tax). This analysis
assumes that all other variables, in particular foreign currency rates, remain constant and excludes any
possible change in fair value of derivatives at period-end because of a change in interest rates. This analysis
is performed on the same basis as for 2017.
Profit or loss Equity
100 bp
100 bp
100 bp
100 bp
In millions of
increase
decrease
increase
decrease
31 December 2018
Variable rate instruments
9
(9)
9
(9)
Cross currency interest rate swaps
(3)
3
(3)
3
Cash flow sensitivity (net)
6
(6)
6
(6)
31 December 2017
Variable rate instruments
2
(2)
2
(2)
Net interest rate swaps
(3)
3
(3)
3
Cash flow sensitivity (net)
(1)
1
(1)
1
Commodity price risk
Commodity price risk is the risk that changes in the prices of commodities will affect HEINEKEN's income.
The objective of commodity price risk management is to manage and control commodity risk exposures
within acceptable parameters. The main commodity exposure relates to the purchase of aluminium cans,
glass bottles, malt and utilities. Commodity price risk is in principle mitigated by negotiating fixed prices in
supplier contracts with various contract durations.
Another method to mitigate commodity price risk is by entering into commodity derivatives.
HEINEKEN enters into commodity derivatives for aluminium hedging and to a certain extent gas, fuel
and sugar hedging. HEINEKEN does not enter into commodity contracts other than to meet HEINEKEN's
expected usage and sale requirements.
Sensitivity analysis for aluminium hedges
The table below shows an estimated pre-tax impact of 10% change in the market price of aluminium.
Equity
10% 10%
In millions of
increase decrease
31 December 2018
Aluminium hedges
43 (43)
Financial Statements
Sustainability Review
Heineken N.V. Annual Report 2018^10'
Other Information
HEINEKEN uses derivatives in order to manage market risks. The schedule below shows the fair value of the
derivatives on the balance sheet of HEINEKEN as per reporting date:
2018 2017
In millions of
Asset
Liability
Asset
Liability
Current
35
(70)
219
(21)
Non-current*
35
(33)
36
(57)
70
(103)
255
(78)
*Non-current derivative assets and liabilities are part of 'Other non-current assets' (note 8
3.4), respectively 'Other non-current liabilities'.
Generally, HEINEKEN seeks to apply hedge accounting or make use of natural hedges in order to
minimise profit and loss or cash flow volatility. The schedule below shows which derivatives are used in
hedge accounting:
2018
2017
In millions of
Asset
Liability
Asset
Liability
No hedge accounting - CCIRS
7
4
No hedge accounting - Other
6
(3)
7
(14)
Cash flow hedge - CCIRS
113
Cash flow hedge - Forwards
21
(38)
50
(4)
Cash flow hedge - Commodity forwards
12
(30)
81
(4)
Fair value hedge - CCIRS
(29)
(48)
Net investment hedge - CCIRS
24
(8)
Net investment hedge - Forwards
(3)
70
(103)
255
(78)
Cash flow hedges
HEINEKEN entered into several cross-currency interest rate swaps which have been designated as cash flow
hedges to hedge the foreign exchange rate risk on the principal amount and future interest payments of
its US dollar borrowings. In August 2018, the cross-currency interest rate swaps were settled and resulted in
a cash receipt of €168 million. In connection with the transactions related to CR Beer in China, HEINEKEN
entered into several forward exchange contracts which have been designated as cash flow hedges to
hedge the foreign exchange rate risk on the net HKD consideration. The market value of these forward
exchange contracts is not material as at 31 December 2018 and is included in the cash flow hedge
forwards above.