Notes to the Consolidated Financial Statements (continued)
Fixed rate instruments
Variable rate instruments
3,211
11.6 Derivative financial instruments
O O Qs
Introduction Report of the Executive Board Report of the Supervisory Board
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, commercial
paper 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.
Interest rate risk - profile
At the reporting date, the interest rate profile of HEINEKEN's interest-bearing financial instruments is
as follows:
In millions of
2019
2018*
Financial assets
128
121
Financial liabilities
(14,822)
(13,214)
Cross-currency interest rate swaps
445
437
(14,249)
(12,656)
Financial assets
2,275
Financial liabilities
(2,230)
(1,771)
Cross-currency interest rate swaps
(463)
(463)
(418)
977
Restated for IAS 37. Refer to note 4 for further details.
Financial Statements
Sustainability Review
Heineken N.V. Annual Report 2019110
Other Information
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates constantly applied during the reporting period would not
have a material impact.
Commodity price risk
Commodity price risk is the risk that changes in the prices of commodities will affect HEINEKEN's cost.
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 other derivatives for commodities
like fuel, corn and sugar. 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 details the estimated pre-tax impact on equity of a 10% change in the market price
of aluminium.
Equity
10%
10%
In millions of
increase
decrease
31 December 2019
Aluminium hedges
36
(36)
HEINEKEN uses derivatives in order to manage market risks. Refer to the table below for the fair value
of derivatives recorded on the balance sheet of HEINEKEN as per reporting date:
2019
2018
In millions of
Asset
Liability
Asset
Liability
Current
28
(69)
35
(70)
Non-current1
2
(22)
35
(33)
30
(91)
70
(103)
1 Non-current derivative assets and liabilities are part of 'Other non-current assets' (note 8.4) and 'Other non-current liabilities' (note 11.6) respectively.
