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Notes to the Consolidated Financial Statements
2,275
11.6 Derivative financial instruments
1 f\0 Heineken N.V. Report of the Report of the Financial Sustainability Other
J-V./0 Annual Report 2020 Introduction Executive Board Supervisory Board Statements Review 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, 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
2020
2019
Fixed rate instruments
Financial assets
122
128
Financial liabilities
(16,473)
(14,822)
Cross-currency interest rate swaps
407
445
(15,944)
(14,249)
Variable rate instruments
Financial assets
4,289
Financial liabilities
(1,724)
(2,230)
Cross-currency interest rate swaps
(463)
(463)
2,102
(418)
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. As a consequence of the COVID-19 pandemic, the commodity price volatility
increased significantly in 2020. 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
A 10% change in the market price of aluminium would not have a material impact on equity.
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:
2020
2019
In millions of
Asset
Liability
Asset
Liability
Current
77
(52)
28
(69)
Non-current1
21
(35)
2
(22)
98
(87)
30
(91)
1 Non-current derivative assets and liabilities are part of 'Other non-current assets' (note 8.5) and 'Other non-current liabilities' respectively.
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 on equity and profit or loss.
