ANNUAL REPORT 2011 REGISTRATION DOCUMENT - Saft

6 Notes
2011 CONSOLIDATED FINANCIAL STATEMENTS
to the Consolidated Financial Statements
Interest rate risk on the Group’s bank debt after management can be broken down as follows:
144 / SAFT - ANNUAL REPORT 2011
31/12/2011 31/12/2010 31/12/2009
Debt in US$
Fixed interest rate debt 0.0 0.0 0.0
Variable interest rate debt
Debt in euros
185.2 177.8 163.7
Fixed interest rate debt 0.0 0.0 0.0
Variable interest rate debt 149.7 148.1 147.0
Total fi nancial liabilities at variable rate 334.9 325.9 310.7
Financial assets at variable rate 0.0 (22.5) 0.0
Net position before management 334.9 303.4 310.7
Euro debt hedging collar (100.0) (100.0) 0.0
Euro debt hedging cap 0.0 0.0 (130.0)
Dollar debt hedging collar (131.4) (127.2) (145.8)
NET POSITION AFTER MANAGEMENT 103.5 76.2 34.9
A 1% increase in the interest rate on the net debt at
31 December 2011 would result in an increase in the interest
expense of €0.6 million per annum (before tax), net of the
impact of hedging instruments.
Inversely, on the same net position after management, a 1%
reduction in the interest rate would reduce the interest expense
by €0.2 million.
3.4 RISK OF FLUCTUATIONS IN
COMMODITY PRICES
Risk identification and measurement
The Group is mainly exposed to price changes in the raw
materials used in its production processes, either through
its purchases of manufactured products or more directly its
purchases of primary or transformed raw materials. The
prices of these materials fl uctuate with changes in supply and
demand, and thus are beyond the Group’s control.
Their fl uctuation could have a signifi cant impact on the costs
of production, and consequently, on the Group’s profi tability.
The main raw material, excluding energy, used by the Group is
nickel, the prices of which are negotiated on the London Metal
Exchange (LME), an international commodities market. Its other
purchases of non-ferrous metals, which are less signifi cant,
concern cobalt, cadmium and lithium. Cobalt prices are
negotiated over the counter based on the LME’s quotations. The
price of cadmium is indexed to that published in the London
Metal Bulletin. Lithium prices are negotiated directly with the
suppliers.
The Group’s exposure to fl uctuations in the price of nickel
affects the Industrial Battery Group division, whose annual
consumption (net of recycling) is about 1,500 to 2,000 metric
tons.
The average price of nickel on the LME increased by almost
5% between 2010 and 2011, from an average price
of US$21,809 per ton in 2010 to an average price of
US$22,894 per ton in 2011.
Risk management
In order to protect itself against fl uctuations in the price of nickel,
the Group‘s hedging policy consists mainly of a hedging pool
covering all or part of estimated needs within the IBG division
(excluding small nickel batteries activities). As of 31 December
2011, 60% of IBG’s forecasted total needs for the fi rst six
months of 2012 were hedged (excluding small nickel batteries
activity). This is done by purchasing forward contracts or other
derivatives such as swaps and/or options denominated in
US dollars, the currency used to buy nickel
According to the so called surcharge policy used on the
markets for small nickel batteries consisting in indexing the
selling prices of its products to the price of nickel on the
London Metal Exchange, no specifi c and automatic hedging
of nickel purchases beyond the fl oor price of the indexation
mechanism is required. However, the Group may enter into
certain hedging transactions on a selective basis by means of
the aforementioned derivative instruments.
The hedging policy, and its implementation, must be approved
by a special committee comprising the Group General
Manager, Group Purchasing Director, IBG General Manager,
and the Group Chief Financial Offi cer.