2007 Interactive Registration Document - Renault

Interest rate derivatives
B3 – Equity risks
Management of equity risks
The Group’s exposure to equity risks essentially concerns marketable securities
indexed to share prices. The Group does not use equity derivatives to hedge
this risk.
The Group made no major changes to its equity risk management policy in
2007.
Analysis of sensitivity of financial instruments to equity risks
Impacts are estimated by applying this 10% decline in share prices to the
fi nancial assets concerned at year-end.
The financial instruments’ sensitivity to equity risks is not significant at
December 31, 2007.
B4 – Commodity risks
Management of commodity risks
Renault’s Purchases department hedges part of its commodity risks using
fi nancial instruments such as forward purchase contracts, purchase options
and tunnel contracts. These hedges concern physical purchasing operations
required by the factories, and are subject to volume and time constraints. The
Group does not take any speculative positions on metals.
Commodity derivatives
✦ Global Reporting Initiative (GRI) Directives
FINANCIAL STATEMENTS 07
CONSOLIDATED FINANCIAL STATEMENTS
The Group made no major changes to its commodity risk management policy
in 2007.
At December 31, 2007, outstanding commodity hedges concerned certain
purchases of copper, aluminium and platinum. These transactions are not
currently classifi ed as hedges and the change in their fair value is therefore
included in the cost of goods and services sold reported in the income
statement.
Analysis of the sensitivity of financial instruments to commodity risks
Financial instruments’ accounting sensitivity to commodity risks results from
derivatives used to hedge the Group’s economic sensitivity to such risks.
Impacts are estimated by applying this 10% rise in commodity prices to
derivatives at the year-end.
The impact on net income (before taxes) of a 10% rise in commodity prices
applied to derivatives not designated as hedges would be €34 million at
December 31, 2007.
The financial instruments’ sensitivity to commodity risks has increased
compared to 2006 due to reinforcement of hedging operations, particularly
in respect of aluminium.
DECEMBER 31, 2007 DECEMBER 31, 2006 DECEMBER 31, 2005
(€ million)
NOMINAL -1 YR 1–5 YRS +5 YRS NOMINAL -1 YR 1–5 YRS +5 YRS NOMINAL -1 YR 1–5 YRS +5 YRS
Forward purchases 623 493 130 - 177 177 - - 222 111 111 -
Forward sales 418 305 113 - 229 229 - - 118 59 59 -
B5 – Counterparty risk
The Group only does business on the fi nancial and banking markets with quality
counterparties, and is not subject to any signifi cant risk concentration.
The various Group entities’ counterparty risk is managed using a scoring system,
based principally on the counterparties’ long-term credit rating and equity level.
For Group companies with signifi cant exposure, compliance with authorised
limits is monitored on a daily basis under strict internal control procedures.
The Group made no major changes to its counterparty risk management policy
in 2007.
B6 – Liquidity risk
The Automobile division is fi nanced via the capital markets, through:
n
long-term resources (bond issues, private placements, etc);
n
n
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DECEMBER 31, 2007 DECEMBER 31, 2006 DECEMBER 31, 2005
(€ million)
NOMINAL -1 YR 1–5 YRS +5 YRS NOMINAL -1 YR 1–5 YRS +5 YRS NOMINAL -1 YR 1–5 YRS +5 YRS
Interest rate swaps 67,865 25,357 41,534 974 67,947 25,264 41,780 903 69,558 21,260 47,723 575
FRA
Other interest rate hedging
550 550 - - - - -
instruments 940 940 3,914 3,698 216 517 292 225 -
short-term bank loans or commercial paper issues;
a receivable securitisation programme by RCI Banque.
Short-term fi nancing arrangements are secured by confi rmed “evergreen” or
permanently renewable credit agreements. The documentation for these credit
facilities contains no clause that might adversely affect credit availability as a
result of a change in Renault’s credit rating.
At all times, RCI Banque thus has suffi cient fi nancial resources at its disposal
to guarantee continuity of business without calling on the Automobile division,
in compliance with strict internal standards.
The Group made no major changes to its liquidity risk management policy in
2007.
Details of the Group’s fi nancing structure are provided in note 24 on fi nancial
liabilities and sales fi nancing debts.
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Registration Document Renault 2007 229