Financial Report and Registration Document 2010 - Groupe Seb

1
GROUPE SEB IN 2010
RISK MANAGEMENT
RISK MANAGEMENT
Groupe SEB pursues a policy of active, prudent management of the risks
inherent in its business, the purpose of which is to defend the Group’s
assets and/or interests of its stakeholders: shareholders, employees, clients,
consumers, suppliers, etc., without forgetting environmental aspects.
This approach is based on a detailed mapping and analysis of the main
risks faced by the Company, which makes it possible to rank them on the
basis of their potential impact on the Group’s operations and performance,
and on the probability of such risks occurring. A comprehensive review of
these risks is carried out regularly with the Group Executive Committee and
the Audit Committee.
1
RISKS INHERENT TO OPERATIONS
COUNTRY-SPECIFIC AND ECONOMIC
SITUATION RISKS
The international nature of the Group’s business exposes it to currency
risk (covered in Note 26.2.1 to the Consolidated Financial Statements)
but also risks of political instability, economic, monetary or labour risks,
especially in Asia, the Middle East and South America. In addition to
these risks, certain countries have under-developed legal systems or
those which offer little in the way of intellectual property protection, import
taxes (e.g. Turkey for certain small electrical products), restrictive measures,
exchange controls, etc. These factors may disturb or even penalize the
Group’s business or financial situation. Nonetheless, this big international
presence also offers protection through wide geographical coverage and
risk diversification.
Alongside this, Group sales inevitably depend on the economic climate and
whether consumption holds up or not, which, in turn, is related to consumer
purchasing power and the financial health of our retail distribution network.
In this respect, the end of 2008 and the entire 2009 were complex, with the
Group having to deal with various situations in various countries: serious
recession and collapse of demand (Russia, USA, UK, etc.); serious recession
but resistance in small electrical appliances and high performance by
the Group (Spain, Greece, Japan, etc.); a moderate crisis and sustained
consumption (France, Germany, Brazil), etc. In consideration of the very
nature of the business (focus on the home) and the limited investment
represented by small domestic equipment, the small electrical appliance
sector held up better than others and, in several markets, the Group’s
results were even totally opposite to the economic situation: this was the
case for Spain, Japan, etc. 2010 unfolded in a generally more buoyant
environment, without any major glitches, but recovery was not the same in
all zones. Central Europe joined the crisis quite late and only showed signs
of a recovery towards the end of the year, while after months of sustained
demand, business in Spain, on the contrary, shrank in the last quarter.
RISKS RELATING TO SOLD PRODUCTS
Risks of warranty or liability claims
Groupe SEB makes consumer safety an absolute priority. In this respect,
it affords maximum attention to safety precautions in terms of raw materials,
components and finished products. It is exposed to a risk of warranty
or liability claims from its clients and consumers; these risks have been
reasonably provided for. In particular, the impact of the change to a 2-year
guarantee for small electrical appliances in the European Union has been
integrated into these provisions. Additionally, to protect itself against cases
of defective products causing damage, the Group has taken out civil liability
insurance (see Insurance section).
Recovering and recycling end-of-life products
European directive 2002/96/EC on Waste Electrical and Electronic
Equipment (WEEE) requires manufacturers to factor in the reprocessing or
recycling of end-of-life products, which then leads to financial challenges.
Transposed since end 2005 into the legislation of a large majority of European
countries, it requires the collection and treatment of electrical and electronic
appliances at the end of their lives.
In European countries concerned by this Directive, Groupe SEB decided
to participate in eco-organizations which will handle the recycling of “new”
and “historical” waste on behalf of manufacturers. The obligation to collect
and process WEEE is pro rata to the equipment put on the market during
the year of collection, and is payable in advance. In consequence, there is
no need to accrue provisions for this at the time the electrical products are
released on the market.
RISKS RELATING TO BRAND ASSETS
Groupe SEB has built its business on a powerful portfolio of brands, some of
which are treated as assets in its balance sheet. For Groupe SEB, the total
book value of its brands at 31 December 2010 amounted to €321 million,
and concerned mainly Rowenta, All-Clad, Lagostina and Supor.
Moreover, as Groupe SEB regularly engages in external growth operations,
goodwill is shown in the consolidated financial statements at the end of 2010
for an amount of €409 million, most of this having been recognised at the
time of the All-Clad and Supor acquisitions.
Under IFRS accounting standards, the value of brands and goodwill must
be reviewed annually to check that the value entered in the balance sheet is
consistent with the actual performance of the brands and the subsidiaries in
their own markets. Any significant disparities, notably with regard to expected
cash fl ow, a brand’s commercial under-performance, or increased costs
incurred by the subsidiaries concerned, could require an adjustment in the
balance sheet which may involve a partial or total recognition of impairment
GROUPE SEB
FINANCIAL REPORT AND REGISTRATION DOCUMENT 2010
19