Scania annual report 2003

Interest rate risk
Scania’s policy concerning interest rate
risks is that the interest rate refixing
period of its borrowing should normally
be 6 months, but that deviations may be
allowed within the 0–24 month range.
One exception is Scania’s Customer
Finance companies, in which the interest
rate refixing period on borrowing is
matched with the interest rate refixing
period on assets. To manage interest
rate risks in the Scania Group, derivative
instruments are used.
Currency
Currency transaction exposure during
2003 was about SEK 18 billion. The
largest currency flows were in EUR and
GBP. Based on the 2003 geographic
distribution of revenue and expenses,
a one percentage point change in the
Swedish krona against other currencies
would have affect operating income by
about SEK 180 m. on an annual basis.
Scania’s policy is to hedge currency
flows during a period of time equivalent to
the projected orderbook until the date of
payment. This normally means a hedging
period of 3 to 4 months. However, the
hedging period is allowed to vary between
0 and 12 months.
At the end of 2003, Scania’s net
assets in foreign currencies amounted to
SEK 10,140 m. The net assets of foreign
subsidiaries are not hedged under normal
circumstances. To the extent a subsidiary
has significant monetary assets in local
currency, however, they may be hedged.
Credit risk
To maintain a controlled level of credit risk
in Customer Finance, the process of issuing
credit is supported by a credit policy
as well as credit instructions.
At year-end, the total reserve for likely
but not actual credit losses in Customer
Finance totalled SEK 458 m. (409), equivalent
to 1.8 (1.6) percent of the portfolio.
The year-end portfolio totalled SEK
25,926 m. (25,303), divided among about
20,000 customers, of whom 97 percent
were small customers with lower credit exposure
per customer than SEK 15 m.
The management of the credit risks
that arise in Scania’s treasury operations,
among other things in liquidity investment
and derivatives trading, is regulated by
Scania’s financial policy document. Transactions
occur only within established limits
and with selected creditworthy counterparties.
OTHER RISKS
Residual value exposure
A portion of Scania’s sales occur with
repurchase obligations or guaranteed
residual value. During 2003, the volume
of such transactions was 6,500 (4,456)
vehicles. The value of all obligations at
year-end was SEK 5,925 m. (6,077).
Obligations outstanding declined somewhat,
mainly due to the stronger krona.
ANNUAL REPORT 2003
52