Ardagh Glass Finance plc - Irish Stock Exchange

Derivative transactions are only undertaken for the purposes of managing interest rate risk and
currency risk. Ardagh does not trade in financial instruments. Ardagh reviews and agrees objectives and
treasury policies for managing each of these risks and they are summarized below.
Interest Rate Risk
Ardagh periodically utilizes interest rate swap agreements to manage and mitigate its exposure to
changes in interest rates.
As at September 30, 2009, Ardagh had A0.7 million of debt bearing interest at variable rates. The
amount of Ardagh’s variable rate debt may fluctuate significantly as a result of changes in the amount
of debt outstanding under its credit facilities from time to time. As of September 30, 2009, we had
A61.6 million of interest rate swaps in excess of the underlying EURIBOR-based variable rate debt. For
additional information concerning the terms of Ardagh’s variable rate debt, see Note 14 to Ardagh’s
audited financial statements located elsewhere in this Offering Memorandum.
Currency Exchange Risk
Ardagh’s results of operations are affected by changes in currency exchange rates, principally
between the British pound, Polish zloty, Swedish kroner, Danish kroner and the euro. The functional
currency of Ardagh’s U.K. operations is the pound, the functional currency of Ardagh’s Polish
operations is the zloty, and the functional currencies of Ardagh’s Danish and Swedish operations are
the kroner and kronor, respectively, while Ardagh’s reporting currency is the euro. Fluctuations in the
value of the pound, zloty, kroner and kronor with respect to the euro have had, and may continue to
have, a significant impact on Ardagh’s financial condition and results of operations as reported in euro.
We currently estimate that Ardagh has approximately A136.0 million aggregate principal amount of
borrowings that will be mismatched by non-euro assets. Ardagh intends to actively manage this
exposure through the deployment of assets and liabilities throughout the Group and, when necessary
and economically justified, by entering into hedging arrangements that will substantially protect Ardagh
from income and balance sheet exposure due to fluctuations in the exchange rate between the euro and
other currencies.
Commodity Price Risk
Ardagh is exposed to movements in the price of natural gas. Ardagh purchases its natural gas
requirements in the United Kingdom under a contract pursuant to which the pricing is derived from
the International Petroleum Exchange (the ‘‘IPE’’). The contract allows Ardagh to choose how the
pricing will be set. Pricing can be set based on the IPE closing spot price for the day, the day ahead
price, balance of month or any future price quoted for entire months. Ardagh tries to ensure that
natural gas prices are fixed for future periods but does not always do so because the future prices can
be far in excess of the spot price.
Ardagh does not use commodity futures contracts to limit the fluctuations in prices paid and the
potential volatility in earnings and cash flows from future market price movements. If the spot price of
natural gas rises unexpectedly and Ardagh has not fixed the price of natural gas in advance of its usage
requirements, its earnings and cash flows could be adversely affected.
60