2012 Annual Report - Italcementi Group

22.4 Interest-rate risk management
The Group interest-rate risk management policy is designed to minimize the cost of net financial liabilities and
reduce exposure to fluctuation risks. It hedges two types of risk:
1. the risk of variations in the market value of fixed-rate borrowing and lending transactions. Group fixed-rate
debt is exposed to an “opportunity cost” risk in the event of a fall in interest rates. A change in interest rates will
affect the market value of fixed-rate assets and liabilities and impact the consolidated profit or loss in the event
of liquidation or early repayment of these instruments;
2. the risk linked to future flows arising from floating-rate borrowing and lending transactions.
A change in interest rates will have a negligible impact on the market value of floating-rate financial assets and
liabilities but will affect finance costs and, consequently, future profits.
The Group manages this dual risk as part of its general policy, performance targets and risk reduction targets
by giving priority to hedges on future flows over the short- and medium-term and to hedges against the market
value risk over the long term, within the specified limits.
It hedges interest-rate risks mainly by arranging interest-rate swaps, forward-rate agreements and interest-rate
options with top-ranking banks. Exposure in derivatives may never exceed the value of the underlying.
22.4.1 Interest-rate risk hedging
The table below sets out the notional value of interest-rate derivatives by maturity:
Maturity Maturity Maturity Maturity Total
less than 1 to 2 2 to 5 more than
(in millions of euro)
1 year years years 5 years
Fair value hedges
SWAPs receive Fixed / pay Floating
165 M€ 4.75% Euribor 3M+ 0.626% - - 165.0 - 165.0
650 M€ 5.375% Euribor 3M+2.284% - - - 650.0 650.0
Total - - 165.0 650.0 815.0
Cash flow hedges
SWAPs receive Floating / pay Fixed
910 M€ Euribor 3M 1.74% 200.0 100.0 175.0 435.0 910.0
76.05 M€ Euribor 6M 2.83% 25.0 50.0 1.1 - 76.1
Cash flow hedges OPTIONS -
-
Total 225.0 150.0 176.1 435.0 986.1
Trading
SWAPs receive Floating / pay Fixed -
400 M$ Libor 3M 0.7359% - 75.8 151.6 75.8 303.2
Trading Options -
Total - 75.8 151.6 75.8 303.2
Total 225.0 225.8 492.7 1,160.8 2,104.3
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