2012 Annual Report - Italcementi Group

The Group companies operate chiefly on their respective local markets. Consequently, invoiced amounts and
operating expenses are denominated in the same currency and exposure of operating cash flows to currency
risk is not particularly significant, with the exception of fuel, spare parts and investments for construction of new
plants.
Group policy requires borrowings or investments to be made in local currency, except in the case of hedges of
foreign-currency cash flows. However, the Group may adapt this general policy to take account of specific
macro-economic conditions in certain geographical areas (hyperinflation, high interest rates, liquidity,
translations).
With regard to financing for subsidiaries, the Group may also arrange facilities in a currency other than that of
the loan to the subsidiary.
Group policy is to hedge exposure whenever the market makes this possible. Net exposure of each entity is
determined on the basis of expected net operating cash flows over one to two years and financing
denominated in currencies other than the local currency.
The Group hedges exposure to currency risk with forward currency purchase and sale contracts, currency
swaps that translate loans and borrowings generally denominated in euro at inception into foreign currency, as
well as options.
These hedges are arranged with leading banks.
The impact of foreign currency translation on subsidiaries’ equity is recorded in a separate equity item.
22.5.1 Exposure to currency risk
Consolidated net exposure by currency of financial assets and liabilities denominated in currencies other than
the local currency is illustrated below:
(in millions of euro) Euro (*) USD (*) Other (*)
Financial assets (°) 13.8 659.0 11.9
Financial liabilities (°) (2.8) (26.2) (46.8)
Derivatives - (534.4) 38.0
Net exposure 11.0 98.4 3.2
(*) assets and liabilities are expressed at nominal value in euro when the local currency is not euro
(°) excluding trade payables and receivables
Foreign currency exposure refers mainly to the US dollar, the Thai baht, the Moroccan dirham, the Egyptian
pound and the Indian rupee. No hedging is set up on net investments in these subsidiaries.
Net exposure in US dollars arose chiefly from the investment in this currency of the cash reserves of the
Egyptian divisions, in order to mitigate possible local-currency fluctuations; also, the US dollar loan granted by
Ciments Français to Essroc was hedged against the exchange rate risk with a currency swap.
At December 31, 2012, a 1% change in the exchange rate with the euro, in cases where the local currency is
not euro, would have an impact of 32.9 million euro on equity, of which 7.8 million euro on non-controlling
interests.
At December 31, 2012, a 10% rise in the US dollar would have an impact on exchange-rate derivatives in
portfolio of 5.4 million euro on equity and -52.1 million euro on profit before tax. A 10% decrease in the US
dollar would have an impact on exchange-rate derivatives in portfolio of -4.4 million euro on equity and 51.8
million euro on profit before tax.
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