2012 Annual Report - Italcementi Group

At December 31, 2012, financial instruments stated at fair value were subdivided as follows:
December 31, level 1 level 2 level 3
(in thousands of euro)
2012
Derivatives - assets 28 28
Other equity investments 5,998 5,998
Derivatives - liabilities 25,471 25,471
20.4. Interest-rate risk management
The company 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. Company fixedrate
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 financial costs and, consequently, future profits.
The company 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, within the specified limits.
It hedges interest-rate risks mainly by arranging interest-rate swaps and interest-rate options with top-ranking
banks. Exposure in derivatives may never exceed the value of the underlying.
20.4.1. Interest-rate risk hedging
The table below sets out the notional value of interest-rate derivatives by maturity:
Maturity
less than
1 year
Maturity
1 to 2
years
Maturity
2 to 5
years
Maturity
more than
5 years
(in millions of euro)
Cash flow hedges SWAPS
pays Fixed / receives Floating
735 M€ Euribor 3M 1.674% 125.0 - 175.0 435.0 735.0
75 M€ Euribor 6M 2.835% 25.0 50.0 - - 75.0
Cash flow hedges Options - - - -
To tal 150.0 50.0 175.0 435.0 810.0
Total
20.4.2. Exposure to interest-rate risk
At December 31, 2012, 94% of Italcementi S.p.A. net financial debt (not including the fair value of derivatives)
was at a fixed rate or hedged against the risk of rate increases for different periods over the entire debt time
horizon. 89% of fixed-rate commitments arose from swapped contracts initially arranged at floating rates.
Hedges are stated at nominal value for the period in question (consistently with instrument maturity) and do not
include fixed-rate to fixed-rate contracts.
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