2011 Annual Report - Italcementi Group

2011 Annual Report
Presentation 4
General information 15
Annual Report Consolidated Annual Report Directors’ report 150
Extraordinary session Italcementi S.p.A. Annual Report Separate financial statements 239
At December 31, 2011, financial instruments stated at fair value were subdivided as follows:
December 31, Level 1 Level 2 Level 3
(in thousands of euro)
2011
Derivatives - assets 1,537 1,537
Other equity investments 6,019 6,019
Derivatives - liabilities 12,593 12,593
19.4 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. 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, 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.
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