palfinger at a glance

Risk Report
conSoliDateD MANAGEMENT REPORT / PERFORMANCE OF PALFINGER
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The objective of the existing accounts receivable management is to reduce credit risks in advance –
an objective that becomes increasingly significant in economically difficult times. Terms of payment
are agreed upon on the basis of financial information about the buyers. The risk of losses on doubtful
receivables is further limited by means of bad debt insurance cover for the individual accounts
receivable.
Liquidity risks, interest rate risks and foreign currency risks are controlled by the treasury
department, where all relevant information from the entire Group converges.
Liquidity risk
Group-wide cash reporting guarantees the transparency required to be able to control funds in a
targeted manner. Thanks to medium to long term planning, potential finance requirements can be
coordinated with the partners at an early stage. A Group-wide project was launched in the 2009
financial year to sustainably reduce capital employed in order to counteract this risk. This project
has been successfully continued and has made a substantial contribution to optimizing capital
employed.
The determination of credit lines and the amount of refinancing costs of credit institutions and
banks depend on their assessment of PALFINGER’s future perspective. Therefore, PALFINGER
maintains close contacts with its banking partners in order to be able to give them a comprehensive
picture of the current situation at all times.
Foreign currency risk
Through local value creation at PALFINGER’s sites, the Group only has a limited number of foreign
exchange positions. The Group makes use of natural hedges, which means that a company offsets
its expenses with the sales generated by its operations in the same currency.
The supply of finished products and components from Europe to North America creates a risk
position primarily in US dollars that is not covered by natural hedges. On the basis of the ongoing
analyses of this position, a hedging strategy is established, which is evaluated at regular meetings.
PALFINGER bases all of its hedging transactions on the underlying operating item, which ensures
that financial operations are carried out to reduce rather than augment the Group’s exposure. Only
derivative financial instruments that may be measured and reported by PALFINGER itself are used.
The primary hedging instruments used are foreign exchange forwards.
Interest rate risk
The greater financing need has increased the impact that changes in interest rates have on the
net financial result of the PALFINGER Group, which is why hedging against interest rate risks has
become increasingly important. This hedging applies to the floating-rate part of the financing
instruments. The interest rate exposure of these loans is hedged in part by interest rate swaps and
in part by interest rate caps. In the case of an interest rate swap, the floating rate is converted into a
fixed rate, thus fixing the cost of interest for the term of the swap. The interest rate cap puts an
upper limit on interest payments. Until the interest rate cap is reached, the market interest rate
is used for calculating interest payments. If the market interest rate exceeds the cap determined,
PALFINGER will receive a payment from its counterparty.
74 palfinger Annual Report 2011