2012 Integrated report - Sappi

Notes to the group annual financial statements
for the year ended September 2012
29.2 Financial instruments continued
Hedge accounting continued
3. Net investment hedges continued
Commodity price risk
Commodity price risk arises mainly from price volatility and threats to security of raw material supply and other inputs to the
production process.
A combination of contract and spot deals are used to manage price volatility and contain costs. Contracts are limited to the group’s own
use requirements. The group aims to improve its understanding of the direction, magnitude and duration of future commodity price
changes and to develop commodity specific expertise.
The pulp swaps contracted in 2010 matured in January 2011 and no other pulp swaps have been contracted during fiscal 2012.
b) Liquidity risk
Liquidity risk is the risk that the group will be unable to meet its current and future financial obligations as they fall due.
The group’s objective is to manage its liquidity risk by:
• managing its bank balances, cash concentration methods and cash flows;
• managing its working capital and capital expenditure;
• ensuring the availability of a minimum amount of short-term borrowing facilities at all times, to meet any unexpected funding
requirements; and
• ensuring appropriate long-term funding is in place to support the group’s long-term strategy.
Details of the group’s borrowings, including the maturity profile thereof, as well as the group’s committed and uncommitted facilities are
set out in note 20.
The group is in compliance with all material financial covenants applicable to its borrowing facilities.
Liquidity risk management
US$ million
September 2012
Total
financial
assets
and
liabilities (1)
Fair value
of financial
instruments
0 – 6
months
6 – 12
months
Undiscounted cash flows
1 – 2
years
2 – 5
years > 5 years Total
Financial assets
Other non-current assets 22 22 12 – – 4 7 23
Non-current derivative
financial assets 22 22 3 3 7 12 – 25
Receive leg 12 11 23 47 – 93
Pay leg (9) (8) (16) (35) – (68)
Trade and other receivables 723 723 722 1 – – – 723
Current derivative financial
assets – – – – – – – –
Receive leg 60 – – – – 60
Pay leg (60) – – – – (60)
Cash and cash equivalents 645 645 645 – – – – 645
1,382 4 7 16 7 1,416
Financial liabilities
Interest-bearing borrowings 2,358 2,282 69 69 588 1,118 1,607 3,451
Non-current derivative
financial liabilities 46 46 2 1 2 18 11 34
Pay leg 33 32 62 595 361 1,083
Receive leg (31) (31) (60) (577) (350) (1,049)
Other non-current liabilities 1 1 – – 1 1 – 2
Interest-bearing borrowings 261 270 140 137 – – – 277
Overdraft 5 5 5 – – – – 5
Current derivative financial
liabilities 1 1 – – – – – –
Pay leg 157 22 – – – 179
Receive leg (157) (22) – – – (179)
Trade and other payables 784 784 746 – – – – 746
962 207 591 1,137 1,618 4,515
Liquidity surplus (gap) 420 (203) (584) (1,121) (1,611) (3,099)
(1) Refers to items that are in scope in terms of IAS 39 Financial Instruments: Recognition and Measurement.
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