2005 Annual Report - Touax

Risk factors
annual report 2005
Group has never been held liable to any significant
extent in such cases.
■ River barges
The fuel oil market may affect the competitiveness
of river transport, either as a result of a shortage or
as a result of an increase in the price of oil. The
Group does not use any hedging instruments to
cover changes in the oil price, but limits the risk by
including indexation clauses in the majority of its
transport contracts to follow changes in the price of
refined products.
Climate risk
■ River barges
River navigation depends on climatic conditions:
precipitation, drought and ice. When heavy rainfall
affects certain rivers, water levels rise and reduce
the clearance under bridges, limiting or preventing
the passage of river barges. Drought leads to a fall in
water levels, requiring loads to be reduced or even
preventing the passage of river barges. Very harsh
winters may mean that all of the fleet is immobilized
until the ice melts.
Poor climatic conditions can also have an impact on
the grain harvests in a country or region. The impact
can be qualitative or quantitative, or even both. Poor
quality grain or a fall in production volume will weaken
export sales, leading to a fall in freight levels. This
risk is limited as a result of the Group’s diversified
geographical presence. In addition, on the Danube the
Group’s activity focuses on waterways (such as
canals) which are less susceptible to climate risk.
■ Railcars
The main climate risk for the Group is the flooding of
a railcar. This would cause additional repair and maintenance
costs up to the limit of the insurance cover.
Positioning risk and risk of loss of containers
Lessees sometimes return containers in regions
where demand for containers is low (notably the
United States). To cover such risks, the Group
applies “penalties” (drop-off charges) when the
containers are returned to regions of low demand. It
is also developing a secondhand container sales
department in order to reduce stocks in regions of
low demand. Stocks of containers in depots are
monitored on a daily basis and analyzed monthly.
Containers can also be lost or damaged. The Group
then bills its customers for the replacement value
previously agreed in each leasing contract. This is
always higher than the net book value. The risk of
total loss is not covered if a customer becomes
insolvent. On the other hand, all of the damage or
losses associated with a natural disaster are covered,
either by the customer’s insurance or by the
depot insurance.
Technical and quality risk applying to modular
buildings
Modular buildings may be subject to technical obsolescence
resulting from qualitative developments in
competitors’ equipment or changes in customer
preferences (changes of taste). Additional costs are
generated by research into quality materials. The
Group invests in high-quality equipment which is
ahead of existing standards and competing products,
enabling it to minimize the additional costs of
new materials.
Railcar subcontracting risk
The subcontracting risks mainly relate to problems
caused by derailments and strikes affecting rail operators.
In the event of a derailment, the Group’s risk
is limited to its share of the liability and to the insurance
cover. In the event of a strike, only railcars in
the process of being delivered are affected, and the
customers continue to be billed as normal for the
leased railcars.
Insurance – coverage of risks
The Group has a policy of systematically insuring its
tangible assets and general risks. The Group has
three kinds of insurance policy: insurance for equipment,
operating public liability and the public liability
of company officers.
The risk of loss or deterioration of the tangible assets
of the modular buildings and river barges businesses
is covered by equipment insurance. The insurance for
the tangible assets of the shipping containers business
and the railcars business is delegated to the
Group’s customers and suppliers (depots), in accordance
with standard practice in the industry.
The operating losses consequent to the loss or deterioration
of tangible assets are covered by the tangible
asset insurance.
There is no captive insurance company.
The public liability insurance of the parent company,
TOUAX SCA, covers material damage arising from its
operations. The Group subsidiaries each have their
own public liability insurance.
The public liability insurance for company officers
covers the Group’s managers (whether they are
company officers or not) incurring liability for a professional
fault committed within their directorial,
managerial or supervisory activity, carried on with
or without a mandate or power of attorney.
The Shipping Containers business has public liability
insurance cover. The equipment is insured directly
by the customers and depots in accordance with
industry practice.
The modular buildings insurance guarantees the
value of equipment generally, and in particular when
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