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CONSOLIDATED FINANCIALSTATEMENTS BarryCallebaut Annual Report2010/11 In order to quantify and manage the Group’sconsolidated exposuretoforeign currencyrisks, the concept of historical VaR has been implemented. The VaR concept serves as the analytical instrument for assessing the Group’s foreign currency risk incurred under normal market conditions. The VaRindicates the loss, which, within atime horizon of 1day, will not be exceeded at aconfidence level of 95% using 7years of historical market prices for each major currency pair. The VaRiscomplemented with the calculation of the expected shortfall and worst cases.The VaRisbased on static exposures during the time horizon of the analysis.The simulation of past market conditions is not predicting the future movement in foreign currency rates.Therefore, it does not represent actual losses. Itonly represents an indication of future foreign currency risks.AsofAugust 31, 2011, the Group had aVaR of CHF 0.3 million (2010: CHF 0.1 million). as of August 31, 2011 2010 Value at Risk on net exposures in thousands of CHF Total for the Group and per main exposure currencies Total Group 265 97 CHF 24 17 EUR 222 83 USD 32 24 GBP 135 26 Others 66 37 Diversification effect 45% 48% Interest rate risks The Group is exposed to changes in interest rates through its short- and long-term debt obligations mainly located in and centralized at the Group’s In-house Bank. The Group’s In-house Bank provides the necessary liquidity in the required functional currency towards all companies of the Group.Consequently,the Group’sdebt obligations areadjusted with the real currencymix of the Group’sliabilities in order to reflect the correct exposuretointerest rates. It is the Group’s policy tomanage its interest cost using an optimal mix of fixed and floating rate debt.This optimal mix is primarily determined by the level of the Group’sinterest cover ratio and is achieved by entering into interest rate derivative instruments, in which it exchanges fixed and floating interest rates. As described in the caption “Foreign currency risks”,the Group’s Finance Committee,which meets on amonthly basis,monitors the Group’s interest risk positions and acts as adecision taking body for the Group in this respect. TheGroup’sTreasury Policyalso covers the management of interest rate risks.Asfor foreign currency risks,the Group’s Risk Management department supervises the compliance of the treasury interest rate risk management strategy with the Group’sTreasury Policyand reports the status periodically to the Group’s CFO, who informs the AFRQCC in their quarterly meetings. The AFRQCC approves requests from the Group Finance Committee on important treasury matters including interest rate risks and provides recommendations thereon to the Board ofDirectors, which is the highest approval authority for all Group treasury matters. 118
CONSOLIDATED FINANCIALSTATEMENTS BarryCallebaut Annual Report2010/11 Thefollowing schedule provides an overview of all interest-bearing items per year-end closing. as of August 31, 2011 2010 in thousands of CHF Fixedinterest bearing items Carrying amountoffinancial liabilities 744,653 448,151 Reclassification due to interest rate derivative – 245,572 Net fixedinterest position 744,653 693,723 Floating interest bearing items Carrying amountoffinancial assets (42,410) (18,110) Carrying amountoffinancial liabilities 87,604 440,769 Reclassification due to interest rate derivative – (245,572) Net floating interest position 45,194 177,087 Sensitivity analysis on interest rate risks The following table shows the impact of aparallel shift of interest rates by 100 basis points (bps) up and 50 bps down on the Group’s equity and income statement, net of tax. Due to lower interest rates,the underlying assumptions for the sensitivity analysis have been aligned with prevailing market circumstances.The calculation is performed on both, the portion of the outstanding debt (excluding the asset-backed securitization program; see notes 9and 12) at floating interest rates and the outstanding derivatives exchanging floating into fixed interest rates at the respective year-end. This sensitivity analysis only indicates the potential impact for the respective fiscal year at the prevailing conditions in the financial markets. Consequently, it does not represent actual or future gains or losses, which are strictly managed and controlled, as clearly indicated in the Group’sTreasury Policy. as of August 31, 2011 2010 Impact on Income statement Equity Income statement Equity in thousands of CHF 100 bps increase 50 bps decrease 100 bps increase 50 bps decrease 100 bps increase 25 bps decrease 100 bps increase 25 bps decrease Floating rate bearing items (339) 169 – – (3,076) 769 – – Interest rate swaps – – – – 2,366 (608) 8,039 (2,123) Total interest rate sensitivity (339) 169 – – (710) 161 8,039 (2,123) Credit risk and concentration of credit risk Credit risk, i.e.the risk of counterparties defaulting,iscontrolled by the application of credit approvals, limits and monitoring procedures. AsofAugust 31, 2011, the largest customer represents 8% (2010: 10%) whereas the 10 biggest customers represent 24% (2010: 26%) of trade receivables.Due to the diverse geographic and large customer base,the Group has no material credit risk concentration. The extent of the Group’s credit risk exposure isrepresented on the one hand by the aggregate balance of amounts receivable, reduced by the effects of netting arrangements, if any, with counterparties.The maximum nominal credit risk exposure inthe event all other parties fail to perform their obligation was CHF 627.7 million as of August 31, 2011 (2010: CHF 750.4 million). The Group has insured certain credit risks through acredit insurance policy. Selected number of customers with significant outstanding amounts are covered by that policy. 119
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ANNUALREPORT 2010/11
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Barry Callebaut aims to significant
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