Annual Report 2006 (pdf) - EuroMaint Rail

E u r o M a i n t A n n u a l R e p o r t 2 0 0 6
Note 25 Financial instruments and financial risk management
Through its business, EuroMaint is exposed to financial risks, including
the effects of changes in prices on the credit and capital markets, and
fluctuations in exchange rates and interest rates. The Group’s overall risk
management focuses on the unpredictability of the financial markets,
and strives to minimise potential unfavourable effects on the Group’s
financial results. Financial operations in the Group are centralised in the
parent company’s finance function. The finance function acts as an internal
bank and is responsible for the sourcing of capital, cash management
and financial risk management. The operation is regulated through the
Group’s financial rules. The important areas of financial risk that are dealt
with comprise:
Exchange rate risks
EuroMaint is exposed to some extent to exchange rate risks due to its
relatively large purchase volumes in foreign currencies and low customer
invoicing in corresponding currencies. Purchases in foreign currencies
for large projects are hedged or agreed with variable foreign exchange
clauses during the tendering/contract formulation stage. The financial
rules and regulations also state that operating net flows shall be hedged
at least to set levels during a rolling 12-month forecast period. This is
usually achieved through forward agreements.
Interest rate risks
EuroMaint is affected by general changes in interest rates on its loan
portfolio. To counter this the portfolio has been divided and tied to different
fixed-interest terms. All borrowing agreements re-signed during the
year have a fixed-interest period of 12 months. On 31 December, 26% of
the total loan amount was subject to variable interest rates. See also Note
17. The only interest-bearing assets are cash and bank balances which
have been credited with variable interest linked to the bank’s VECI interest
rate, a weekly interest rate on deposits, less 0.15 percentage points, which
equated to 2.85% on 31 December 2006.
Credit risk
EuroMaint has procedures for minimising ongoing customer credit risks
in the business. These procedures include credit checks, advance payment
and guarantee management, and ongoing credit monitoring. Bad
debt losses established in 2006 amounted to SEK 1,110,000 (2,000). On
the balance sheet date, EuroMaint owned securities of approximately SEK
36 million in the form of advances from customers. The Group does not
consider there to be any significant concentration of credit risks regarding
financial assets.
Liquidity and refinancing risk
EuroMaint’s policy is always to have cash and cash equivalents and secured
refinancing available to the extent required for the operation. On 31
December 2006, the company had credit facilities of SEK 725 million with
Swedbank and a bank overdraft facility of SEK 125 million. The company’s
total credit facility amounts to SEK 850 million.
Fair values of derivative instruments on the balance sheet date
SEK thousands
31 Dec 2006 31 Dec 2005
Contracts with positive fair values:
Hedging 249 61
Contracts with negative fair values:
Hedging 0 154
The nominal amount of outstanding derivatives on 31 December was
NOK 182,450,000 (Sell).
The fair value of the derivative contracts has been calculated as the
costs or revenue which would have arisen if the contract had expired on
the balance sheet date. The banks’ official exchange rates have been used.
Note 26 Disclosure on fair values relating to financial instruments
The fair values of financial instruments correspond to the book values, with the exception of financial loans which are subject to fixed interest rates.
The nominal and book value of fixed-interest loans on the balance sheet date amounted to SEK 200 million. Upon valuation at fair value the liability
increases by SEK 564,000, taking into account any interest penalty calculated by the bank that would be payable if the loans were to be settled in
advance on the balance sheet date.
Note 27 Net turnover
SEK thousands Group Parent company
2006-12-31 2005-12-31 2006-12-31 2005-12-31
Sale of services 1,859,500 1,638,228 28,140 0
Sale of goods 174,342 226,783 0 0
Total 2,033,842 1,865,011 28,140 0
Note 28 Definition of key ratios
Operating margin: Operating profit as a percentage of operating revenues
Equity/assets ratio: Equity as a percentage of total assets
Note 29 Reclassifications
2005 figures in In last Reclassifications,
this year’s report year’s report completed, Other
Assets not invoiced Tax provisions
Other receivables 54,296 41,275 -15,931 28,952
Completed, not invoiced 75,224 79,997 -4,773
Prepaid expenses/accrued revenues 20,335 28,450 -8,115
Liabilities
149,855 149,722
Other provisions 26,968 6,363 -20,605
Income tax liability 37,394 6,690 -30,704
Accrued expenses/deferred revenues 193,326 242,750 28,819 20,605
257,688 255,803
Reclassifications of the comparison year 2005 have taken place in the following areas: Reserve for guarantees classified as other provisions.
Reclassification of accrued expenses/deferred revenues and prepaid expenses/accrued revenues relating to completed not invoiced.
Reclassification of income tax liabilities/assets, previously offset.
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