2013-vinci-annual-report

22.3.4 Analysis of foreign currency exchange rate risk
The principal foreign exchange risk exposure was as follows at 31 December 2013:
(in € millions) 31/12/2013
Currency US dollar Chilean peso Ukrainian hryvnia Swedish krona
Closing rate 1.3791 723,546 11,357 8.8591
Exposure 298 (40) (36) 19
Hedging (150) (6) – (2)
Net position 148 (47) (36) 17
Given a residual exposure on some assets that have not been designated as hedges, a 10% appreciation of foreign currencies against the
euro would have a pre-tax negative impact on the financial statements of €11 million.
22.4 Commodity risks
Most of the Group’s revenue arises either from contracts that include price revision clauses or under short-term contracts. The risks associated
with an increase in commodity prices are therefore generally limited.
For major contracts with no price revision clauses, the commodity risks are analysed on a case-by-case basis and managed in particular by
negotiating firm price agreements with suppliers and/or through cash-and-carry deals and/or hedging derivatives based on commodity
indexes.
For its small contracts in France, of which the average length is less than three months and which do not include price revision clauses,
Eurovia has set up a policy to manage bitumen price risks by putting in place short-maturity hedging derivatives (swaps of less than three
months on average).
VINCI uses little unprocessed raw material, other than the aggregates produced and used by Eurovia. In 2013, approximately 38% of Eurovia’s
aggregates came from Group quarries.
22.5 Credit and counterparty risk
VINCI is exposed to credit risk in the event of default by its customers and to counterparty risk in respect of its investments of cash (credit
balances at banks, negotiable debt securities, term deposits, marketable securities, etc.), subscription to derivatives, commitments received
(sureties and guarantees received), unused authorised credit facilities, and financial receivables.
The Group has set up procedures to manage and limit credit risk and counterparty risk.
Trade receivables
Approximately 37% of consolidated revenue is generated with public sector or quasi-public sector customers. Moreover, VINCI considers
that the concentration of credit risk connected with trade receivables is limited because of the large number of customers and the fact that
they are widely scattered across France and other countries. No customer accounts for more than 10% of VINCI’s revenue. In export markets,
the risk of non-payment is generally covered by appropriate insurance policies (Coface, documentary credit, etc.). Trade receivables are broken
down in Note E.20.2 “Breakdown of trade receivables”.
Financial instruments (cash investments and derivatives)
Financial instruments (cash investments and derivatives) are set up with financial institutions that meet the Group’s credit rating criteria.
The Group has also set up a system of counterparty limits to manage its counterparty risk. Maximum risk amounts by counterparty are
defined taking account of their credit ratings as published by Standard & Poor’s and Moody’s. The limits are regularly monitored and updated
on the basis of a consolidated quarterly reporting system.
The Group Finance Department also distributes instructions to subsidiaries laying down the authorised limits by counterparty, the list of
authorised UCITS (French subsidiaries) and the selection criteria for money market funds (foreign subsidiaries).
The measurement of the fair value of derivative financial instruments carried by the Group includes a “counterparty risk” component for
derivatives carried as assets and a “credit risk” component for derivatives carried as liabilities. Credit risk is measured using standard mathematical
models for market participants. At 31 December 2013, adjustments recognised with respect to counterparty risk and own credit
risk were not material.
22.6 Netting agreements
At 31 December 2013 and in accordance with IAS 32, the Group’s financial assets and liabilities (including derivative financial instruments)
are not netted on the balance sheet.
However, the Group has netting agreements for some of its derivative instruments. In the event of default by the Group or the financial
institutions with which it has contracted, these agreements provided for netting between the fair values of assets and liabilities arising from
derivative financial instruments presented in the consolidated balance sheet.
CONSOLIDATED FINANCIAL STATEMENTS 267
The table below sets out the Group’s net exposure arising from these netting agreements:
(in € millions) 31/12/2013 31/12/2012
Fair value of
Fair value of
derivatives Impact of netting
recognised on the agreements
Total
derivatives Impact of netting
recognised on the agreements
Total
balance sheet (*)
balance sheet (*)
Derivative financial instruments - assets 902 (292) 609 1,144 (357) 787
Derivative financial instruments - liabilities (461) 292 (169) (590) 357 (233)
Net derivative instruments 441 441 554 554
(*) Gross amounts as stated on the Group’s consolidated balance sheet.