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Consolidated financial statements at 31 December 2011 Ferrovial S.A. and Subsidiaries As regards these instruments, a linear variation of 100 basis points in the market interest rate curves at 31 December 2011 would, in the case of the effective hedges, have a net impact of EUR -462 million on the equity attributable to the Parent (-EUR 177 million at companies accounted for using the equity method and EUR -285 million at fully consolidated companies). 4.2 Foreign currency risk Foreign currency risk management is generally centralised through the Group Finance Department, on the basis of its global policies that seek to minimise the impact caused by fluctuations in the exchange rates of the currencies in which Ferrovial operates, by means of hedging mechanisms. Ferrovial has significant investments in developed countries with a currency other than the euro, including most notably, pounds sterling, US dollars, Canadian dollars and Polish zlotys. Ferrovial sets up hedging strategies for these long-term investments by issuing debt in the same currency as that in which the investment is denominated. With regard to management of foreseeable cash flow risks, the following transactions are analysed: Investments or divestments in projects. Income obtained from foreign subsidiaries in the form of dividends or capital reimbursements expected to be received from those subsidiaries. Intra-Group loans to foreign subsidiaries. Cash surpluses at foreign subsidiaries. Foreign currency collections from customers and payments to suppliers. The following table shows the values of assets, liabilities, noncontrolling interests and equity attributable to the Parent by type of currency at December 2011: Millions 2011 Currency Assets Liabilities Noncontrolling Equity of the Parent interests Euro 10,642 10,734 -294 186 Pound sterling 3,765 818 2,946 1 US dollar 4,377 4,114 375 -112 Canadian dollar 2,825 0 2,824 0 Polish zloty 1,213 1,004 151 75 Chilean peso 141 9 132 0 Other 9 6 3 0 Total Group 22,972 16,684 6,138 150 An analysis of the table above shows that the Group's equity is particularly exposed to the Canadian dollar and to the pound sterling. In general, they are treated as long-term investments denominated in strong currencies that historically have not fluctuated significantly. On the basis of all the data provided above, a 10% appreciation of the euro at year-end against the main currencies in which the Group has investments would have an impact on the Parent’s equity of EUR -643 million, of which 46% would relate to the impact of the pound sterling and 44% to the impact of the Canadian dollar. This fluctuation in the value of the euro would have an impact on total assets of EUR -1,232 million, of which 36% would relate to the investments in the US dollar and 31% to the investments in pounds sterling. The hedging strategy is analysed on a case-by-case basis, avoiding significant effects that might hinder the fulfilment of the business plan and impair Ferrovial’s capital. The factors considered are: (1) Size of the investment/transaction versus the level of capitalisation required; (2) Financing sources to be used (debt, cash flows received, etc.); (3) Risk of currency appreciation/depreciation; (4) Financial cost of the possible hedge. In general, the Group attempts to finance all the infrastructure projects that it invests in using the currencies in which each project’s income is denominated. Where this is not feasible, the Group arranges derivatives to hedge potential changes in the value of the debt caused by exchange rate fluctuations. Also, in construction or services contracts in which the price is received in a currency other than that in which the related costs are paid, hedges are arranged to avoid changes in the profit margin caused by exchange rate fluctuations. Ferrovial, S.A. Consolidated financial statements at 31 December 2011 20
Consolidated financial statements at 31 December 2011 Ferrovial S.A. and Subsidiaries Also, the detail of the net profit attributable to the Parent by type of currency in 2011 is as follows: c) Derivative financial instruments (see Note 12) d) Trade and other receivables (see Note 15) Millions of euros 2011 Currency Net profit Euro (*) 1,143 Pound sterling 94 US dollar -36 Canadian dollar 27 Polish zloty 38 Chilean peso 5 Total Group 1,269 (*) The profit in euros includes the gains on the disposals of Swissport and BAA, since the functional currency of the companies that own those investments is the euro. In this regard, the impact of a 10% appreciation of the euro on the income statement would have amounted to EUR -13 million. As indicated above, in terms of net assets Ferrovial has a strong foreign currency position, particularly in the Canadian dollar and the pound sterling. The value of the euro dropped against these two currencies, particularly against the pound sterling (2.53%), which had a positive exchange rate effect on the Group's consolidated financial statements. Exchange rate at year-end 2011 2010 Change 11/10 Pound sterling 0.8357 0.8574 -2.53% US dollar 1.2960 1.3366 -3.04% Canadian dollar 1.3175 1.3291 -0.87% Polish zloty 4.4627 3.9557 12.82% Chilean peso 673.2800 625.6500 7.61% Average exchange rate 2011 2010 Change 11/10 Pound sterling 0.8690 0.8561 1.51% US dollar 1.3998 1.3211 5.96% Canadian dollar 1.3787 1.3674 0.83% Polish zloty 4.1380 3.9915 3.67% Chilean peso 674.9383 673.8300 0.16% 4.3 Credit and counterparty risk The Group’s main financial assets exposed to credit risk or counterparty risk are as follows: a) Investments in financial assets included in cash and cash equivalents (short term) (see Note 20) The Group’s overall exposure to credit risk is equal to the balance of the above-mentioned items, as the Group has not granted any credit lines to third parties. As regards the risk incurred by investing in financial products or arranging derivative financial instruments (included in letters a, b and c), Ferrovial has established internal criteria to minimise credit risk, stipulating that counterparties must always have high credit ratings received from prestigious international rating agencies. Ferrovial also imposes maximum limits on amounts invested or arranged, which are periodically reviewed. In the case of transactions in countries whose economic and socio-political circumstances preclude high credit quality, the Group mainly selects branches and subsidiaries of foreign entities that meet or nearly meet the stipulated credit requirements, or the largest local entities. In the specific case of restricted cash linked to infrastructure project financing, the financing contracts that provide for the amounts that must be set aside as restricted cash usually also stipulate the conditions that must be fulfilled by the financial products in which these obligations must be instrumented. With respect to risks related to trade receivables (included in letter d) and non-current receivables (letter b), there are a wide variety of customers, a large proportion of which are public-sector entities, as indicated in Note 15. 4.4 Liquidity risk In the current market environment, in which a major financial crisis caused a widespread credit crunch in 2011 (as in 2010), Ferrovial adopted a proactive approach to liquidity risk management, focusing basically on the preservation of the Company’s liquidity and on settling financial transactions before they mature. This policy is based on four main pillars: 1.- Efficient working capital management to ensure timely fulfilment of payment obligations by customers. 2.- Monetisation of financial assets, where this can be done under reasonable market conditions, through the factoring and discounting of future collection rights. 3.- Integral cash management, in order to optimise daily liquidity positions at the various companies by setting up a global cash management system. 4.- Setting up credit lines, particularly long-term lines, that guarantee the availability of cash and the payment of obligations in the event of any unusual scenarios or periods of difficulty in relation to collections and available balances. b) Non-current financial assets (see Note 11) Ferrovial, S.A. Consolidated financial statements at 31 December 2011 21
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