Annual Report 2010 (PDF, 5.2MB) - Panalpina Annual Report 2012

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Consolidated and Annual Financial Statements 2010 116 2010 (in thousand CHF) Level 1 Level 2 Level 3 Total Available-for-sale financial assets 0 1,074 14,228 15,302 Financial assets at fair value through profit or loss held for trading 691 125 0 816 Derivative financial assets 0 20,454 0 20,454 Available-for-sale financial assets at cost 323 Total 36,895 Derivative financial liabilities 0 5,532 0 5,532 Total 5,532 2009 (in thousand CHF) Level 1 Level 2 Level 3 Total Available-for-sale financial assets 252 1,068 15,963 17,283 Financial assets at fair value through profit or loss held for trading 463 155 0 618 Derivative financial assets 0 11,286 0 11,286 Available-for-sale financial assets at cost 511 Total 29,698 Derivative financial liabilities 0 2,233 0 2,233 Total 2,233 The fair value of financial instruments traded in active markets is based on quoted market prices at the statement of financial position date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s-length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair-value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. The Group used the discounted cash flow method to determine the fair value of level 3 financial instruments. The following table presents the changes in level 3 instruments for the year ended 31 December 2010: in thousand CHF Available-for-sale financial assets Total Balance on 1 January 15,963 15,963 Fair value adjustments in the statement of comprehensive income (1,735) (1,735) Balance on 31 December 14,228 14,228 Total gains or losses for the period included in the statement of comprehensive income for assets held at the end of the reporting period (1,735) (1,735) Neither in 2010 nor in 2009 did the Group transfer financial instruments into another level. Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market price. Market prices entail three types of risk: foreign currency risk, interest rate risk and other price risk such as equity risk. The Group’s activities expose it primarily to financial risk due to changes in foreign currency exchange rates. Panalpina Annual Report 2010
Consolidated and Annual Financial Statements 2010 Foreign currency risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily in regard to the US dollar and the euro. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities as well as net investments in foreign operations. 117 Management has set up a policy to require Group companies to manage their foreign exchange risk against their functional currency. The Group companies are required to hedge their entire foreign exchange risk exposure with the Group Treasury, if possible. To manage foreign exchange risks arising from future commercial transactions or recognized assets and liabilities, entities in the Group use forward contracts. Foreign exchange risk arises when future commercial transactions or recognized assets and liabilities are denominated in a currency that is not the Group entity’s functional currency. The Group Treasury is responsible for managing the net position using external derivative con tracts. For segment reporting purposes, each subsidiary designates contracts with the Group Treasury as fair value hedges. External foreign exchange contracts are designated at the Group level as hedges of foreign exchange risk on specific assets and liabilities on a gross basis. At 31 December 2010, the Group’s net foreign currency risk exposure amounted to CHF 31.6 million (2009: CHF 52.2 million). The following table demonstrates the sensitivity to a reasonable possible change of 10 % in the USD, EUR and HKD exchange rate, with all other variables held constant, of the Group’s profit before income tax (due to changes in the fair value of monetary assets and liabilities). Profit before income tax Effect in thousand CHF 2010 2009 US dollar (2,286) 5,753 Euro 371 704 Hong Kong dollar (896) (482) Total effect (2,811) 5,975 The movement in the pre-tax effect is a result of change in the fair value of derivative financial instruments not designated in a hedging relationship and monetary assets and liabilities denominated in USD, EUR and HKD, where the functional currency of the entity is a cur rency other than USD, EUR or HKD. Although the derivatives have not been designated in a hedge relationship, they act as a commercial hedge and will offset the underlying transactions should they occur. If the exchange rates of all currencies changed by 10 %, the total maximum net effect would amount to CHF 3.2 million (2009: CHF 5.2 million). Interest rate risk The Group has a clear funding policy that prohibits affiliates from borrowing in foreign currency and has a clear preference for intragroup financing. Affiliates are also required to repatriate their excess cash. Liquidity is mainly managed at the corporate level by using money market products. Derivative instruments are used to manage the duration of financial instruments in a prudent manner. As the Group generally has no significant interest-bearing liabilities, and given their short-term nature, the Group has a limited exposure to interest rate risk. Consequently the Group’s expense and operating cash flows are substantially independent of changes in market interest rates. Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a finan cial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and other financial institutions, foreign exchange transactions and other financial instruments. Credit risk related to trade receivables Customer credit is managed by each business unit and subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit limits are established for all customers based on external ratings or, if not available, according to internal rating criteria. The customer’s credit quality is assessed based on an extensive credit rating scorecard. Outstanding customer receivables are regularly monitored. The objective of the management of trade receivables is to sustain the growth and profitability of the Group by optimizing asset utilization while maintaining risks at an acceptable level. There is no significant concentration of counterparty credit risk due to the Group’s large number of customers and their wide geographical spread. Risk limits and exposures are continuously monitored by country and by the nature of counterparties. Additionally, the Group obtains credit insurance and similar enhancements when appropriate to protect the collection of trade receivables. The maximum exposure is the carrying amount as disclosed in note 20 – Trade receivables. Credit risk related to financial instruments and cash deposit Credit risk from balances with banks and financial institutions is managed by the Group Treasury in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and with credit limits assigned to each counterparty with a minimum rating of A. Counterparty credit limits are reviewed by senior management on a regular basis. The limits are set to minimize the concentra tion of risks and therefore mitigate financial loss through potential counterparty failure. Panalpina Annual Report 2010
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Contents Introduction 4 An Intervie
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Air Freight Ocean Freight Logistics
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Core Activities Ocean Freight Panal
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Customer Groups Customer case Coope
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Customer Groups 49 Panprojects The
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Annual Report 2010 (PDF, 5.2MB) - Panalpina Annual Report 2012

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