Annual report 20108.31 MB - Boskalis

Report of the Board of Managementpolicy for political and payment risks. Except wherefirst-class clients with an excellent credit ratingare involved, these risks are in principle coveredby measures such as credit insurance, bankguarantees and advance payments. Revenue andprofits are only accounted for once realization issufficiently certain.A large proportion of projects, particularly dredgingprojects, are not contracted in euros. Generally,positions in non-euro currencies are fully hedgedas soon as they occur, usually with forwardexchange contracts. The US dollar exchange ratein relation to the euro is particularly relevant. Alarge proportion of the projects are contracted inUS dollars or in currencies that are linked, to agreater or lesser extent, to the US dollar. Within thedredging industry most of our major internationalcompetitors also have a cost structure largelybased on the euro. This means that exchangerate fluctuations have no major impact on ourrelative competitive position. In a number of marketsegments there is competition from parties whosecost structures are not based on the euro. Theimpact of currency fluctuations is greater in thesemarket segments. However, on balance, exchangeratefluctuations only have a limited impact on thecompany’s competitive position.Financial risksWhen executing projects Boskalis is exposed tofinancial as well as operating risks. The main risksinclude disruption by political developments andviolence, and the risk of non-payment by clients.Boskalis has a strict risk acceptance and hedgingSeveral important affiliated companies of Boskalis(Archirodon, Lamnalco, Keppel Smit Towage,Asian Lift) are largely or entirely based on theUS dollar or Singapore dollar. However, both therevenue structure and the cost structure of thesecompanies are also largely or entirely based onthese same currencies. These holdings are viewedfrom a long-term perspective. Exchange rate risksrelated to the investments in these holdings are nothedged. It is assumed that currency fluctuationsand developments in interest rates and inflationwill offset each other in the long term. The incomestatements of these affiliates are translated ataverage exchange rates. Translation differences arecharged or credited directly to shareholders’ equity.54 Annual Report 2010