financial report and registration document 2011 - Groupe SEB

INTEREST-RATE RISK AND CURRENCY RISK
The Group sells its products in more than 150 countries. With a substantial
proportion of our manufacturing still based in Europe (37% of products
sold), the Group’s business is strongly export-oriented. Exchange rate swings
thus affect our ability to be competitive, so that these must be effectively
managed from a long-term perspective. To limit the direct impact of currency
fl uctuations, Groupe SEB strives to balance incoming fl ows (products)
and outgoing fl ows (expense) in each currency and especially in terms of
procurement, by diversifying sources geographically. However, this cannot
fully redress imbalances, as the Group’s dollar position is short-term, while
for several other currencies it is long-term. To limit this risk, the Group also
uses fi nancial instruments to hedge transaction risks.
For several years, the Group’s trading activity has been strongly disrupted
by volatile exchange rates. Given the swings between the sharp collapse
of several currencies (rouble, Korean won, Turkish lira, Mexican peso, etc.)
versus the euro in 2009, the rallying of these same currencies in 2010,
followed by another round of depreciation in 2011, the Group is constantly
forced to adapt its pricing policy: increasing sale prices to preserve the
local profi tability of commercial subsidiaries where the relevant currency
depreciates against the euro and adjusting prices downwards to preserve
market momentum and competitiveness where foreign currency/euro
exchange rates improve. The effects on the Group’s turnover are therefore
very different from one year to another. For example, exchange rate effects
had a negative impact of €63 million on sales in 2009, while in 2010 they
had a positive impact of +€170 million. In 2011, they were again negative
(-€26 million). The effects also impacted income albeit less dramatically.
Group fi nancing uses mostly variable-rate loans in currencies that correspond
to its needs (mainly the euro and the US dollar). Nevertheless, a portion of the
Company’s debt – the longest-term extending to 2016 – has been fi nanced
Sensitivity analysis
Groupe SEB conducted a sensitivity analysis of data published in 2011 to
assess the impact of euro-dollar exchange rate variations on its operating
result from activity * and the effect of interest-rate variations on profit
before tax.
Concerning the euro-dollar exchange rate, as a regular buyer of dollars or
in “dollar zones” (raw materials, products sourced in Asia, etc.), Groupe
SEB has held a “short-term” position in this currency for several years.
The sensitivity analysis shows that a 1% variation in the euro-dollar exchange
rate would have an impact of about €3 million on the Group’s operating
result from activity (formerly known as the operating margin). However, other
important operating currencies for the Group could also have a signifi cant
impact on operating result from activity. These include the yen, the rouble,
the pound sterling, the Turkish lira, the Korean won, the Polish zloty, the
Brazilian real and the Mexican peso. The depreciation of important currencies
for the Group can have a strong negative impact, such as in 2009, while
their appreciation in relation to the euro can result in a very positive effect
* Formerly operating margin.
Financial Report and Registration Document 2011
1
Presentation of the Group
Risk management
at a fi xed rate, making it possible for the Group to protect itself against the
likelihood of interest-rate rises.
Details of interest rate and exchange rate risks are given in Notes 26.2.1
and 26.2.2 to the Consolidated Financial Statements.
RISKS RELATING TO SHARES
At 31 December 2011, Groupe SEB held 2,331,797 treasury shares for a total
value of €93.2 million. This treasury stock is deducted from shareholders’
equity at acquisition cost.
On the basis of the closing price of the SEB share at 31 December 2011 (€58.12),
the market value of treasury stock was €135.5 million (this market value has
no impact on the Group’s consolidated fi nancial statements). A 10% increase
or decrease in the share price would therefore have led to a €13.6 million
change in the fair value of treasury stock. This variation has no impact on
the consolidated income statement or shareholders’ equity.
After two years of very strong stock market growth in 2009 and 2010 (at
+85% in 2009 and +96% in 2010), SEB’s stock experienced a more diffi cult
year in 2011, underperforming the indices throughout almost the entire
year. In late December, however, the share price essentially recovered to
its original level. This fl uctuation, in a complicated, bleak macroeconomic
environment and in an, essentially, bear market, appears to be the result of
profi t-taking given the unrealised gains available to investors. In the end,
after greatly outperforming the market for two years, SEB’s share price fell
by 26% over 2011, while the CAC 40 index was down 19% and the CAC
Mid 60 was down 22%.
Further information on share risks is given in Note 26.2.4 to the Consolidated
Financial Statements. This data also takes account of risk on the Supor share
which is quoted on the Shenzhen stock market.
(as it was the case in 2010). At any rate, the fi nal impact is the result of all
fl uctuations in the rates between the euro and other currencies, which may
vary greatly from one currency to another. These fl uctuations may partially
offset one another, cancel each other out, combine for an even greater
impact, etc. In 2011, because the average euro-dollar exchange rate was
less than it was in 2010 (average euro-to-dollar rate of 1.39 in 2011 vs. 1.33
in 2010), the Group was at an advantage in its procurement, and this positive
exchange rate effect on operating result from activity * more than offset the
negative impact of other currencies.
This sensitivity analysis does not take into account the impact of currency
exchange fl uctuations on the competitive capacity of our European industrial
facilities, which still represent a large share of the Group’s production: a
strong euro in relation to most other currencies, notably the US dollar,
makes European manufacturing more expensive than production in dollar
zones, and thus acts as a curb on exports. Inversely, a stronger dollar
could be a source of better competitiveness for our European production
GROUPE SEB
1
17