Annual Report 2010 - Baltika Breweries

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OAO Baltika Breweries and subsidiaries
(d) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s income or the value
of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimizing the return.
(i) Currency risk
The Group is exposed to currency risk on purchases and borrowings that are denominated in a currency other than the respective functional currencies
of the Group entities, primarily the Russian Rouble (RUB). The currencies in which these transactions are primarily denominated are USD, EURO and
AZN.
In respect of monetary assets and liabilities denominated in foreign currencies, the Group’s policy is to ensure that its net exposure is kept
to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.
Exposure to currency risk
The Group’s exposure to foreign currency risk was as follows based on notional amounts:
EURdenominated
USDdenominated
AZNdenominated
EURdenominated
USDdenominated
AZNdenominated
’000 RUB
2010 2010 2010 2009 2009 2009
Current assets
Cash and cash equivalents 3,579 12,734 64,891 11,428 29,234 17,593
Loans and receivables 558,944 2,728,235 108,083 738,816 2,797,109 —
Trade receivables 11,100 — 60,907 15,789 — 31,315
Current liabilities
Secured bank loans — — — — (181,572) —
Trade payables (388,857) (363,427) (15,083) (576,325) (109,563) (8,275)
Gross balance sheet exposure 184,766 2,377,542 218,798 189,708 2,535,208 40,633
Net exposure 184,766 2,377,542 218,798 189,708 2,535,208 40,633
The following exchange rates applied during the year and as at the end of the year:
RUB 1 Average rate Reporting date spot rate
equals 2010 2009 2010 2009
USD 0.0329 0.0315 0.0328 0.0331
EURO 0.0248 0.0227 0.0248 0.0230
AZN 0.0264 0.0252 0.0262 0.0266
Sensitivity analysis
A 20 % strengthening of the RUB, as indicated below, against the following currencies at 31 December would have decreased profit or loss by the
amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the
end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the
same basis for 2009.
’000 RUB Equity Profit or loss
2010
USD (20 % strengthening) — (475,508)
EUR (20 % strengthening) — (26,069)
AZN (20 % strengthening) — (43,672)
2009
USD (20 % strengthening) — (507,042)
EUR (20 % strengthening) — (22,914)
AZN (20 % strengthening) — (7,959)
A weakening of the RUB against the above currencies at 31 December would have had an equal, but opposite effect on the above currencies to the
amounts shown above, on the basis that all other variables remain constant.