Annual Report 2010 - Baltika Breweries

(ii) Interest rate risk
Changes in interest rates impact primarily loans and borrowings by
changing either their fair value (fixed rate debt) or their future cash
flows (variable rate debt). Management does not have a formal policy
of determining how much of the Group’s exposure should be subject
to fixed or variable rates. However, at the time of raising new loans or
borrowings management uses its judgment to decide whether it believes
that a fixed or variable rate would be more favourable to the Group over
the expected period until maturity.
Profile
Notes to the Consolidated Financial Statements for the year ended 31 December 2010
At the reporting date the interest rate profile of the Group’s interestbearing
financial instruments was:
’000 RUB
Carrying amount
2010 2009
Fixed rate instruments
Financial assets 4,101,153 10,503,633
Variable rate instruments
4,101,153 10,503,633
Financial liabilities — (181,572)
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and
liabilities at fair value through profit or loss. Therefore a change
in interest rates at the reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would
have increased (decreased) profit and loss by the amounts shown
below. There would have been no impact directly on equity. This analysis
assumes that all other variables, in particular foreign currency rates,
remain constant. The analysis is performed on the same basis for 2009.
Profit or loss
2010 100 bp 100 bp
’000 RUB increase decrease
Variable rate instruments — —
Cash flow sensitivity — —
2009
’000 RUB
Variable rate instruments (1,816) 1,816
Cash flow sensitivity (1,816) 1,816
(iii) Other market risk
Material investments are managed on an individual basis and all buy
and sell decisions are approved by the Board of Directors.
The primary goal of the Group’s investment strategy is to maximise
investment returns.
The Group does not enter into commodity contracts other than to meet
the Group’s expected usage and sale requirements; such contracts are
not settled net.
(e) Accounting classifications and fair values
(i) Fair values
The basis for determining fair value is disclosed in note 4. The fair value
of unquoted equity instruments is discussed in note 15. In other cases
management believes that the fair value of the Group’s financial assets
and liabilities approximates their carrying amounts.
Interest rates used for determining fair value
The interest rates used to discount estimated cash flows, where
applicable, are based on the government yield curve at the reporting
date plus an adequate credit spread, and were as follows:
Short-term bank deposits in RUB
2010 2009
1.90 % –
11.00 %
3.30 % –
13.15 %
Short-term bank deposits in USD 3.50 % – 5.90 % 0.50 % – 5.90 %
Short-term bank deposits in EUR 3.50 % – 3.90 % 1.30 % – 3.90 %
Short-term bank deposits in AZN 6.50 % –
Originated loans to related parties 3.67 % 6.60 %
Loans and borrowings
(f) Capital management
LIBOR 6m +
0.75 %
LIBOR 6m +
0.75 %
The Group’s policy is to maintain a strong capital base so
as to maintain investor, creditor and market confidence and
to sustain future development of the business. The Board of Directors
monitors the level of dividends to ordinary shareholders.
The Group’s debt to capital ratio at the end of the year was as follows:
’000 RUB 2010 2009
Total liabilities 15,612,370 15,957,254
Less: cash and cash equivalents (566,986) (1,740,702)
Net debt 15,045,384 14,216,552
Total equity 55,027,837 63,681,313
Debt to capital ratio at
31 December
0.27 0.22
Neither the Company nor any of its subsidiaries are subject to externally
imposed capital requirements.
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