AAK Annual Report 2017

59 Exposure to raw material price risk, December 31, 2017 (Thousand tons) Inventory Sales contracts Purchase contracts Net exposure Oils and fats 255 -1,512 1,261 4 Exposure to raw material price risk, December 31, 2016 (Thousand tons) Inventory Sales contracts Purchase contracts Net exposure Oils and fats 209 -1,250 1,047 6 Sensitivity analysis – raw materials (excluding exotic raw materials) With the stocks and commercial contracts hedged by raw material hedge contracts, leaving a very limited net exposure, changes in raw material prices have no significant effect on the Group’s profit margin. A 10 percent change in all raw material prices would therefore have a negligible effect on Group operating profit. Gross contribution for rapeseed As explained above, our policies and procedures for risk management in general imply that our profit margin is not affected by FKDQJHV LQ UDZ PDWHULDO SULFHV +RZHYHU $$. FDQQRW HOLPLQDWH LWV H[SRVXUH WR PDUNHW SULFH IOXFWXDWLRQV LQ UHODWLRQ WR UDSHVHHG crushing. The crushing margin (oil plus meal value less seed price) can vary over time and can thereby directly affect profitability within the Technical Products & Feed business area. Exposure to foreign currency A significant portion of the Group’s buying and selling of raw materials is denominated in foreign currency. Moreover, most of the *URXS¶V RSHUDWLRQDO VXEVLGLDULHV DUH ORFDWHG RXWVLGH 6ZHGHQ &KDQJHV LQ H[FKDQJH UDWHV WKHUHIRUH DIIHFW $$. LQ VHYHUDO ZD\V Sales contracts and raw material contracts in foreign currency give rise to transaction risk. Profits for our foreign subsidiaries are affected by changes in currency rates, when they are translated to SEK. The Group’s equity is affected when equity in our foreign subsidiaries is translated to SEK. AAK hedges all its currency transaction risks. Payment for all sales contracts is thus hedged in the local currency of the subsidiaries that have entered into such sales contracts. Exchange rate risk related to translating equity and profit/loss in our foreign subsidiaries to SEK is not hedged. Exposure to transaction risk, December 31, 2017 SEK million Assets Liabilities Sales contracts Purchase contracts Currency contracts Net exposure Sold Bought USD 3,326 -4,791 -558 16 -1,509 3,539 23 EUR 1,564 -786 1,392 -188 -2,395 417 4 GBP 45 -461 40 -2 -444 824 2 Other 468 -1,049 440 -231 -2,350 2,724 2 Total 5,403 -7,087 1,314 -405 -6,698 7,504 31 Exposure to transaction risk, December 31, 2016 SEK million Assets Liabilities Sales contracts Purchase contracts Currency contracts Net exposure Sold Bought USD 2,491 -4,274 1,012 -1,255 -1,586 3,600 -12 EUR 1,601 -1,048 876 -41 -1,887 509 10 GBP 74 -615 43 0 -445 949 6 Other 1,057 -237 333 -178 -5,979 5,051 47 Total 5,223 -6,174 2,264 -1,474 -9,897 10,109 51 Sensitivity analysis – Currency With all foreign currency transaction risk hedged by currency hedge contracts, leaving a very limited net exposure, changes in IRUHLJQ FXUUHQFLHV ZLOO KDYH DQ LQVLJQLILFDQW HIIHFW RQ HDFK VXEVLGLDU\¶V SURILW PDUJLQ +RZHYHU FKDQJHV LQ IRUHLJQ FXUUHQFLHV relative to SEK do affect Group profit when the profit of each foreign subsidiary is translated into SEK. A 10 percent change in the exchange rates of all foreign currencies relative to SEK would have an effect of ± SEK 140 million (130) on Group operating profit. Furthermore, a 10 percent change in the exchange rates of all foreign currencies relative to SEK would affect Group net sales by SEK 1,800 million (1,600) and Group net working capital by SEK 350 million (300). Interest rate risk AAK’s policy on interest rate risk management is to minimize volatility in cash flow and net profit caused by fluctuations in interest UDWHV +RZHYHU GXULQJ DEQRUPDO PDUNHW FRQGLWLRQV ± H J D ILQDQFLDO FULVLV ± VKRUW WHUP LQWHUHVW UDWHV FDQ ULVH WR H[WUHPH OHYHOV In order to protect the Group’s interest costs against such abnormal scenarios, the interest rate on part of the Group’s net interest- bearing debt can be fixed or capped. At year-end 2017, the Group’s interest-bearing net debt, including pensions, amounted to SEK 2,666 million (2,620).