AAK Annual Report 2017

60 Effective interest rate on debt to banks and credit institutions at balance sheet date SEK DKK USD CNY TRY BRL INR 2017 0.80 0.70 2.30 4.60 15.00 11.00 6.50 2016 0.80 0.70 1.50 4.45 11.00 13.50 6.50 Sensitivity analysis – Interest rates At the closing date, the Group had a floating-rate-based net debt of SEK 3,191 million (2,480). A 1 percent change in interest rates would therefore have a full-year effect of SEK 32 million (25) on the Group’s interest costs before tax. Loans and capital structure AAK’s policy on capital structure is to maximize debt financing, though not to a level that would threaten the Company’s position as an investment grade company. 2017 2016 AAK’s target key ratios are as follows: Target Net interest-bearing debt/EBITDA < 3.0 1.17 1.26 This target level is considered to be relatively conservative and contributes to ensuring that AAK will be able to retain its high credit rating. The Group’s policy is to allocate total net borrowings per subsidiary relative to each subsidiary’s share of the Group’s free cash flow. This minimizes the currency risk in relation to the Group’s ability to pay interest on and amortize its borrowings, which in turn strengthens the Group’s debt capacity. Total borrowing reported in the balance sheet, per currency at balance sheet date SEK million 2017 2016 SEK 350 202 DKK 502 491 USD 1,145 1,433 CNY 244 81 TRY 315 240 BRL 240 296 INR 140 177 Other 46 154 Total 2,982 3,074 Liquidity risk Liquidity risk concerns the Group’s ability to meet its financial commitments as they fall due. The table below shows all of the Group’s financial commitments, listed by the earliest contractual maturity date at the balance sheet date. All liabilities to banks and credit institutions are based on variable interest rates, which means the year-end carrying value reflects the present value of these liabilities. All liabilities in foreign currency are translated into SEK at year-end closing rates. Disclosure of financial liabilities by maturity date, December 31, 2017 Total amount Less than 1 year Between 1 and 2 years Between 2 and 5 years More than 5 years Non-current liabilities Financial liabilities Liabilities to banks and credit institutions 2,354 559 253 1,040 502 Other non-current liabilities 300 - - - 300 Total non-current liabilities 2,654 559 253 1,040 802 Interest on liabilities to banks and credit institutions 399 18 17 312 52 Total non-current liabilities and interest 3,053 577 270 1,352 854 Current liabilities Financial liabilities Liabilities to banks and credit institutions 628 628 - - - Accounts payables 3,137 3,137 - - - Derivative financial instruments 426 426 - - - Accrued expenses 993 993 - - - Other current liabilities 176 176 - - - Total current liabilities 5,360 5,360 - - - Interest on liabilities to banks and credit institutions 12 12 - - - Total current liabilities and interest 5,372 5,372 - - - Unused credit facilities available to the Group at the 2017 year-end Total amount Less than 1 year Between 1 and 2 years Between 2 and 5 years More than 5 years Unused credit facilities 4,209 492 1,247 2,469 1