AAK Annual Report 2018

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 changes in raw material prices. However, AAK cannot eliminate its exposure to market price fluctuations in relation to rapeseed 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 Group’s operational subsidiaries are located outside Sweden. Changes in exchange rates therefore affect AAK in several ways: Exposure to transaction risk, December 31, 2018 SEK million Assets Liabilities Sales contracts Purchase contracts Currency contracts Net exposure Sold Bought USD 3,265 -3,999 -759 170 -2,105 3,332 -96 EUR 1,768 -717 2,172 -699 -3,222 681 -17 GBP 37 -474 45 0 -452 845 1 Other 382 -251 554 -332 -3,032 2,692 13 Total 5,452 -5,441 2,012 -861 -8,811 7,550 99 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 3 Note Financial risk management and hedge accounting 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. 73