AAK Annual Report 2020

AAK Annual Report 2020 76 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, but a cash flow impact of SEK 350-400 million. 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: • 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 risks related to translating equity and profit/loss in our foreign subsidiaries to SEK are not hedged. Note 3 | Financial risk management and hedge accounting Exposure to transaction risk, December 31, 2020 SEK million Assets Liabilities Sales contracts Purchase contracts Currency contracts Net exposure Sold Bought USD 3,173 -2,802 -2,583 1,386 -1,135 1,946 -15 EUR 1,535 -1,107 1,273 -189 -2,176 640 -24 GBP 132 -683 32 1 -451 967 -2 Other 965 -183 348 -137 -2,059 1,067 1 Total 5,805 -4,775 -930 1,061 -5,821 4,620 -40 Exposure to transaction risk, December 31, 2019 SEK million Assets Liabilities Sales contracts Purchase contracts Currency contracts Net exposure Sold Bought USD 3,402 -4,181 -2,333 1,174 -1,508 3,362 -84 EUR 2,292 -994 1,687 -327 -3,214 511 -45 GBP 39 -676 68 0 -359 929 1 Other 1,577 -201 417 -281 -2,934 1,386 -36 Total 7,310 -6,052 -161 566 -8,015 6,188 -164