FINANCIAL STATEMENTS 2010 - Finnlines

Translation risk
The Group has net investments abroad and is thus exposed to risks which arise when investments in GBP, DKK and PLN are convert-
ed into the parent company’s functional currency. The Group’s principle is to hedge significant net investments made in foreign sub-
sidiaries through foreign currency loans. In 2010 and 2009, the Group had no such significant investments in foreign currencies. The
tables below show the translation position at the end of 2010 and 2009.
EUR 1,000 Investment
Group translation exposure 2010
GBP -179
DKK 288
PLN 74
183
EUR 1,000 Investment
Group translation exposure 2009
NOK * -1,602
GBP -208
DKK 272
PLN 73
-1,465
* The Norwegian group companies were dissolved in 2010.
Sensitivity to exchange rate fluctuations
The following table describes the Group’s sensitivity to changes in the EUR/USD exchange rate. The impact of exchange rate changes
in other currencies is not significant.
Assumptions in estimating sensitivity:
• The variation in the EUR/USD exchange rate is assumed to be +/-10 per cent.
• The position, 31 December, includes USD-denominated financial liabilities, deposits, loan assets, accounts receivable, accounts
payable and derivative contracts.
• The position, 31 December, excludes future USD-denominated cash flows and future USD-denominated instalments for the ro-ro
vessels ordered from the Jinling shipyard.
EUR 1,000 Change in Profit & Loss Change in Equity
Sensitivity at closing date 2010, change in USD,
weakening / strenghtening 10% against EUR +234/-286 -1,766/+2,159
Sensitivity at closing date 2009, change in USD,
weakening / strenghtening 10% against EUR -60/+74 -2,017/+2,465
Change before tax effect.
INTEREST RATE RISK
Interest-bearing debt exposes the Group to interest risk, i.e. re-pricing and price risk caused by interest rate movements. Management
of interest rate risk is centralised to the Group Finance. The objective of the interest rate risk management is to reduce the fluctuation of
the interest expense, enabling a more stable net income. The Group may manage interest rate risk by selection of debt interest periods
and by using interest rate forwards and interest rate swaps.
The level of hedging against interest rate risks and the duration of the debt portfolio are reviewed annually by the Board of Directors
when making the budget. At the end of the reporting period, 60 per cent of the Group’s borrowings were floating-rate and the rest were
fixed-rate borrowings (including loans from financial institutions, pension loans and commercial papers).
The duration (average interest rate period) of the debt portfolio was approximately 39 months.
40 FINNLINES PLC Financial Statements 2010 (figures in EUR thousand, if not stated otherwise)