sain t-gobain annu al report 2008 annual report

isks is hedged wherever possible with Compagnie de
Saint-Gobain on receipt of orders sent by the subsidiaries, or
with the national delegations’ cash pools. In other cases,
hedges are contracted with the subsidiaries’ banks.
The Group monitors its exposure to foreign exchange risk
using a monthly reporting system which captures the foreign
exchange positions taken by the Group’s subsidiaries.
At December 31, 2008, 94% of the Group’s foreign exchange
position was hedged.
The net foreign exchange exposure of subsidiaries whose
functional currency is not those presented below was as
follows at December 31, 2008:
(in millions of euro equivalents) Long Short
EUR 8 10
USD 17 21
Other currencies 1 2
Total 26 33
Based on a sensitivity analysis at December 31, 2008, a 10%
increase in the exchange rates of the main currencies used by
subsidiaries would have the following negative impact on net
income:
(in € millions)
Net gains or losses
EUR (0.2)
USD (0.5)
A 10% fall in exchange rates would have had a positive impact
on net income in the same amounts (assuming that all other
variables were unchanged).
Energy risk
The Group limits its exposure to energy price fluctuations by
using swaps and options to hedge part of its natural gas
purchases in certain European countries and the United
States, and its fuel oil purchases in Europe. The swaps and
options are contracted in the functional currency of the
entities concerned. Hedges of gas and fuel oil purchases are
managed by a steering committee comprising members of the
Group Finance Department, the Group Purchasing Department
(Saint-Gobain Achats - SGA) and the relevant Delegations.
These hedges (excluding fixed-price purchases negotiated
directly with suppliers by the Purchasing Department) are
arranged by the Group Treasury and Financing Department in
accordance with instructions received from SGA.
The steering committee does not manage hedges of energy
purchases or purchases in geographical areas not mentioned
above because:
the volumes involved are not material, or
there are no international price indexes used by local
players in the geographical areas concerned, and transactions
are therefore based on either administered prices or strictly
national indexes.
In both of these cases, local purchasing units manage energy
risk primarily through fixed-price purchases.
The Group may from time to time enter into contracts to
hedge purchases of other commodities, in accordance with
the principles outlined above for gas and fuel oil.
Credit risk
To limit the Group’s exposure to credit risk, the Treasury and
Financing Department only deals with counterparties with a
long-term rating of A- or above from Standard & Poor’s or A3
or above by Moody’s, with a stable outlook in both cases.
Concentrations of credit risks are closely monitored to ensure
that they remain at reasonable levels.
Note 19 provides details of the Group’s interest rate and
energy hedges, and the interest rates for the main items of
debt. It also provides a breakdown of net debt by currency and
interest rate (fixed or variable), as well as the interest rate
repricing schedule.
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Saint-Gobain – Financial Report 2008