Report and Accounts 1999 / 2000 - Carlsberg Group

Financial Review of the Carlsberg Group
65
the majority of which is included in the statement
in Danish kroner.
Assets and liabilities within the individual currency
categories are practically of the same dimension,
with the British pound showing a bias in
favour of the liabilities however.
When included in the Carlsberg Group accounts,
the individual currencies are translated
into Danish kroner in accordance with the official
exchange rates. The balance sheet applies the
exchange rates on the balance sheet date whereas
the profit and loss account is translated according
to a computed average of the exchange
rates throughout the year.
As is shown in the table, all currencies stated
have increased compared to Danish kroner
against last year. GBP is particularly strong, which
affects the profit and the balance sheet total of
Carlsberg-Tetley in Danish kroner. Apart from that,
the negative influence of these currency developments
on the profit and loss account for this financial
year are negligible.
As the Group has aimed at balancing assets
and liabilities at a reasonable level in the individual
currency categories, the development in exchange
rates has resulted in a comparatively equal increase/decrease
in assets and liabilities.
Financial risks
As an international business, the Group is exposed
to a number of financial risks.
Currency exposure arises as a result of the fact
that about 54% of the Group’s ordinary activities
originate from foreign companies translating into
Danish kroner according to a computed average,
and fluctuations in these currencies will have a direct
impact on the profit and loss account of the
Group.
Because of the distribution of primary operations
on various currency groups, it will be fluctuations
particularly in the British pound and other
western European currencies that will influence
the Group results.
In the balance sheet, fluctuations in exchange
rates affect primarily the translation of the foreign
companies’ equity at the exchange rate ruling at
the balance sheet date. Adjustment is made directly
against equity as is also the case for longterm
loans in foreign currency raised to cover the
investments. Not all investments are covered, but
the uncovered part is not assessed to affect the
Group’s equity materially.
The Carlsberg Group advances loans to the
on-trade, particularly in the United Kingdom
through Carlsberg-Tetley. Even though loans have
been reduced during the past years, total loans
still constitute a considerable item in the balance
sheet. The loans are subjected to continuous control
and supervision, and it is assessed that provisions
to the reserves are sufficient to cover any
loss.
28%, or DKK 0.8 billion, of the Group’s securities,
cash and cash equivalents is in the form of
Danish bonds with a DKK duration of approx.
DKK 11.2 million, with which amount the year’s
result will be reduced should the interest rate increase
by 1%. Cash at bank and in hand included
in the cash and cash equivalents with DKK 1.7
billion are invested as short-term deposits in
banks or other financial credit institutions, all
having satisfactory creditworthiness. It is assessed
that these arrangements involve no risk of loss.
The Group primarily applies financial instruments
to cover agreements, resulting in no other
significant material risks to the Group.
The Group’s future financial risks which are not
hedged stem from Orkla’s contribution of activities
into Carlsberg Breweries A/S, particularly the activities
in Russia.