4 - Refresco.de

Financial review 2009
concentration of credit risk. In order to reduce the exposure
to credit risk, the Group carries out ongoing credit evaluations
of the financial position of customers but generally does not
require collateral. Use is made of a combination of independent
ratings and risk controls to assess the credit quality of the
customer, taking into account its financial position, past experience
and other factors. Sales are subject to payment conditions
which are common practice in each country. The banks and
financial institutions used as counterparty for holding cash and
cash equivalents and deposits and in derivative transactions
can be classified as high credit quality financial institutions
(minimal: A rating).
The Group has policies that limit the amount of credit exposure
to individual financial institutions. Management believes that
the likelihood of losses arising from credit risk is remote particularly
in the light of the diversification of activities.
3.3 Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet
its financial obligations as they fall due. The approach of the
Group to managing liquidity risk is to ensure, as far as possible,
that it always has sufficient liquidity to meet its liabilities
when due, under both normal and more extreme conditions,
without incurring unacceptable losses or risking damage to the
reputation of the Group.
The Group has a clear focus on financing long-term growth as
well as current operations. Strong cost and cash management
and controls over working capital and capital expenditure proposals
are in place to ensure effective and efficient allocation
of financial resources.
3.4 Market risk
Currency risk
The Group is exposed to currency risk mainly on purchases
denominated in USD. At any point in time the Group hedges
80 to 100 percent of its estimated foreign currency exposure
on forecasted purchases for the following 12 months. The
Group uses currency option contracts and forward exchange
contracts to hedge its currency risks, most of which have a
maturity date of less than one year from the reporting date.
Where necessary, forward exchange contracts are rolled over
on maturity.
In respect of other monetary assets and liabilities denominated
in foreign currencies, the Group ensures that its net exposure
is kept to an acceptable level by buying or selling foreign
currencies at spot rates, as necessary, to address short-term
imbalances.
The Group’s investment in its UK subsidiaries is hedged by a
GBP secured bank loan, which mitigates the currency risk
arising from the subsidiary’s net assets. The investments in
other subsidiaries are not hedged.
Interest rate risk
The Group is exposed to interest rate risk on interest-bearing
long-term and current liabilities. The Group is exposed to the
effects of variable interest rates on receivables and liabilities.
On fixed interest receivables and liabilities, it is exposed to
market value fluctuations.
For certain long-term interest liabilities to financial institutions,
the Group has entered into interest rate swap agreements
through which the Group effectively pays at fixed interest rates
for certain long-term interest liabilities.
3.5 Capital management
There were no changes in the approach of the Group to capital
management during the year. The policy is to maintain a
sufficient capital base so as to maintain investor, creditor
and market confidence and to sustain future development
of the business. The Executive Board monitors the capital
employed, which consists of the capital in property, plant and
equipment, as well the net working capital. Furthermore, the
Group monitors its cash positions, both actual and forecasted,
on a monthly basis.
Neither the Company nor any of its subsidiaries are subject to
externally imposed capital requirements.