2008 Registration Document - Rexel

The following table indicates the periods in which the Groupexpects the cash flow associated with derivative instrumentsqualified as cash flow hedges. They will be recognized inprofit and loss account following the same schedule:(in millions of euros) Fair value One year Two years Three years ThereafterDerivative assets – – – – –Derivative liabilities (48.0) (28.2) (14.1) (5.0) (0.7)Derivatives (48.0) (28.2) (14.1) (5.0) (0.7)Cash flow hedged (48.0) (28.2) (14.1) (5.0) (0.7)Sensitivity to interest rate variationAs of December 31, 2008 an instantaneous rise of 1% in shortterminterest rates on variable debt excluding inactive interestrate options after the 1% rise, would lead to an increase ininterest expense estimated to €17.2 million on a yearly basis.20.2 Hedging of fluctuations in foreign currencyExchange exposure arises principally from external financingin currency other than the euro and in financing of/by Groupentities of/by the Parent company in their local currency. Inorder to neutralize the exposure to the exchange rate risk, thepositions in currencies other than the euro are systematicallyhedged with term contracts with duration generally betweenone and three months. The hedge contracts are renewed asnecessary while exposure remains.Fair valueThe notional amount and the fair value of financial instrumentshedging foreign exchange risk as of December 31, 2008 wererespectively €121.8 million (€454.6 million forward sales and€332.8 million forward purchases) and €1.9 million. Changein fair value is accounting for in net financial expenses in orderto neutralize exchange rate gain (loss) related to hedgingtransactions.Sensitivity to variation in the exchange rateIn 2008, nearly two-thirds of the Group’s sales on a proformabasis were in currencies other than euro, including nearly40% in US dollars and 10% in Canadian dollars.Also, around half of the Group’s net debts were originallydemonstrated in currencies other than euro, of which nearly27% were in US dollars and 9% in Canadian dollars. Thepresentation currency of the financial statements being theeuro, the Group is required to translate into euros thoseassets, liabilities, revenues and expenses denominated inother currencies in preparing its financial statements.The results of these operations are included in the Group’sconsolidated income statement after conversion at theaverage rate applicable to the period. A 5% increase (ordecrease) of euro against the US dollar and the Canadiandollar would have led to a decrease (increase) in salesof €225.9 million and a decrease (increase) in operatingincome before other income and other expenses ofrespectively €10.9 million.The Group’s financial liabilities and shareholder equity arelikewise included on its consolidated balance sheet afterconversion at the exchange rate at the close of the fiscalyear. Thus, a 5% variation in the exchange rate of the US orCanadian dollar considered at the close of the fiscal yearon December 31, 2008, would result in a correspondingdecrease or increase in financial debt and shareholders’equity of, respectively, €49.3 million and €3.1 million foran appreciation of the euro.The amount of the financial debt per currency of repaymentis analyzed as follows:(in millions of euros)EuroUSdollarsCanadiandollarsAustraliandollarsNorwegiancrownSwedishkronorPoundsterlingOthercurrencyFinancial liabilities 2,088.8 876.3 260.0 68.6 6.1 94.3 207.2 137.7 3,739.0Cash and cash equivalents (620.0) (83.5) 0.2 (24.0) (24.3) (12.0) (13.5) (29.9) (807.0)Net financial positionbefore hedging 1,468.8 792.8 260.2 44.6 (18.2) 82.3 193.7 107.8 2,932.0Impact of hedge (138.9) (40.9) (27.1) 23.6 211.1 77.3 (138.2) 33.1 –Net financial positionafter hedging 1,329.9 751.9 233.1 68.2 192.9 159.6 55.5 140.9 2,932.0Impact of a 5% increaseof exchange rate – 37.6 11.7 3.4 9.6 8.0 2.8 7.0 80.1TotalREXEL 2008 | PAGE 201