THE GROUP
FINANCIAL INFORMATION
FINANCIAL RISK MANAGEMENT
New Wave Group is continually exposed to various financial risks. Financial risks comprise interest risk, currency risks and liquidity
and credit risks. To minimize the impact on the income statement from these risks, the Group has adopted a financial policy which
describes how the company seeks to limit the impact of financial risks on the incom statement. The goal is to ensure that the central
finance function exploits available economies of scale in the Group and assists the subsidiaries by providing professional service in order
to minimize the risks.
INTEREST RISK
New Wave Group believes the use of short fixed-rate periods leads to lower borrowing costs over time while short-term interest rates
follow the economy cycles and therefore offset fluctuations in the Group’s earnings. The breakdown by currency of the Group’s
borrowing at year-end is shown in the below table. An increase in interest rates over the course of the year by one percentage point
would have a negative impact on earnings of about SEK 9.2 million (SEK 9.8 million), based on the reported net debt at 31 December
2017. Net debt breakdown is shown in Note 20.
Breakdown by currency
SEK
EUR
GBP
USD
CHF
DKK
NOK
CAD
CNY
Other
Total
2017
Net debt, SEK million
-507.2
-215.2
-16.6
-831.2
8.8
50.9
-113.1
-53.9
23.6
16.6
-1 637.3
2016
Net debt, SEK million
-435.7
-279.1
-15.1
-948.3
15.0
23.0
-129.2
-33.8
42.8
11.5
-1 748.9
CURRENCY EXPOSURE
A significant portion of New Wave Group’s sales are made in foreign currency (approx. 76 %). The Group is exposed to changes in
exchange rates in the future flows of payments related to firm commitments and to loans and investments in foreign currencies, i.e.
transaction exposure. The Group’s accounts are also affected by translating the results and net assets of foreign subsidiaries into SEK,
i.e. translation exposure.
TRANSACTION EXPOSURE – HEDGE ACCOUNTING
Transaction exposure mainly arises as a result of intra-Group transactions between New Wave's purchasing companies and the Group’s
sales companies, situated in other countries and selling the products to their customers normally in local currency on their local market.
In some countries, transaction exposure may arise from sales to external customers in a currency different from the local currency. The
Group’s most important purchasing currency is the US dollar. Changes in exchange rates between the dollar, euro and Swedish krona
constitute the single largest transaction exposures in the Group.
Managing the currency exposure differs between the group's both sales channels. In the promo sales channel, New Wave Group is the
stock keeper and orders from resellers are therefore not placed until the the reseller has received an order from the end customer. The
order backlog for future deliveries is therefore small, as deliveries are made immediately. Hedging is not used for this sales channel
since price adjustments towards the customer are made continuously as the purchase price changes. In the retail sales channel, sales
are mostly made through advance orders and, at this point, the prices towards the customers are fixed. An advance order means, for
example, that customers place orders in the spring for deliver inte autumn. In order to limit the currency risk in these advance orders,
derivates are purchased to guarantee that the value of incoming deliveries to the warehouses match the prices towards the customers.
In these cases IAS 39 hedge accounting is applied, which means that changes in the value of the derivatives are recognized in other
comprehensive income.
In the Corporate Promo operating segment, 97 (97) % of the sales occur in the promo sales channel and adjustments for changes in
purchase prizes are made continously. In Sports & Leisure about 75 (76) % of sales are made through the retail sales channel which
means that the majority of purchases in the operating segment are hedged against fluctuations in exhange rates. For Gifts & Home
Furnishing, 87 (86) % of the sales are to retail and most of the production takes place in Sweden. Where purchases are made from
another country, 50-80% of the purchase in a foreign currency are hedged against fluctuations in exchange rates.
82 | NWG 2017