NWG // FINANCIAL INFORMATION // THE GROUP
Financial risk management
New Wave Group is continuously exposed to various financial risks . Financial risks comprise interest risks , currency risks and liquidity and credit risks . To minimize these risks ' impact on the income statement , the Group has a risk policy which describes how the Group seeks to limit the impact of financial risks on the income 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 that the use of short-term fixed interest rates 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 . An increase in interest rates by one percentage point would have a negative impact on earnings before tax of SEK 21.4 ( 33.2 ) million , based on the interest-bearing liabilities at year-end . The breakdown by currency of the Group ’ s net debt at year-end is shown in the table below . Net debt breakdown is shown in note 19 .
SEK million |
2020 |
2019 |
Breakdown by currency |
Net debt |
Net debt |
SEK |
-1 149.6 |
-1 596.0 |
EUR |
-267.4 |
-587.2 |
GBP |
-9.9 |
-23.0 |
USD |
-223.4 |
-434.0 |
CHF |
123.8 |
97.7 |
DKK |
22.7 |
-0.2 |
NOK |
-173.6 |
-273.2 |
CAD |
-166.3 |
-189.9 |
CNY |
-1.7 |
8.6 |
Other |
27.6 |
32.4 |
Total |
-1 817.6 |
-2 964.8 |
Currency risk
A significant portion of New Wave Group ’ s sales are made in foreign currency ( 74 %). 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 financial statements are also affected by translating the results and net assets of foreign subsidiaries into SEK , i . e . translation exposure .
Transaction exposure and hedge accounting
Transaction exposure mainly arises as a result of intra-Group transactions between the Group ' s purchasing companies and 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 USD . Changes in exchange rates between USD , EUR and SEK constitute the single largest transaction exposures in the Group .
Managing the currency exposure related to purchases 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 . Currency 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 , a part of the sales are made through pre-orders and , at this point , the prices towards the customers are fixed . A pre-order means , for example , that customers place orders in the spring for delivery in the autumn . In order to limit the currency risk in these pre-orders , derivatives are purchased to guarantee that the value of incoming deliveries to the warehouses match the prices towards the customers . In these cases hedge accounting according to IFRS 9 is applied , which means that changes in the value of the derivatives that are part of an effective cash flow hedge are recognized in other comprehensive income .
In the Corporate operating segment , 99 ( 98 )% of the sales occur in the promo sales channel and adjustments for changes in purchase prices are made continuously . In Sports & Leisure about 74 ( 74 )% of sales are made through the retail sales channel which means that a part of purchases in the operating segment are hedged against fluctuations in exchange rates . For Gifts & Home Furnishings , 71 ( 75 )% of the sales are to retail and most of the production takes place in Sweden . Even if sales mainly take place in the retail sales channel , pre-orders do not occur to any great extent . There is thus no large order backlog for future deliveries , but deliveries take place immediately . Consequently , no major currency hedging occurs in this segment and price adjustments to customers
094 // ANNUAL REPORT