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 36 million( 24), 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.
Currency risk
A significant portion of New Wave Group’ s sales are made in foreign currency( 79 %). 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.
Transaktionsexponering och säkringsredovisning
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
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