34 JOTUN GROUP Jotun A/S has financial and operational foreign exchange income and costs which are hedged as a net position according to the policy of Jotun Group, relating to USD and EUR. This represents all hedging relationships for the Group. During 2016 Jotun A/S has hedged USD cash inflows and EUR cash outflows, in accordance with the Treasury policy. The table below shows the status as of 31 December 2016: 2016 HEDGED VALUE UNREALISED GAIN / LOSS(–) REALISED EFFECT (NOK THOUSAND) 31.12.2016 31.12.2016 2016 Hedging of cash flows 952 941 –14 625 –743 2015 HEDGED VALUE UNREALISED GAIN / LOSS(–) REALISED EFFECT (NOK THOUSAND) 31.12.2015 31.12.2015 2015 Hedging of cash flows 1 146 597 –36 392 –34 557 Unrealised gain from financial instruments of NOK 22 million is reported under net financial items, ref. note 5. Market value information related to the tables above is gathered from: • Reuters 31 December 2016 and market value estimates generated by Jotun Group’s financial system CRM. • The valuations are based on inputs that are derived from observable prices and are hence categorized as a “Level 2” input according to the three-tier fair value hierarchy in IFRS. TRANSLATION RISK IN SALES AND OPERATING RESULT When all local sales and profit figures are converted to NOK and consolidated into Group accounts, there is a translation effect in the NOK numbers. This reflects the currency movement between NOK and all the relevant foreign currencies. This translation effect is not hedged. SENSITIVITY ANALYSIS ON TRANSLATION EFFECTS The Jotun Group has approximately 80 per cent of its sales and operational profit arising from foreign currency. Translating local currency figures into NOK, a ten per cent currency change would give an impact on the sales and operational profit of NOK 1 248 million and NOK 141 million respectively. Changes in currency exchange rates had a moderate impact on sales and operating profit during 2016. The reported decline in operating revenue of NOK 497 million from NOK 16 282 million in 2015 to NOK 15 788 million, would theoretically have been NOK 301 million given equal currency exchange rates in 2015 and 2016. Similarly, the reported decline in operating profit for 2016 of NOK 301 million would have been NOK 283 million in the theoretical scenario of equal currency exchange rates in 2015 and 2016. TRANSLATION RISK ON NET INVESTMENT Net investment in a foreign operation equals the booked value of equity and intercompany loans in foreign currency where settlement is neither planned nor likely to occur in the foreseeable future, adjusted for the Jotun’s ownership share. Currency translation risk arises when the financial statements of subsidiaries, joint ventures and associated companies presented in local currencies, are translated into NOK. In 2016, a currency loss of in total NOK 472 million has been recognised related to the net investments in subsidiaries, joint ventures and associated companies (2015: gain NOK 459 million). This currency effect, net after tax, is presented in the consolidated statement of other comprehensive income. (NOK THOUSAND) 2016 2015 EGP –149 689 23 673 CNY –115 223 142 732 TRY –80 792 –20 535 GBP –49 040 29 227 MYR –16 697 –19 378 AUD –14 632 3 112 KRW –12 360 28 038 AED –11 420 34 818 SEK –10 920 7 490 Other 23 037 131 668 Total -437 736 360 846 The currency loss in 2016 is mainly arising from translation differences related to the booked value of equity in the following underlying functional currencies: In addition, translation differences related to intercompany loans classified as net investments in foreign operations resulted in a currency loss of NOK 35 million (2015: gain NOK 99 million). The Group uses a traditional debt instrument in the form of a USD 120 million loan for hedging net investments in foreign subsidiaries. The net investment hedging is carried out in accordance with IAS 39. Foreign exchange gains or losses on the hedging instrument relating to the effective portion of the hedge are recognised in other comprehensive income. In 2016, a foreign exchange gain of NOK 16 million was recognised (2015: loss NOK 119 million).
Jotun Annual Report 2016
To see the actual publication please follow the link above