68 JOTUN A/S MARKET VALUE: Market value information is gathered from: • Reuters 31 December 2016 and estimates generated by Jotun’s financial system CRM. • Valuation is 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. HEDGING OPERATIONAL AND FINANCIAL CASH FLOWS Jotun A/S do not apply hedge accounting for cash flow hedging. Realised and unrealised loss/gain of the hedges is brought to Jotun A/S’ financial result. Realised and unrealised currency loss/ gain on short term and long term loans is equally brought to the financial result. Jotun A/S has International Swap Dealers Association (ISDA) agreements with its counterparts for derivative transactions, and transactions are made only with Jotun’s core relationship banks with satisfactory ratings. COMMODITY PRICE RISK Jotun A/S is exposed to a significant price risk in respect of a number of raw materials. Raw material purchases account for almost 60 per cent of total sales revenue. Volatility in raw material prices can have a significant impact on the company’s results. Large short-term increases in the raw material prices can not be compensated immediately in the product prices, and in the period until product prices can be increased, the profit will be nagatively impacted. Most of the raw materials do not have a financial derivative price market, and therefore most of the raw material prices are not accessible for hedging. Two raw material prices have previously been hedged, namely copper and zinc prices. Copper and zinc account for around five percent of the total raw material purchase in the company. Jotun A/S has no hedging positions at 31 December, but might hedge this risk in the future if significant effects are anticipated. HEDGING OF OPERATIONAL AND FINANCIAL CASH FLOWS 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 A/S. The table below shows the status as of 31 December: 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
Jotun Annual Report 2016
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