|Note 37 - Financial risk factors|
Novozymes’ international operations mean that the income statement and balance sheet are exposed to a number of financial risk factors. Financial risks are managed centrally for the entire Group. The use of financial instruments is governed by the treasury policy approved by Novozymes’ Board of Directors. The treasury policy is unchanged from previous years, and contains rules on which financial instruments can be used for hedging, the counterparties that can be used, and the risk profile that is to be applied. Financial instruments are used to hedge existing assets, liabilities, and future net cash flows.
A 0.5% movement in the EUR would, other things being equal, result in a change in operating profit of around DKK 15–20 million (2010: DKK 15–20 million). A movement of 5% in the USD would result in a change in operating profit of around DKK 60–80 million (2010: DKK 60–80 million). A movement of 5% in the JPY would result in a change of around DKK 5–10 million (2010: DKK 5–10 million) in operating profit.
A 5% movement in the CNY would, other things being equal, result in a change in Shareholders' equity of around DKK 85 million (2010: DKK 71 million), while a movement of 5% in the USD would result in a change in Shareholders' equity of around DKK 19 million (2010: DKK 37 million).
Novozymes’ policy is to hedge existing net assets in foreign currencies and expected future net exposure from the Group’s operations. Hedging of exchange rate exposure is carried out through a combination of loans, forward exchange contracts, swaps, and options. Exchange rate hedging transactions are carried out to minimize risks and thereby increase the predictability of the Group’s financial results.
Currency risk relating to net investments in foreign subsidiaries is hedged where this is deemed appropriate and is managed primarily by taking out loans and entering into swaps. Currency swaps, which are used to hedge equity investments, generally have a maturity period of over 12 months.
According to Novozymes’ treasury policy, free funds may only be invested in government bonds, ultra-liquid mortgage credit bonds, and money market deposits.
The table below shows the future draw on liquidity based on the financial liabilities at December 31, 2011 (settled by financial assets). The table is broken down by payment periods, in accordance with the contractual due date. The amounts are shown undiscounted, so the figures cannot be directly reconciled with the respective items in the balance sheet.