-
-
-
its long- and short-term debt instru
ments, which contain certain accel
erated repayment terms that are
detailed in these Notes.
Interest Rate Risk
Interest rate risk arises on interest-
bearing financial instruments and
represents the risk that the fair value
or the associated interest cash flows
of the underlying financial instru
ment will fluctuate because of future
changes in market interest rates.
Delhaize Group's interest rate risk
management objectives are to
reduce earnings volatility, to mini
mize interest expense over the long
term, and to protect future cash
flows from the impact of mate
rial adverse movements in interest
rates.
Delhaize Group reviews its interest
rate risk exposure on a quarterly
basis and at the inception of any
new financing operation. As part of
its interest rate risk management
activities, the Group enters into inter
est rate swap agreements when
appropriate (see Note 19 "Derivative
Financial Instruments and Hedging"
in the Financial Statements). At the
end of 2012, 75.8% of the financial
debt after swaps of the Group were
fixed-rate debts (2011: 75.1%; 2010:
72.3%).
The sensitivity analysis presented in
the table on the right estimates the
impact on the income statement and
equity of a parallel shift in the inter
est rate curve. The shift in that curve
is based on the standard deviation
of daily volatilities of the "Reference
Interest Rates" (Euribor 3 months
and Libor 3 months) during this year,
within a 95% confidence interval.
Currency Risk
Delhaize Group's foreign currency
risk management objectives are to
minimize the impact of currency fluc
tuations on the Group's profit loss
account, cash flows and balance
sheet, using foreign exchange con-
tracts, including derivative financial
instruments such as currency swaps
and forward instruments (see Note
19 "Derivative Financial Instruments
and Hedging" in the Financial State
ments).
Translation exposure
The results of operations and
the financial position of each of
Delhaize Group's entities outside
the euro zone are accounted for in
the relevant local currency and then
translated into euro at the applicable
foreign currency exchange rate for
inclusion in the Group's consolidated
financial statements, which are pre
sented in euros (see also Note 2.3
"Summary of Significant Accounting
Policies" in the Financial Statements
with respect to translation of foreign
currencies). If the average U.S. dol
lar exchange rate had been 1 cent
higher/lower and all other variables
were held constant, the Group's
net profit would have increased/
decreased by €2 million in 2012 and
2011 (2010: €3 million), solely due to
the translation of the financial state-
ments denominated in U.S. dollars.
The effect from the translation of the
functional currency to the reporting
currency of the Group does not affect
the cash flows in local currencies.
To reduce the overall foreign
exchange exposure from foreign
currency earnings the Group strives
to achieve a natural currency offset
between assets and liabilities and
between revenues and expendi
tures denominated in local curren
cies using foreign exchange for
ward contracts and currency swaps.
Because a substantial portion of
its assets, liabilities and operating
results are denominated in U.S. dol
lars, Delhaize Group is particularly
exposed to currency risk arising
from fluctuations in the value of the
U.S. dollar against the euro. After
cross-currency swaps, 65% of the
Group's financial debt is denomi
nated in U.S. dollars (71% and 85%
in 2011 and 2010, respectively). In
2012, 62% of net cash provided by
operating activities were generated
in U.S. dollars (77% and 61% in 2011
and 2010, respectively).
DECEMBER 31, 2012 (in millions of
Currency Reference Interest Rate
Shift
Impact on Net Profit
Impact on Equity
0.19%
+/- 7 basis points
+/- 0.09
0.31%
+/- 4 basis points
-/+ 0.17
+/- 0.2
Total
Increase/Decrease
-/+ 0.08
+/- 0.2
DECEMBER 31, 2011 (in millions of
Currency Reference Interest Rate
Shift
Impact on Net Profit
Impact on Equity
1.36%
+/- 29 basis points
+/- 0.1
0.58%
+/- 11 basis points
-/+ 0.5
+/- 0.6
Total
Increase/Decrease
-/+ 0.4
+/- 0.6
DECEMBER 31, 2010 (in millions of
Currency Reference Interest Rate
Shift
Impact on Net Profit
Impact on Equity
1.01%
+/- 16 basis points
-/+ 0.2
0.3%
+/- 13 basis points
-/+ 0.7
+/- 0.9
Total
Increase/Decrease
-/+ 0.9
+/- 0.9
DELHAIZE GROUP ANNUAL REPORT '12 61
