Risk and sensitivity
Risks and uncertainties
Elanders divides risks into circumstantial risks (the future of printing, business cycles, global financial situation, structural and the competition), financial risks (currency, interest, financing and credit) as well as operational risks (customer concentration, operations, operating costs, contracts, disputes, insurance and other risk management as well as other operational risks).
Circumstantial risks
Elanders believes printed matter will continue to grow as a bearer of information in coming decades although to a lesser degree as time passes. Growth will mainly take place in Eastern Europe and Asia and in packaging as well as digital print where Elanders is well positioned. The greatest business cycle sensitivity is mainly connected to supplying customers concentrated on consumer markets such as vehicles and electronics. This is balanced by investments in solutions that will generate volumes from smaller companies and consumers, continued growth in Asia, access to production in low-cost countries and deliveries with a high level of service. Structural sensitivity is in the section of the Group that through operations in Western Europe and the US supply printed matter production in offset to industry and publishing customers as a sole offer, which makes up approximately half our net sales. Elanders works determinedly to reduce this risk by taking advantage of our global presence, expanding our offer with packaging, offer production in low-cost countries as well as by developing solutions for a greater share of digital print. As far as competition is concerned Elanders is one of the few players in the world that can provide global deliveries to international customers through our own organization. This is one of the most important platforms for the Group's competitiveness in the future.
Financial risks
The currency risk in the Group amounts to an effect on pre-tax result of up to MSEK 2 with a fluctuation of 5 percent in the most important currencies used by the Group. The Group counteracts this through forward exchange contracts in foreign currency. The interest risk amounts to an effect on pre-tax result of up to MSEK 8 during a twelve month period of a change in the interest rate up or down of one percentage unit. The Group renegotiated most of the loan portfolio in February 2009 and this portfolio is subject to renegotiations in spring 2010. The Group is insured against large credit losses. For more information please see note 17 to the Group’s financial reports (Annual Report for 2009).
Business Risks
None of Elanders’ customers generate more than 10 percent of net sales. The ten largest customers represented less than 36 percent of net sales. The risk that the Group will suffer a major stop in operations is minimal since the Group has similar production capacity in several places. The most significant operating cost is the cost for personnel which makes up around 33 percent of operating costs, which is why the Group works, for instance, to continually improve healthiness among employees. Paper costs are next and make up approximately 17 percent of operating costs. Elanders protects itself as is customary against price fluctuations through a paper price clause in contracts with our customers. Costs for other resources are not individually large enough for price fluctuations to have a significant effect on the Group.
Elanders believes there are no disputes that will have any important consequences for the Group's financial position. The Group’s insurance program contains global liability insurance, product liability, crime fidelity and limited protection against environmental damage, which is discussed in more detail in the section on Environmental impact above. Other operational risks consist primarily of irregularities or flaws in risk management. Elanders believes that the size of the Group and the fact that Executive Management is composed of members that have profound insight into, and close contact with, daily operations counteracts these risks.
Managing capital risk
Elanders’ goal concerning capital structure is to secure the Group’s continued existence so that it can continue to generate earnings to the owners and be useful to other interested parties. To maintain or change the capital structure the Group can change the dividends, repay capital to the owners by buying back shares, issue new shares or sell assets to reduce debts. Elanders assesses capital on the basis of the debt/equity ratio which is calculated on net debt in relation to equity. Group capital strategy has not changed during the year, which means a debt/equity ratio of no more than one. More information on capital structure is given in note 17 to the Group’s financial reports (Annual Report for 2009).
Utoljára frissítve:
2010. 04. 15.
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