Risk management


Currency. The Group’s earnings are affected by fluctuations in exchange rates. Transaction exposure risk arises due to a significant portion of the Group’s sales income being in different currencies from costs. The translation exposure risk arises from the translation of foreign subsidiaries’ assets, liabilities and earnings into Swedish kronor.

Transaction exposure. In order to reduce the impact on profit from changes in exchange rates, net flows are hedged using forward foreign exchange contracts. Net flows in euros, US dollars and sterling for the coming four months are always hedged. These normally correspond to trade receivables and outstanding orders. The Board can decide to hedge flows for a longer period if this is deemed suitable in light of the products’ profitability, competitiveness and the currency situation. Currency exposure arising when investments are paid for in foreign currency is distinguished from other transaction exposure. Normally, 90–100 per cent of the currency exposure associated with major investments is hedged.

Translation exposure. Hedging exposure that arises when subsidiaries’ assets and liabilities are translated into Swedish kronor (known as equity hedging) is assessed on a case-by-case basis and is arranged based on the value of net assets upon consolidation. The Group’s non-current assets are mainly Swedish, with the exception of the paperboard mill in the UK, which accounts for 3 per cent of the assets. The hedges take the form of foreign currency loans or forward foreign exchange contracts. Exposure that arises when the earnings of foreign subsidiaries are translated into Swedish kronor is not normally hedged.

For just over the next two years expected flows in EUR/ SEK are hedged at an average of 10.43. For other currencies, approximately 4 months of flows are hedged.



Hedging in pounds sterling amounted to GBP 14 million at year-end. Net assets in other currencies are limited and are not usually hedged.

Interest rates. Risks that arise when changes in the market interest rate affect the Group’s interest income and cost. The fixed interest periods for the Group’s financial assets and liabilities are normally short. The Board can decide to lengthen these periods in order to limit the effect of a rise in interest rates. Derivatives in the form of interest rate swaps may be used to manage fixed interest periods without altering underlying loans. The Group’s average borrowing rate in 2019 was 1.2 per cent. In 2019 the long-term fixed interest increased by SEK 1 000 million, with SEK 500 million for four years and SEK 500 million for five years.
Credit risk from financial counterparties. The risk of financial transactions giving rise to credit risks in relation to financial counterparties.s. A maximum credit risk and settlement risk are established for each financial counterparty and are monitored continually. Holmen’s financial counterparties are assessed using reputable credit rating agencies or, where a counterparty has no credit rating, the company’s own analyses. This calculation is based on the maturity and historical volatility of different types of derivative. The maximum credit risk for other financial assets is estimated to correspond to their nominal amount. At 31 December 2019, the Group had outstanding derivative contracts with a nominal amount of SEK 16 billion and a net fair value of SEK +123 million.
Liquidity and refinancing The risk of the need for future funding and refinancing of maturing loans being required at a high cost. Holmen’s strategy is to have a strong financial position in order to secure room for manoeuvre when making long-term commercial decisions. The target is for net financial debt not to exceed 25 per cent of equity. Holmen’s financing mainly comprises bond loans and the issue of commercial paper. Holmen reduces the risk of future funding becoming difficult or expensive by using long-term contractually agreed credit facilities. The Group plans its financing by forecasting financing needs over the coming years based on the Group’s budget and profit forecasts that are regularly updated. The financial position is strong, with net financial debt at 31 December 2019 amounting to SEK 3 784 million, which corresponds to 9 per cent of equity. Of these financial liabilities, SEK 2 498 million falls due in 2020.
At year-end the Group had an unused committed credit facility of EUR 400 million (SEK 4 172 million) with a syndicate of eight banks, of which SEK 296 million was available for use up until June 2020 and the remainder until June 2021. In February 2020 this was replaced by a new committed credit facility of SEK 4 000 million from a syndicate of seven banks, which is available to use until February 2025. The credit facility may be used provided that the Group’s net debt does not exceed 125 per cent of equity.


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Operational risks

Sensitivity analysis