Econocom - 2019 Universal registration document

04 risk factors financial risk

Financial risk 4. The Group’s activities are subject to certain financial risks: market risk (including currency risk, interest rate risk and price risk), liquidity risk and credit risk. The Group’s overall financial risk management policy focuses on reducing exposure to credit risk and interest rate risk by transferring finance lease receivables to refinancing institutions and by using factoring solutions on a non-recourse basis in the Services and Products & Solutions businesses. Market risk 4.1. Financial market risks (interest rate and currency risk) and liquidity risks are handled by Group Management. CURRENCY RISK 4.1.1. The Group operates chiefly in the eurozone; however, following the expansion of operations in non-eurozone countries in Europe, as well as North and South America, the Group may be exposed to currency risk on other currencies. The currencies concerned are the pound sterling, the US and Canadian dollars, the Moroccan dirham, the Czech crown, the Swiss franc, the new Romanian leu, the Polish zloty, the Brazilian real and the Mexican peso. Since the large majority of subsidiaries’ purchases and sales are denominated in the same currency, this

exposure is limited. Econocom group does not deem this risk to be material, but has nevertheless signed a number of foreign exchange hedging agreements to hedge risks on internal flows. INTEREST RATE RISK 4.1.2. Econocom’s operating income and cash flows are substantially independent of changes in interest rates. Sales of leases to refinancing institutions are systematically based on fixed rates. Income arising on these contracts is therefore set at the outset and only varies if the contract is amended. The Group uses a combination of fixed rates and floating rates to hedge its interest rate exposure. At 31 ژ December 2019, the Group’s floating-rate debt comprises short-term borrowings (credit lines, commercial paper and bridge loans), and short-term factoring agreements. Partial hedges were in place as of 31 December 2019 on these floating-rate borrowings. The Group’s long-term debt is at fixed rates and comprises a euro private placement (Euro PP) for €102 ژ million and a €150 ژ million Schuldschein bond and a €189 ژ million bond investment. Rate hedges are in place for the floating-rate portion.

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2019 annual report