SOMFY - Annual Financial Report 2020

05 CONSOLIDATED FINANCIAL STATEMENTS

Interest rate risk

Raw material risk

The Group is exposed to interest rate risks. Management of the interest rate relative to Group debt is based on consolidated position and market conditions. The primary objective of the rate risk management policy is to control Group financing costs. The majority of the Group companies’ financial liabilities is at variable rate. The Group applies hedge accounting to interest rate hedge instruments. The effective portion of fair value movements is therefore taken to items of other comprehensive income and the ineffective portion is recognised in net financial income/(expense). The Group did not use any interest-rate hedging instruments during the 2020 financial year, as was also the case in 2019. Liquidity risk The Group must have permanent access to the necessary financial resources to allow it to finance its day-to-day activities and its investments. The Group’s liquidity risk primarily arises from the obligation to repay its existing debt, the funding of its future requirements and observance of its financial ratios. The granting of credit facilities is subject to Somfy SA’s commitments to its banking partners to comply with financial covenants. The Group has specifically reviewed its liquidity risk and believes that it is in a position to meet its future commitments, particularly those falling due in the next 12 months, despite the uncertain economic environment stemming from the health crisis. External Group financing essentially relies upon leases and medium-term credit facilities. Some debts are subject to compliance with covenants. The covenants are detailed in note 7.2.2.6. The Group does not finance itself using revolving loans, securitisation or reverse factoring. The Group has access to both confirmed and unconfirmed (overdrafts) medium-term bank facilities, which are undrawn to date (see note 7.2.2.6). Credit risk The Group’s exposure to credit risk is related to its cash surplus deposited with banks. Given the composition of its marketable securities portfolio (interest-bearing current accounts and term deposits) and the credit risk of its main banking partners, which are rated between A and A+, the Group’s exposure to investment risk is low but must be closely monitored given the uncertain economic environment stemming from the health crisis.

The Group is exposed to fluctuations in the price of the raw materials used in the manufacture of its products (copper and zinc in particular). To maintain its profitability, the Group must be able to cover for or offset this risk or pass it on to its customers. The Group has nevertheless implemented procedures to limit its exposure to risks related to changes in raw material prices. Somfy protects against fluctuations in the price of raw material by placing firm orders with its suppliers ( physical hedges for copper) and via hedging agreements for materials on the financial markets (copper and zinc paper hedging ) on components that cannot be physically hedged. The Group is vigilant in its assessment of the risk related to the supply of raw materials and electronic components within a market environment that is challenging. Raw material hedging continues to be adapted in line with forecasts and market trends. In accordance with IFRS 9, the Group is in a position to apply hedge accounting to a material component of a non-financial item. As such, the effective portion of financial instruments implemented is therefore taken to items of other comprehensive income and the ineffective portion is recognised in net financial income/(expense). Raw material hedges are adapted in line with forecasts. The positive impact of efficient hedges on items of other comprehensive income was €0.4 million net of deferred tax at 31 December 2020. The ineffective portion of hedges was nil at 31 December 2020 and 2019.

Tonnes Hedging of off-balance sheet items € thousands

Fair value € thousands

Types

31/12/20

Copper

170

830

250 407 657

Swap Swap

Zinc

1,300 1,470

2,520 3,350

Tonnes Hedging of off-balance sheet items € thousands

Fair value € thousands

Types

31/12/19

Copper

700

3,584 3,571 7,155

230 -69 160

Swap Swap

Zinc

1,760 2,460

137

SOMFY – ANNUAL FINANCIAL REPORT 2020