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Market Risk

Market Risk

(i) Foreign Exchange Risk

The Company is activated in a global level and consequently is exposed to foreign exchange risk emanating mainly from the US dollar. This kind of risk mainly results from commercial transactions in foreign currency as well as net investments in foreign entities. For managing this type of risk, the Company Treasury Department enters into derivative or non derivative financial instruments with financial institutions on behalf and in the name of group companies.

In Group level these financial instruments are characterized as exchange rate risk hedges for certain assets, liabilities or foreseen commercial transactions.

 

(ii) Price Risk

The Company’s earnings are exposed to movements in the prices of the commodities it produces, which are determined by the international markets and the global demand and supply.

The Company is price risk from fluctuations in the prices of variables that determine either the sales and/or the cost of sales of the group entities (i.e. products’ prices (LME), raw materials, other cost elements etc.). The Group’s activities expose it to the fluctuations of the prices of Aluminium (AL), Zinc (Zn), Lead (Pb) as well as to Fuel Oil as a production cost.

Commodity price risk can be reduced through the negotiation of long term contracts or through the use of financial derivatives.

 

(iii) Interest rate risk.

Company’s interest bearing assets comprises only of cash and cash equivalents. Additionally, the Group maintains its total bank debt in products of floating interest rate.  In respect of its exposure to floating interest payments, the Company evaluates the respective risks and where deemed necessary considers the use of appropriate interest rate derivatives. The policy of the Company is to minimize interest rate cash flow risk exposures on long-term financing.

The effects of the above risks at the Company’s operating results, equity, and net profitability are presented in page 120 of ANNUAL REPORT 2016.