Goods prices that are mainly determined by international markets and global offer and demand result in the Group’s exposure to the relevant prices fluctuation risk.
Goods’ prices are connected both to variables that determine revenues (e.g. metal prices at LME) and to the cost (e.g. natural gas prices) of the Group’s companies. Due to its activity, the Group is exposed to price fluctuation of aluminium (AL), zinc (Zn), lead (Pb) as well as to price fluctuation of natural gas, as production cost.
As regards price fluctuation of metals, the Group’s policy is to minimize risk by using financial derivative instruments.
Exchange rate risk
The Group develops activity at international level and is therefore exposed to exchange rate risk that arises mainly from the US dollar. Such risk primarily stems from commercial transactions in foreign currency as well as from net investments in foreign financial entities. For the management of such risk, the Group’s Financial Management Department establishes financial derivative and non-derivative instruments with financial organizations for the account and in the name of the Group’s companies.
At the Group level, such financial instruments are considered to constitute compensation means for the exchange rate risk of specific assets, liabilities or future commercial transactions
Interest rate risk
The Group’s assets that are exposed to interest rate fluctuation primarily concern cash and cash equivalents. The Group’s policy as regards financial assets is to invest its cash in floated interest rates so as to maintain the necessary liquidity while achieving satisfactory return for its shareholders. In addition, for the totality of its bank borrowing, the Group uses floating interest rate instruments. Depending on the level of liabilities in floating interest rate, the Group proceeds to the assessment of interest rate risk and when necessary examines the necessity to use interest bearing financial derivative instruments. The Group’s policy consists in minimizing its exposure to interest bearing cash flow risk as regards long-term funding.
It is noted that an increase of five (5) basis points presume a decrease of 3.43 mil. € on net results and Equity.
The Group’s exposure in price risk and therefore sensitivity may vary according to the transaction volume and the price level. However the above sensitivity analysis is representative for the Group exposure in 2014.
The effect from the above mentioned factors to Group’s operating results, equity and net results presented in the page 39 of the ANNUAL REPORT 2014.