Huawei 2011 Annual Report Download - page 27

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22
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Cash Flow from Operating Activities
CNY Million 2011 2010 YOY(%)
Net prot 11,647 24,716 -52.9%
Depreciation, amortization and non-operating loss / (income) 7,900 3,893 102.9%
Cash ow before change in operating assets and liabilities 19,547 28,609 -31.7%
Change in operating assets and liabilities -1,721 2,946 -158.4%
Cash ow from operating activities 17,826 31,555 -43.5%
The net cash flow from operating activities in 2011
amounted to CNY17,826 million, a decrease of 43.5%
year-on-year. This decrease was mainly attributable to:
■Lower profitability: net profit decreased by 52.9%
year-on-year.
■The impact of depreciation, amortization, and
non-operating loss or income: the cash flow from
operating activities increased by CNY4,007 million
compared to that of 2010 mainly due to exchange
loss or gain.
■Changes in working capital: the total balance of net
operating assets and liabilities as of December 31,
2011 increased by CNY1,721 million compared to
that of December 31, 2010.
Financial Risk Management
In 2011, Huawei further amended and improved its nancial
risk management policies and processes to enhance the
company's ability to withstand financial risks and better
strategize to achieve business development goals.
Liquidity Risk
Huawei has a well functioning cash flow planning,
budgeting, and forecasting system to evaluate its short-
term liquidity needs. The company has implemented a
variety of sound financial measures to fulfill its overall
liquidity requirements, including centralizing cash
management, maintaining a reasonable level of funds,
and gaining access to adequate and committed credit
facilities to enhance its liquidity management. In 2011,
cash and short term investments increased by 12.4%
year-on-year to CNY62,342 million. An adequate
capital reserve and consistent cash ow from operating
activities has enabled Huawei to manage its liquidity
and borrowing risks, thus ensuring nancial stability for
the company.
CNY Million 2011 2010 YOY (%)
Cash ow from
operating activities 17,826 31,555 -43.5%
Cash and short term
investments 62,342 55,458 12.4%
Total borrowings 20,327 12,959 56.9%
Liquidity Trends
Currency risk
As the company's reporting currency is CNY, the exchange
rate fluctuation between CNY and other currencies will
impact its nancial results.
The company has established a currency exposure
management system and mitigated currency risk by adopting
various forex hedging measures. These measures include:
■Matching the transaction currency between procurement
and sales.
■Balancing the cash inows and outows of foreign currencies.
■Selecting the appropriate nancial hedging measures which
are in line with the company's risk management strategies.
Management Discussion and Analysis