Huawei 2015 Annual Report Download - page 51

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49
Cash flow from operating activities in 2015 increased by 18.1% year-on-year to CNY49,315 million. This increase
was attributable to the following factors:
■ Net profit grew by 32.5% year-on-year due to increased revenue.
■ Adjustments for depreciation, amortization, and non-operating losses (net) contributed an additional CNY194
million to cash flow from operating activities compared with that in 2014.
■ Reductions in the capital tied up in operating assets and liabilities in 2015 contributed CNY2,324 million to the
cash flow from operating activities.
Financial Risk Management
In 2015, Huawei amended and improved its financial risk management policies and processes to further enhance
the company's ability to withstand financial risks and better support its business development.
Liquidity Risk
Huawei has continuously refined its cash flow planning,
budgeting, and forecasting system to better assess its
short-term and mid-to long-term liquidity needs. The
company has implemented a variety of prudent financial
measures to meet its overall liquidity needs, including
centralizing cash management, maintaining a reasonable
level of funds, and gaining access to adequate and
committed credit facilities. As of December 31, 2015,
cash and short-term investments increased by 18.1%
year-on-year to CNY125,208 million. An adequate capital
reserve and a stable cash flow from operating activities enabled Huawei to mitigate its liquidity and borrowing
risks, thus ensuring financial stability for the company.
Liquidity Trends
CNY Million 2015 2014 YoY
Cash flow from operating
activities 49,315 41,755 18.1%
Cash and short-term
investments 125,208
106,036
18.1%
Short-term and long-
term borrowings 28,986 28,108 3.1%
Foreign Exchange Risk
The Group's functional currency is CNY. Huawei has foreign currency exposure related to buying, selling, and
financing in currencies other than CNY, mainly USD and EUR. According to the Group's foreign exchange risk
management policy, material foreign exchange exposures are hedged unless hedging is uneconomical due to market
liquidity and/or hedging costs. The Group has developed a complete set of foreign exchange management policies,
processes, and instructions. These include:
■ Natural hedging: The Group structures its operations to match receivables and payables in a foreign currency,
to the greatest extent possible.
■ Financial hedging: For certain currencies where natural hedging does not fully offset the foreign currency
position, the Group hedges using a combination of short- and long-term foreign currency loans.
In countries where local currencies depreciated sharply or in those with strict foreign exchange controls, the Group
managed foreign exchange exposures via different measures, including pricing in USD, accelerating payment
collection, and promptly transferring payments out of these countries.
With other conditions remaining unchanged, exchange rate fluctuations will impact the Group's net profit as follows:
Impact on net profit
CNY million
2015
CNY appreciates 5% against USD (1,269)
CNY appreciates 5% against EUR (319)
2014
CNY appreciates 5% against USD (578)
CNY appreciates 5% against EUR (173)