LensCrafters 2011 Annual Report Download - page 114

ANNUAL REPORT 2011> 38 |
FINANCIAL RISKS
t) If the Euro or the Chinese Yuan strengthens relative to certain other currencies or if
the US or Australian Dollar weakens relative to the Euro, the Group’s profitability as a
consolidated group could suffer
The Group’s principal manufacturing facilities are located in Italy. The Group also
maintains manufacturing facilities in China, India and the United States as well as sales
and distribution facilities throughout the world. As a result, its results of operations could
be materially adversely affected by foreign exchange rate fluctuations in two principal
areas:
• the Group incurs most of its manufacturing costs in Euro and in Chinese Yuan, and
receives a significant part of its revenues in other currencies such as the US Dollar
and the Australian Dollar. Therefore, a strengthening of the Euro or the Chinese Yuan
relative to other currencies in which the Group receives revenues could negatively
impact the demand for its products or decrease its profitability in consolidation,
adversely affecting its business and results of operations; and
• a substantial portion of its assets, liabilities, revenues and costs are denominated in
various currencies other than Euro, with most of its revenues and operating expenses
being denominated in US Dollars. As a result, its operating results, which are reported
in Euro, are affected by currency exchange rate fluctuations, particularly between the
US Dollar and the Euro.
As its international operations grow, future changes in the exchange rate of the Euro
against the US Dollar and other currencies may negatively impact its reported results,
although the Group has in place policies designed to manage such risk.
u) If economic conditions around the world continue to worsen, the Group may
experience an increase in its exposure to credit risk on its accounts receivable which
may result in increased costs due to additional reserves for doubtful accounts, and a
reduction in sales to customers experiencing credit-related issues.
A substantial majority of the Group’s outstanding trade receivables are not covered
by collateral or credit insurance. While the Group has procedures to monitor and limit
exposure to credit risk on its trade and non-trade receivables, there can be no assurance
such procedures will effectively limit its credit risk and avoid losses, which could have a
material adverse effect on its results of operations.
In 2012, Luxottica will develop its action plans guided by three main principles: Grow,
Simplify and Connect.
Grow
Luxottica aims at continuing its growth throughout 2012 in all the main geographic
areas where the Group operates. In particular, Luxottica expects to achieve
11. 2012 OUTLOOK