Reebok 2015 Annual Report Download - page 133

129
3
GROUP MANAGEMENT REPORT – FINANCIAL REVIEW
Group Business Performance – Treasury
INTEREST RATE DECREASES
The weighted average interest rate on the Group’s gross borrowings decreased to 2.4% in 2015 (2014:
3.1%). This development is mainly due to the repayment of a US private placement of US $ 115 million,
which carried a higher coupon, as well as lower interest rates on short-term financing. The latter was
mainly related to euro-denominated commercial paper which was issued in the course of 2015 to meet
seasonal funding needs. Fixed-rate financing represented 87% of the Group’s total gross borrowings at
the end of 2015 (2014: 90%). Variable-rate financing accounted for 13% of total gross borrowings at the
end of the year (2014: 10%).
EFFECTIVE CURRENCY MANAGEMENTA KEY PRIORITY
As a globally operating company, the adidas Group is exposed to currency risks. Therefore, effective
currency management is a key focus of Group Treasury, with the aim of reducing the impact of currency
fluctuations on non-euro-denominated net future cash flows. In this regard, hedging US dollars is a central
part of our programme. This is a direct result of the Group’s Asian-dominated sourcing, which is largely
denominated in US dollars. In 2015, Group Treasury managed a net deficit of around US $ 6.2 billion related
to operational activities (2014: US $ 5.6 billion). Thereof, around US $ 3.6 billion was against the euro (2014:
US $ 2.8 billion). As governed by the Group’s Treasury Policy, we have established a hedging system on a
rolling basis up to 24 months in advance, under which the vast majority of the anticipated seasonal hedging
volume is secured approximately six months prior to the start of a season. As a result, we have almost
completed our anticipated hedging needs for 2016 as of year-end 2015 and have already started hedging
our exposure for 2017. In 2016, we expect a negative effect from less favourable conversion rates, mainly
as a result of the strengthening of the US dollar. The use or combination of different hedging instruments,
such as forward exchange contracts, currency options and swaps, protects us against unfavourable currency
movements. The use of currency options allows the Group to benefit from future favourable exchange rate
developments.
see Diagram 47
see Global Operations, p. 74
see Risk and Opportunity
Report, p. 156
47INTEREST RATE DEVELOPMENT 1IN %
2015 2.4
2014 3.1
2013 3.8
2012 4.4
2011 4.9
1 Weighted average interest rate of gross borrowings.