Saab 2014 Annual Report Download - page 124

FINANCIAL INFORMATION – NOTES
According to the Group’s policy, commodity risk is minimised and managed prima-
rily through contract clauses with customers/suppliers. To minimise the risk to
Saab’s operating margin, future electricity consumption is hedged. This is done by
hedging projected consumption according to a model where 100 per cent of the
next quarter’s consumption is hedged. The hedging level then drops on a straight-
line basis to 0 per cent in quarter 13. Swedish units consume around 134 GWH per
year (138) with a spot price risk of MSEK 1.3 (1.4) per every time the price of electri-
city changes by SEK 0.01. Electricity directives are managed through a discretio-
nary management mandate, under which the manager has the mandate to accept
risks in relation to benchmarks (hedging strategy) at the equivalent of MSEK 1 (1)
expressed in VaR. The market value of electricity derivatives as of year-end was
MSEK -5 (-12). Since 1 January 2010, electricity derivatives are used as cash flow
hedges for the Stockholm price area (SE3). Inefficiency affecting net income for the
year amounted to MSEK 0 (0).
Credit and counterparty risks
Credit risk is the risk that the counterparty in a transaction will not be able to fulfil
the financial obligations of a contract. In the course of its day-to-day operations,
Saab is exposed to credit risks as a result of transactions with counterparties in the
form of customers, suppliers and financial players. The Group’s aggregate credit
risks consist of commercial credit risks and financial credit risks.
Commercial credit risks
Commercial credit risks consist of outstanding accounts receivable and advances
paid to suppliers. According to the Group’s policy, commercial credit risks are iden-
tified and actively managed on a case-by-case basis. Credit risks that arise in
customer contracts are managed by utilising available banking, insurance or export
credit institutions. According to the policy, credit risks that arise through advances
paid to suppliers are managed by always maintaining bank-guaranteed security for
any advances.
Accounts receivable
On 31 December 2014, the Group’s outstanding accounts receivable amounted to
MSEK 3,414 (3,295). The programme for the sale of trade receivables reduced
accounts receivable at year-end by 1,071 (555). Defence-related sales accounted
for 79 per cent (80) of total sales, where the counterparties in most accounts recei-
vable are nations with high creditworthiness. The Group’s receivables are mainly in
the EU, which accounted for 58 per cent (50) of the total. Where counterparties’
creditworthiness is deemed unsatisfactory, bank or insurance guarantees or
guarantees from EKN are secured.
In connection with cash transactions, Saab generally requires that a letter of
credit is opened in its name to ensure that payment is received.
Write-downs of accounts receivable amounted, as of 31 December 2014, to
MSEK 15 (19), corresponding to 0.4 per cent (0.6) of total accounts receivable.
Write-downs of accounts receivable have changed as follows.
MSEK 2014 2013
Write-downs, 1 January -19 -13
Write-downs from acquisitions -6 -
Write-downs for calculated losses -6 -15
Reversal of previous write-downs 13 3
Actual credit losses 3 5
Translation differences - 1
Write-downs, 31 December -15 -19
The following table shows an age analysis of the Group’s overdue receivables:
MSEK 31-12-2014 31-12-2013
<30 days 460 329
30 to 90 days 215 443
91 to 180 days 81 109
>181 days 356 263
Accounts receivable overdue 1,112 1,144
Accounts receivable not overdue 2,302 2,151
Total accounts receivable 3,414 3,295
Since accounts receivable are largely secured via bank or insurance guarantees
or are attributable to states, the commercial credit risk is low despite overdue
receivables.
Advances paid to suppliers
Advances paid to suppliers constitute a credit risk, since the counterparty’s servi-
ces have not been fully rendered. As of 31 December 2014, the Group had paid its
suppliers advances of MSEK 35 (145). As the Group’s policy is to maintain bank-
guaranteed security for any advances it pays, the commercial supplier credit risk is
considered low.
Financial credit risks
Financial credit risk consists of exposures to banks through deposits, securities
investments and/or the market value of outstanding derivatives.
The Group’s policy for managing financial credit risks is to:
• Ensure that all financial counterparties have a long-term credit rating of no lower
than A from Standard and Poor’s or A3 from Moody’s
• Assign each financial counterparty a credit limit based on its long-term credit
rating
• Enter into ISDA master agreements with financial counterparties to net the posi-
tive and negative market values of outstanding derivatives, see tables below.
Market value of financial assets and liabilities subject to
n etting arrangements
2014
Gross
amount Set-off
Net
amount in
balance
sheet
Master
netting
arrange-
ments
Collateral
received/
assets
pledged
Net
amount
Currency
derivatives 507 - 507 -415 - 92
Interest rate
derivatives - - - - - -
Electricity
derivatives 2 - 2 - - 2
Assets 509 - 509 -415 - 94
Currency
derivatives 1,310 - 1,310 -415 - 895
Interest rate
derivatives 91 - 91 - - 91
Electricity
derivatives 7 - 7 - - 7
Liabilities 1,408 - 1,408 -415 - 993
2013
Gross
amount Set-off
Net
amount in
balance
sheet
Master
netting
arrange-
ments
Collateral
received/
assets
pledged
Net
amount
Currency
derivatives 384 - 384 -158 - 226
Interest rate
derivatives 5 - 5 -5 - -
Electricity
derivatives 6 - 6 - - 6
Assets 395 - 395 -163 - 232
Currency
derivatives 291 - 291 -158 - 133
Interest rate
derivatives 14 - 14 -5 - 9
Electricity
derivatives 18 - 18 - - 18
Liabilities 323 - 323 -163 - 160
Credit risk is calculated on established and anticipated risks pursuant to the
recommendations of the Bank of International Settlements (BIS I). On 31 Decem-
ber 2014, counterparty risks amounted to MSEK 2,356 (3,617), of which deposits
with banks, mortgage institutions, companies and the Swedish government total-
led MSEK 2,842 (3,118).
Note 41, cont.
120 – SAAB ANNUAL REPORT 2014