DHL 2010 Annual Report Download - page 56

As a result of the sharp increase in funds from operations,  to debt improved
on the prior year despite the negative e ect of restructuring payments on liquidity and
the increase in debt due to higher operating lease liabilities. With a value of . , this
performance metric is within our expectations as well as those of Standard & Poor’s.
Central cash and liquidity management
 e cash and liquidity of the globally active subsidiaries is managed centrally by
Corporate Treasury. A total of   of the Group’s external revenue is consolidated in
cash pools and used to balance internal liquidity needs. In countries where this prac-
tice is ruled out for legal reasons, internal and external borrowing and investment are
arranged centrally by Corporate Treasury. In this context, we observe a balanced banking
policy in order to remain independent of individual banks. Our subsidiaries’ intra-group
revenue is also pooled and managed by our in-house bank in order to avoid external
bank charges and margins (intercompany clearing). Payment transactions are executed
in accordance with uniform guidelines using standardised processes and  systems.
Managing market risk
 e Group uses both primary and derivative  nancial instruments to limit market
risk. Interest rate risk is managed only with the help of swaps. Currency risk is addition-
ally hedged using forward transactions, cross-currency swaps and options. We pass on
most of the risk arising from commodity  uctuations to our customers and manage
the remaining risk by means of commodity swaps.  e parameters, responsibilities and
controls governing the use of derivatives are laid down in internal guidelines.
Flexible and stable fi nancing
 e Group covers its long-term  nancing requirements by maintaining a balanced
ratio of equity to liabilities.  is ensures our  nancial stability whilst providing adequate
 exibility. Our most important source of funds is net cash from operating activities.
During the reporting year, the average drawdown on the Group’s committed,
unsecured, bilateral credit lines was only around  ; the total volume amounted to an
annual average of  . billion. As part of our  nance strategy, in December  we
agreed upon a  ve-year syndicated credit facility with a volume of   billion that has
replaced the previous bilateral loan agreements in full.  e syndicated credit facility
guarantees us the best current market conditions and makes it a secure, long-term
liquidity reserve.  e credit facility does not contain any  nancial covenants concerning
the Group’s  nancial indicators and had not yet been drawn down as at the balance
sheet date.
As part of our banking policy, we make certain to spread our business volume widely
and maintain long-term relationships with the  nancial institutions we entrust with our
business. In addition to credit lines, we meet our borrowing requirements through other
independent sources of  nancing.  ese include bonds, structured  nance products and
operating leases. Most debt is taken out centrally in order to leverage economies of scale
and specialisation bene ts and hence to minimise the cost of capital.
Note 
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