Electrolux 2005 Annual Report Download - page 34
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Please find page 34 of the 2005 Electrolux annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Report by the Board of Directors for 2005
30 Electrolux Annual Report 2005
Long-term borrowings, by maturity
In 2005, a net total of SEK 2,531m in borrowings matured or was amortized. For more
information on borrowings, see Note 17 on page 63.
Ratings
Electrolux has Investment Grade ratings from Moody’s and Stan-
dard & Poor’s. Both ratings remained unchanged during the year,
but Moody’s changed the outlook from Stable to Negative.
Ratings
Long-term Short-term Short-term
debt Outlook debt debt, Sweden
Moody’s Baa1 Negative P-2
Standard & Poor’s BBB+ Stable A-2 K-1
Net debt/equity and equity/assets ratios
The net debt/equity ratio rose to 0.11 (0.05). The equity/assets
ratio declined to 33.6% (35.6).
Net debt/equity and equity/assets ratios
The net debt/equity ratio increased somewhat to 0.11 (0.05) in 2005.
Equity and return on equity
Group equity as of December 31, 2005, amounted to
SEK 25,888m (23,636), which corresponds to SEK 88.32 (81.17)
per share. Return on equity was 7.0% (13.1). Excluding items
affecting comparability, return on equity was 18.3% (18.3).
Financial risk management
The Group is exposed to a number of risks relating to financial
instruments, including, for example, liquid funds, accounts
receivables, customer financing receivables, accounts payables,
borrowings, and derivative instruments. The risks associated
with these instruments are, primarily:
• Interest-rate risk on liquid funds and borrowings
• Financing risks related to the Group’s capital requirements
• Foreign-exchange risk on earnings and net investments in
foreign subsidiaries
• Commodity-price risk affecting expenditure on raw materials
and components to be used in production
• Credit risk related to financial and commercial activities
The Board of Directors of Electrolux has approved a financial pol-
icy and a credit policy for the Group in order to manage and con-
trol these risks. Each business sector has specific financial and
credit policies approved by the sector board. The above-men-
tioned risks are amongst others managed by the use of derivative
financial instruments according to the limitations stated in the
Financial Policy. The Financial Policy also describes management
of risks related to pension-fund assets.
Management of financial risks has largely been centralized to
Group Treasury in Stockholm, Sweden. Measurement of risk in
Group Treasury is performed by a separate risk controlling func-
tion on a daily basis. Furthermore, the Group’s policies and pro-
cedures include guidelines for managing operating risk related to
financial instruments through, e.g., segregation of duties and
power of attorney.
Proprietary trading in currency, commodities and interest-
bearing instruments is permitted within the framework of the
Financial Policy. This trading is aimed primarily at maintaining a
high quality of information flow and market knowledge in order to
contribute to proactive management of the Group’s financial
risks.
The Credit Policy for the Group ensures that the management
process for customer credits includes customer ratings, credit
limits, decision levels and management of bad debts.
For detailed information on:
• Accounting principles for financial instruments, see Note 1 on
page 48.
• Financial risk management, see Note 2 on page 55.
• Financial instruments, see Note 17 on page 63.
05040302010099989796
Equity/assets ratio
Net debt/equity ratio
2.0
1.6
1.2
0.8
0.4
0.0
%
50
40
30
20
10
0
201120102009200820072006
SEKm
5,000
4,000
3,000
2,000
1,000
0
and after
3,013
1,291
135
516
730 863