Electrolux 2011 Annual Report Download - page 76

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North America
The principal currency pairs for the North
American operations are the USD/CAD
and USD/MXN. A significant portion of
production is conducted in Mexico and
the products are subsequently sold in
USD. Accordingly, a weak MXN com-
pared with the USD is positive for the
Group. A strong CAD compared with the
USD is positive for the Group, since a large
portion of the costs for the Canadian
products is expensed in USD (purchasing
and production costs).
USD/CAD
USD/MXN
USD/BRL
Latin America
The principal currency pair for the Latin American
operations is the USD/BRL. Purchases of raw
materials and components are priced to some
extent in USD. The products are then sold in BRL.
A strong BRL compared with the USD is positive
for the Group.
Exchange-rate exposure
The global presence of Electrolux, with manufacturing and sales in
a number of countries, offsets exchange-rate effects to a certain
degree. The principal exchange-rate effect arises from transaction
flows; when purchasing and/or production are/is carried out in one
currency and sales occur in another currency. The Group utilizes
currency derivatives to hedge a portion of the currency exposure
that arises. The business sectors within Electrolux usually have a
hedging horizon of between three and eight months of forecast
flows. Hedging horizons outside this period are subject to approval
from Group Treasury. It is mainly sectors within growth markets that
have a shorter hedging horizon. The business sectors are allowed to
hedge forecast flows from 60% to 80%. The effect of currency
hedging is usually that currency movements that occur today have,
to a certain degree, a delayed effect. Electrolux is also affected by
translation effects when the Group’s sales and operating income are
translated into SEK. The translation exposure is primarily related to
currencies in those regions where the Group’s most substantial
operations exist, that is, EUR and USD.
Sensitivity analysis of currencies
The major currencies for the Electrolux Group are the USD, EUR,
BRL, RUB AUD and GBP. The key currency pairs are presented in
the map together with an explanation of how they impact the Group.
In general, income for Electrolux benefits from a weak USD and EUR
and from a strong BRL, RUB, AUD and GBP.
Currency effects 2011
The total currency effect (translation effects, transaction effects and
net hedges) amounted to approximately SEK 150m. The translation
effect was a negative SEK 325m, which was principally due to a
stronger SEK, on average, relative to the USD and EUR in 2011
compared with 2010.
The transaction effect was a positive SEK 400m, which was pri-
marily due to a stronger BRL and AUD, on average, relative to the
USD, and the weakness of the EUR in relation to a number of Euro-
pean currencies in 2011 compared with 2010. Net hedging effects
amounted to a positive SEK 75m.
Exchange-rate exposure at Electrolux
Main translation effects: USD/SEK, EUR/SEK
annual report 2011 risks
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