Huawei 2013 Annual Report Download - page 42

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41
Management Discussion and Analysis
Liquidity Trends
CNY Million 2013 2012 YOY (%)
Cash flow from operating activities 22,554 24,969 (9.7%)
Cash and short-term investments 81,944 71,649 14.4%
Long-term and short-term borrowings 23,033 20,754 11.0%
In addition to maintaining liquidity, Huawei also optimized the debt maturity structure to a more
reasonable level.
CNY Million 1 year or below Above 1 year
Total borrowings 3,043 19,990
Foreign Exchange Risk
The Group’s functional currency is CNY and has foreign currency exposures related to buying, selling, and
financing in currencies other than CNY, which are mainly USD and EUR. According to the foreign exchange
policy guidelines of the Group, material foreign exchange exposures are hedged unless hedging would
be uneconomical due to market liquidity and/or hedging cost. The Group uses the value at risk (VaR)*
model to measure its foreign currency exposures, and uses the following techniques to mitigate such risks:
■ Natural hedging: The Group continuously structures their operations to match its receivables and
payables in a foreign currency, to the extent possible.
■ Financial hedging: For certain currencies where natural hedging does not fully offset the foreign
currency position, the Group hedges using a combination of short and long-term foreign currency
loans.
With other conditions unchanged, exchange rate fluctuations will impact the group’s net profit as follows:
Impact on
net profit
CNY million
2013
CNY appreciates 5% against USD (1,454)
CNY appreciates 5% against EUR (173)
2012
CNY appreciates 5% against USD (1,009)
CNY appreciates 3% against EUR (140)
* The VaR model is a statistical tool. Huawei uses this model to estimate the quantitative value of foreign exchange
exposures under a certain confidence level within a period of time based on the Group’s net assets in foreign
currencies, historical exchange rate fluctuations, and the relevancy between exchange rates.