Saab 2013 Annual Report Download - page 116

Commodity risks
Price risks are divided into two parts:
 Commodity price risk refers to the risk that purchasing costs for ma-
terial will rise.
 Electricity price risk refers to the risk that Saab could be negatively af-
fected by changes in electricity prices.
According to the Group’s policy, commodity risk is minimised and managed
primarily through contract clauses with customers/suppliers. To minimise
the risk to Saab’s operating margin, future electricity consumption is hedged.
is is done by hedging projected consumption according to a model where
 per cent of the next quarter’s consumption is hedged. e hedging level
then drops on a straight-line basis to  per cent in quarter . Swedish units
consume around  h per year () with a spot price risk of .
(.) per every time the price of electricity changes by  .. Electricity
directives are managed through a discretionary management mandate, under
which the manager has the mandate to accept risks in relation to benchmarks
(hedging strategy) at the equivalent of   () expressed in VaR. e mar-
ket value of electricity derivatives as of year-end was  - (-). Since
January , electricity derivatives are used as cash ow hedges for the
Stockholm price area (). Ineciency aecting net income for the year
amounted to   (-).
Credit and counterparty risks
Credit risk is the risk that the counterparty in a transaction will not be able to
full the nancial 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 nancial players. e
Group’s aggregate credit risks consist of commercial credit risks and nancial
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 identied and actively managed on a case-by-case basis.
Credit risks that arise in customer contracts are managed by utilising availa-
ble 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  December , the Group’s outstanding accounts receivable amounted
to  , (,). e Receivables Financing Programme reduced
accounts receivable at year-end by  (). Defence-related sales accounted
for  per cent () of total sales, where the counterparties in most accounts
receivable are nations with high creditworthiness. e Group’s receivables are
mainly in the , which accounted for  per cent () of the total. Where
counterparties’ creditworthiness is deemed unsatisfactory, bank or insurance
guarantees or guarantees from  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.
Impairments of accounts receivable amounted, as of  December , to
 (), corresponding to . per cent (.) of total accounts receivable.
Impairments of accounts receivable have changed as follows.
MSEK 2013 2012
Impairments, 1 January -13 -19
Impairments for calculated losses -15 -5
Reversal of previous impairments 3 1
Actual credit losses 5 10
Translation differences 1 -
Impairments, 31 December -19 -13
e following table shows an age analysis of the Group’s overdue receivables: :
MSEK 31-12-2013 31-12-2012
<30 days 329 412
30 to 90 days 443 169
91 to 180 days 109 196
>181 days 263 124
Accounts receivable overdue 1,144 901
Accounts receivable not overdue 2,170 2,553
Total accounts receivable 3,314 3,454
Since accounts receivable are largely secured via bank or insurance guaran-
tees 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
services have not been fully rendered. As of  December , the Group had
paid its suppliers advances of   (). As the Group’s policy is to main-
tain bank-guaranteed security for any advances it pays, the commercial sup-
plier credit risk is considered low.
Financial credit risks
Financial credit risk consists of exposures to banks through deposits, securi-
ties investments and/or the market value of outstanding derivatives.
e Group’s policy for managing nancial credit risks is to:
 Ensure that all nancial counterparties have a long-term credit rating
of no lower than  from Standard and Poor’s or   from Moody’s
 Assign each nancial counterparty a credit limit based on its long-
term credit rating
 Enter into  master agreements with nancial counterparties to
net the positive and negative market values of outstanding derivatives,
see tables below.
Market value of financial assets and liabilities subject to n etting
arrangements
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
NOTE 41, CONT.
FINANCIAL INFORMATION > NOTES
112 SAAB ANNUAL REPORT 2013