Unilever 2011 Annual Report Download - page 98

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95
16B. Treasury risk management continued
The following table shows the split in fixed and floating rate interest exposures, taking into account the impact of interest rate swaps
and forward foreign currency contracts:
€ million
2011
€ million
2010
Cash and cash equivalents 3,484 2,316
Current other financial assets 1,453 550
Current financial liabilities (5,840) (2,276)
Non-current financial liabilities (7,878) (7,258)
(8,781) (6,668)
Of which:
Fixed rate (amount of fixing for following year) (6,179) (4,946)
Floating rate (2,602) (1,722)
(8,781) (6,668)
Assuming that all other variables remain constant, a 100bps increase in floating interest rates on a full year basis would lead to an
additional €26 million debit in the income statement (2010: €17 million debit). A 100bps decrease in floating interest rates on a full-year
basis would have an equal but opposite effect.
Furthermore, Unilever has interest rate swaps for which cash flow hedge accounting is applied. Assuming that all other variables
remain constant, a 100bps increase in floating interest rates on a full year basis would lead to an additional €16 million credit in equity
(2010:€10 million credit). A 100bps decrease in floating interest rates on a full year basis would have an equal but opposite effect.
(iii) Commodity price risk
The Group uses commodity forward contracts to hedge against the risk of changes in price of certain commodities. All commodity
forward contracts hedge future purchases of raw materials and the contracts are settled either in cash or by physical delivery.
Commodity derivatives are generally designated as hedges within cash flow hedge arrangements.
The amount of outstanding commodity contracts is immaterial.
b) Liquidity risk
Liquidity risk is the risk that the Group will face difficulty in meeting its obligations associated with its financial liabilities. The Group’s
approach to managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring
unacceptable losses. In doing this management considers both normal and stressed conditions. A material and sustained shortfall in
our cash flow could undermine the Group’s credit rating, impair investor confidence and also restrict the Group’s ability to raise funds.
Given recent volatility in the financial markets, the Group has maintained a cautious funding strategy, running a positive cash balance
throughout 2011. This has been the result of a strong cash delivery from the business, coupled with the proceeds from bond issuances
in 2011. This cash has been invested conservatively with low risk counterparties at maturities of less than six months.
Cash flow from operating activities provides the funds to service the financing of financial liabilities on a day-to-day basis. The Group
seeks to manage its liquidity requirements by maintaining access to global debt markets through short-term and long-term debt
programmes. In addition, Unilever has committed credit facilities for general corporate use.
Unilever had US $6,150 million of undrawn committed facilities on 31 December 2011 as follows:
• revolving 364-day bilateral credit facilities of in aggregate US $5,950 million (2010: US $5,495 million) with a 364-day term-out; and
• 364-day bilateral money market commitments of in aggregate US $200 million (2010: US $555 million), under which the
underwriting banks agree, subject to certain conditions, to subscribe for notes with maturities of up to three years.
As part of the regular annual process these facilities will again be renewed in 2012.
Unilever Annual Report and Accounts 2011
Financial statements