Financial Risk Management
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Risk - Currency risk
In its operations, HEXPOL is exposed to various financial risks, of which the currency risk is the dominant one. Exchange-rate fluctuations affect HEXPOL’s earnings, in part when sales and purchases take place in different currencies (transaction exposure) and, in part when the income statements and balance sheets of foreign subsidiaries are translated to SEK (translation exposure). HEXPOL’s global operations give rise to extensive foreign-currency cash flows. The key currencies in the Group’s payment flows are SEK, USD and EUR. Exchange-rate fluctuations have an impact on the Group’s earnings in the translation of foreign Group companies’ profit or loss to SEK. Since a considerable portion of the Group’s earnings is generated outside Sweden, exchange-rate fluctuations could have a significant impact on the Group’s profit or loss. In conjunction with the translation of the Group’s investments in foreign subsidiaries to SEK, there is a risk that exchange rate fluctuations could have an impact on the Group’s balance sheet.
Risk management
HEXPOL’s business is local, which means that sales and purchases normally are made in local currency and thus limits the Group’s transaction exposure. The translation effect is limited to a certain extent through hedging instruments in the Parent Company.
A sensitivity analysis for 2023 shows that the effect of a change of 10 percent against all currencies in relation to the exchange rate for SEK would affect sales by 1,859 MSEK, operating profit by 274 MSEK and shareholders equity by 1,768 MSEK.
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Risk - Interest risk
Changes in the market interest rates affect HEXPOL’s net financial items.
Risk management
Excess liquidity and credit agreements are primarily managed at Group level and in accordance with the financial policy and at variable interest rate.
On December 31, 2023, external liabilities amounted to 2,683 MSEK (4,393). A one percentage point change in the interest rate on the Group’s closing liabilities for 2023 would impact the full-year earnings by approximately 27 MSEK before tax.
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Risk - Credit risks
The financial risks to which HEXPOL is exposed also include credit risks, meaning that a customer or business partner will be unable to fulfill heir payment obligations or to settle receivables that HEXPOL has invoiced or intends to invoice. Financial credit risks are defined s the risk that counterparties with which the Group has invested cash and cash equivalents, has current bank investments or has entered into financial in instruments will be unable to fulfill heir obligations.
Risk management
HEXPOL conducts regular credit assessments of customers. HEXPOL has widely diversified customers in terms of both geographical areas and customer groups, which limits the risk of significant customer losses.
HEXPOL’s excess liquidity is primarily used to amortize external loans and further surpluses are placed in well-known banks.
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Risk - Financing and liquidity risk
To enable corporate acquisitions or otherwise achieve strategic objectives, HEXPOL’s operations could ultimately require additional financial resources.
Risk management
HEXPOL has a strong balance sheet that provides a financial platform for future acquisitions.
HEXPOL had the following major credit agreements with Nordic banks as per December 31, 2023:
- A credit agreement with a framework of 1,100 MSEK maturing in February 2027.
- A credit agreement with a framework of 1,000 MSEK maturing in May 2026.
- A credit agreement with a framework of 150 MEUR maturing in May 2026.
- A credit agreement with a framework of 1,500 MSEK maturing in June 2026.
- In 2021, HEXPOL established a program for issuing commercial papers. As per December 31, 2023 they amounted to 1,880 MSEK.
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Risk - Insurable risks
HEXPOL’s operations, assets and employees are to some extent exposed to various types of risks that may affect HEXPOL’s operations.
Risk management
HEXPOL has a centrally procured coverage for property, liability, disruption, travel and transport insurance, etc., combined with local insurances where necessary.
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