The goal of ALK-Abelló’s financial risk management is to reduce the sensitivity of earnings to fluctuations in exchange rates, interest rates, credit rating and liquidity.

Exchange rate exposure
The most significant financial risk relates to exchange rate fluctuations. The exposure is greatest to EUR and USD, as 71% of the Allergy Sector’s revenue is denominated in EUR and 12% in USD. As the costs of the company’s subsidiaries are in local currencies, the exposure at EBIT level is reduced. The exposure to USD at EBIT level is thus less than 5%.

Currency translation adjustments relating to sales and costs denominated in other currencies than DKK are recognized in the income statement. In addition, the Allergy Sector is exposed to the exchange rate risks that relate to the translation into DKK of the net assets of its foreign subsidiaries. In accordance with the accounting policies, such currency translation adjustments are recognized directly in equity. The exposure, however, is very limited at the present balance composure.

The Allergy Sector’s intercompany sales are generally invoiced in the currency of the buying country. Thus, the currency exposure is limited to Denmark and the other three production countries: Spain, France and the USA.

The other exchange rate risks, which are limited, are evaluated and hedged by financial instruments such as forward currency contracts. This serves to limit and postpone the impact of any currency fluctuations on the financial results. Financial instruments are not used for speculative purposes.

Interest-rate and liquidity exposure
At the end of the financial year, interest-bearing net assets stood at approximately DKK 5.4 billion, which have been reduced to approximately DKK 1.4 billion following the payment of the interim dividend. Excess liquidity from, among other things, the divestment of the Ingredients Sector, is invested in investment-grade, liquid, interest-bearing instruments with a relatively short duration. Based on an individual risk assessment, the interest-rate exposure of interest-bearing debt is, among other things, hedged by financial instruments.

Credit exposure
The credit exposure in connection with cash and cash equivalents as well as financial instruments is managed by using only financial institutions with satisfactory creditworthiness, in Denmark as well as abroad. Trade receivables are monitored closely at the local level and are distributed on a number of markets and customers. The credit risk is therefore considered low.