Currency exposure

The goal of currency management is to minimize the short-term adverse effects of currency exchange rate fluctuations on the Group’s earnings and financial position.

As Husqvarna Group sells its products in more than 100 countries, the Group is exposed to such exchange rate fluctuations. The fluctuations affect the Group’s earnings in terms of translation of income statements in foreign subsidiaries, i.e. translation exposure, as well as the sale of products on the export market and purchases of materials in foreign currencies, i.e. transaction exposure, and also in terms of translation of balance sheet items such as trade receivables and payables.

Translation exposure is related primarily to USD, JPY, EUR, CNY and GBP while transaction exposure is related primarily to EUR, USD, CAD and CNY. The Group’s globally widespread production and sales enable the various exchange-rate effects to offset each other to some extent.

Changes in exchange rates also affect Group equity. The difference between the assets and liabilities of foreign subsidiaries in foreign currencies is affected by such changes, which generate translation differences that impact equity. At year-end 2014, most foreign net assets were in USD and EUR.

For more information on risks related to currency exposure, see Note 19 in the Annual Report.

The table shows the forecasted commercial flows (export and import) for a 12-month period during 2015 and the outstanding hedges at year-end 2014.

Commercial flows
Currency 2016 Forecast flow SEKm 31 Dec 2014 Total hedgeamount SEKm 2014 Forecast flow SEKm 31 Dec 2013 Total hedgeamount SEKm
EUR 2,796 -2,260 2,963 -2,511
CAD 710 -521 907 -552
AUD 421 -304 490 -323
CHF 415 -304 421 -340
NOK 347 -264 336 -244
DKK 335 -255 302 -230
Other 623 -277 1,165 -334
CNY -393 341 -565 493
USD -2,408 1,984 -2,716 1,792
SEK -2,846 1,860 -3,303 2,249
   
The hedging effect on operating income amounted to SEK 381m (-54) during 2015. At year-end, the unrealized exchange rate result on forward contracts, all maturing in 2016, amounted to SEK 75m (155).


Annual Report 2015