The group’s business activities give rise to credit risk exposure in relation to counterparties. Credit risk and counterparty risk refer to the risk of loss if the counterparty fails to meet its contractual obligations. Credit risk arises partly through sales to customers, extending advances to suppliers or accepting guarantees, and partly through Treasury’s liquidity management or use of derivative
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CONSOLIDATED FINANCIAL STATEMENTS > CONSOLIDATED NOTESCredit risk from accounts receivable
Credit risk in connection with credit sales to customers is limited by spreading the risk across numerous customers in various industries. All customers undergo a credit check in which data on a customer’s financial position is obtained from a credit-rating agency. The group’s aggregate accounts receivable totaled SEK 4,370m (4,262). The group’s reported losses on accounts receivable totaled SEK 33m (21) in 2011.
Ageing of accounts receivable Dec 31 2011 Dec 31 2010 Accounts receivable, undue 3,890 3,746
Accounts receivable, due, not impaired
1-5 days 204 236 6-20 days 122 161 21-30 days 83 26 31-60 days 32 54 61-90 days 29 18 >90 days 87 109 Total 4,447 4,350 Provision for bad debts -77 -88 Total 4,370 4,262
Credit risk in treasury operations
Credit risk on financial transactions is limited by depositing surplus liquidity in a bank or investing it in interest-bearing instruments with high credit ratings. All counterparties must undergo a credit check before qualifying as a debtor.
Market risk
The risk that changes in market prices will affect the fair value or cash flows of a financial instrument. PostNord is exposed to two types of market risks: currency risk and interest rate risk.
Currency risk
PostNord has exposure to transaction risks and translation risks. Transaction exposure consists of loans and investments and foreign exchange flows with suppliers and customers. Transaction exposure is limited through use of derivative instruments, and may not exceed the equivalent of SEK 450m. Translation exposure is defined as net assets in the group’s foreign subsidiaries. Due to exchange rate
fluctuations, a change in the group’s equity arises through the translation of foreign net assets. The greatest exposure arises in DKK, NOK and EUR. Treasury management does not hedge translation exposure, but limits it by adjusting the capitalization of group companies to a prudent commercial level.
Translation
exposure Dec 31 2011 Dec 31 20101)
Currency SEKm % +/- 1 % SEKm % +/- 1 % AUD 4 0.0 0 3 0.0 0 DKK 5,383 67.1 54 6,238 70.4 62 EUR 552 6.9 6 615 6.9 6 GBP 93 1.2 1 130 1.5 1 HKD 14 0.2 0 8 0.1 0 NOK 1,974 24.5 20 1,853 20.9 19 SGD -12 -0.1 0 -10 -0.1 0 USD 19 0.2 0 23 0.3 0 PLN -3 0.0 0 -2 0.0 0 Total 8,024 100.0 81 8,858 100.0 88
1) Previous year's value adjusted due to amended definition of "net asset."
Interest rate risk
Interest rate refers to the risk that the value of interest- bearing assets and liabilities will change following fluctuations in the market interest rate. Interest rate risk is controlled by limiting price risk and duration. Price risk is the risk that the market value of interest-related financial instruments will change following fluctuations in the general interest rate level. Duration is a time measurement and refers to the effective payback period taking into consideration the investment’s final maturity date and the interest rates and amortizations that may be relevant during the period remaining. The duration of the facilities portfolio may not exceed 2 years. Interest rate risk is measured in the Treasury Policy as the change in value of all interest-bearing assets and liabilities if the market interest rate for all relevant maturities changes +/- 1 %. Interest rate risk in the group’s interest-bearing
receivables and liabilities was SEK 3m (2) as of December 31, 2011. A change of +/- 1% in the market rate as of December 31, 2011 causes an effect on earnings totaling SEK 17m (26) over the next twelve months. The group’s price risk, if greater than SEK 25m, shall not exceed 1% of the portfolio’s total value (net debt expressed in SEK) or a maximum of SEK 50m. The interest amount refers to interest expense for the entire duration.
Market risk in asset management
Asset management is carried out in the group’s affiliated agencies Posten’s Pension Fund and Posten’s insurance association. The agencies manage assets that safeguard payments of certain of the group’s commitments such as future pensions, sickness benefits and family pensions. Asset management includes the investment of capital in various markets and instruments. Through board representation, PostNord advocates a prudently managed diversification between asset classes in Posten’s Pension Fund and Posten’s insurance association in relation to PostNord’s underlying commitment and expected returns.
Financial assets and liabilities, Dec 31, 2011, SEKm, unless otherwise indicated
Nominal amount in millions, local currency Nominal amount in millions SEKm Effective interest, % Interest amount Duration < 3 months 3 months –
1 year 1–5 years >5 years
Investments
Other, EUR 299 299 2.1-2.7% 1 299 Investments 298 298 1.2-2.1% 298 Treasury bills, SEK 0,6 5 2 3
Total 602 1 597 2 3
Liabilities
Bank loans
SEK, variable interest rate 9 9 9
DKK, variable interest rate 40 48 1.5-6.2% 48
Other loans
Real estate credit, SEK 1 1 6.7% 0,2 0,3 Real estate credit, DKK 665 800 1.5% 189 800 Finance leasing 108 108 56 52 Liabilities, payment transfers 9 9
Total 975 189 57 65 52 800
Financial assets and liabilities, Dec 31, 2010, SEKm, unless otherwise indicated
Nominal amount in millions, local currency Nominal amount in millions SEKm Effective interest, % Interest amount Duration < 3 months 3 months –
1 year 1–5 years >5 years
Investments
Deposits, DKK 405 489 1.15 - 1.4 % 6 483 6
Deposits, EUR 0,1 1 1
Treasury bills, SEK 900 900 1.05 - 1.3 % 10 900 Commercial paper, SEK 828 828 1.39 - 1.88 % 13 828
Other, EUR 0,6 5 2 3
Total 2,223 29 2,211 2 10
Liabilities
Bank loans
EUR, variable interest rate 30 270 3.72% 10 270 SEK, variable interest rate 50 50 2.13% 1 50
Credit line, DKK 17 20 1.8 - 4.1 % 20
Other loans
Real estate credit, SEK 0,5 0,5 4.7% 0,2 0,3 Real estate credit, DKK 665 804 1.82% 230 804 Finance leasing 155 155 1 46 108
Liabilities, payment transfers 19 19 19
Total 1,319 241 1 405 108 804