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CONSOLIDATED FINANCIAL STATEMENTS
reduced size of the investment, there is no exposure
to currency exchange risk. Angolan branch loan in
the amount of 2,500,000 USD does not provide
great exposure to currency exchange rate due to
its reduced amount and to the strong correlation
between American dollar and local currency.
ii) Price risk
The group is not greatly exposed to the merchandise
price risk.
iii) Interest rate risk (cash flow and fair value)
Since the group does not have remunerated assets
earning significant interest, the profit and cash flow
from financing activities are substantially independent
from interest rate fluctuations.
The group’s interest rate risk stems from its liabilities,
in particular from long-term loans. Loans issued with
variable rates expose the group to the cash flow risk
associated to interest rates. Loans with fixed rates
expose the group to the risk of the fair value associated
to interest rates. At the current interest rates, in
financing of longer maturity periods the group has a
policy of totally or partially fixing the interest rates.
In recent years the group has taken into account the
possibility of hedging the risk of interest rate variations
only in a small part of their funding. The Group has a
Swap operation over 1,9 millions of euros in Spain.
Therefore, the remaining remunerated debt bears
interest at a variable rate. Moreover, the Group
has cash to cover about half of its loans whose
remuneration dampens changes in debt interest rate.
Based on simulations performed on 31 December
2011, an increase of 100 basis points in the interest
rate, maintaining other factors constant, would have
a negative impact in the net profit of 250,000 euros.
b) Credit risk
The group’s main activity covers sales paid in cash
or by debit/credit cards. As such, the group does
not have relevant credit risk concentrations. It has
policies ensuring that sales on credit are performed
to customers with a suitable credit history. The group
has policies that limit the amount of credit to which
these customers have access.
c) Liquidity risk
Liquidity risk management implies maintaining a
sufficient amount of cash and bank deposits, the
feasibility of consolidating the floating debt through
a suitable amount of credit facilities and the capacity
to liquidate market positions. Treasury needs are
managed based on the annual plan that is reviewed
every quarter and adjusted daily. Related with the
dynamics of the underlying business operations, the
group’s treasury strives to maintain the floating debt
flexible by maintaining credit lines available.