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a) Market risk
i) Currency exchange risk
The currency exchange risk is very low, since the group
operates mainly in the Iberian market. Bank loans are
mainly in euros and acquisitions outside the Euro
zone are of irrelevant proportions.
Although the Group holds investments outside the
euro-zone in external operations, in Angola, due to
the reduced size of the investment, there is no sig-
nificant exposure to currency exchange risk. Angolan
branch loans in the amount of 3.125.000 USD does
not provide material exposure to currency exchange
rate due to its reduced amount and to the strong cor-
relation between USA dollar and local currency. The
remaining loans are in local currency, the same as
the revenues.
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 investment activities are substantially independ-
ent from interest rate fluctuations.
The group’s interest rate risk follows its liabilities, in
particular long-term loans. Loans issued with variable
rates expose the group to the cash flow risk associat-
ed 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 long-
er maturity periods the group has a policy of totally or
partially fixing the interest rates.
The unpaid debt bears variable interest rate, part of
which has been the object of an interest rate swap.
The interest rate swap to hedge the risk of a 10 million
euros (commercial paper programmes) loan has the
maturity of the underlying interest and the repayment
plan identical to the terms of the loan.
Based on simulations performed on 31 December
2014, an increase of 100 basis points in the interest
rate, maintaining other factors constant, would have
a negative impact in the net profit of 160.000 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 cus-
tomers 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 suf-
ficient amount of cash and bank deposits, the feasibil-
ity of consolidating the floating debt through a suit-
able amount of credit facilities and the capacity to
liquidate market positions. Treasury needs are man-
aged based on the annual plan that is reviewed every
quarter and adjusted daily. Related with the dynam-
ics of the underlying business operations, the group’s
treasury strives to maintain the floating debt flexible
by maintaining credit lines available.
The Group considers that the short-term bank loans are
due on the renewal date and that the commercial paper
programmes matured on the dates of denunciation.
