IBERSOL Annual Report 2018

ANNUAL REPORT 2018 Additionally, in Angolan subsidiaries, there are debts to suppliers - mainly group companies - denominated in EUR, which, after conversion, generate exchange differ- ences in the consolidated financial statements (other operating costs). On the other hand, the same subsidiaries hold financial assets indexed to the USD in an amount necessary to fully cover foreign currency liabilities. Due to this full coverage and based on the figures for 31 December 2018, any simula- tion of a depreciation of the AKZ against the USD and EUR, keeping everything else constant, would not have a negative impact on Ibersol’s Net Profit. Based on simulations performed on December 31, 2018, a decrease from 10% to 15% in AOA, concerning EUR and USD currency, keeping everything else constant, would have an impact of 1.471 thousand and 2.065 thousand euros (396 thousand euros and 590 thousand euros in 2017), respectively, on equity of the group. ii) Price risk The group is not greatly exposed to the merchandise price risk. iii) Interest rate risk (cash flow and fair value) With the exception of the Angola Treasury Bonds, the group has no significant inter- est bearing assets. Therefore, profit and cash flows from investment activities are substantially independent of changes in market interest rate. Regarding the Angolan State treasury bonds, interest is fixed, so there is also no risk. 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 associated to inter- est rates. Loans with fixed rates expose the group to the risk of the fair value associ- ated to interest rates. At the current interest rates, in financing of longer maturity periods the group has a policy of fixing interest rates of at least 50% of the outstand- ing amount. The unpaid debt bears variable interest rate, part of which has been the object of an interest rate swap. Interest rate swap contracts to hedge the interest rate risk of part of the loans (commercial paper) of EUR 28 million are subject to interest maturities and repayment plans identical to the terms of the loans. Based on simulations performed on 31 December 2018, an increase of 100 basis points in the interest rate, maintaining other factors constant, would have a negative impact in the net profit of 730.000 euros (949.000 euros in 2017). 235