Exchange rate risk
The Group is exposed to exchange rate fluctuations that may affect its sales, results, equity and cash flows. These mainly arise from:
-
Investments in foreign countries (essentially Mexico, Argentina, the Dominican Republic, Colombia, Panama and the United States).
-
Transactions made by Group companies operating in countries whose currency is other than the euro (essentially Mexico, Argentina, the Dominican Republic,
Venezuela and the United States).
The NHGroup endeavours to align its borrowings with the cash flows in the different currencies.
A sensitivity analysis was performed in relation to the possible fluctuations in the exchange rates that might arise in the markets in which it operates. For this analysis,
the Group has taken into consideration fluctuations in the main currencies with which it operates other than its functional currency (the US dollar, the Argentine peso,
the Mexican peso and the Colombian peso). On the basis of this analysis, the Group considers that a 5% depreciation in the corresponding currencies would have the
following impact on equity:
Thousand euros
Equity
Income
US dollar
(408)
(26)
Argentine peso
(2,678)
(3)
Mexican peso
(4,611)
(281)
Colombian peso
(941)
(12)
Liquidity risk
Exposure to adverse situations in debt or capital markets could hinder or prevent the Group from meeting the financial needs required for its operations and for
implementing its Strategic Plan.
Management of this risk is focused on thoroughly monitoring the maturity schedule of the Group’s financial debt, as well as on proactive management and maintaining
credit lines that allow any cash needs forecast to be met.
The Group’s liquidity position in 2013 is based on the following points:
-
The group had cash and cash equivalents amounting to EUR 133.869 million available at 31 December 2013.
-
Available in credit facilities amounting to EUR 73,285 thousand which has not been drawn down at 31 December 2013.
-
The Group’s business units have the capacity to generate cash flow from their operations in a recurrent and significant manner. Cash flow from operations in 2013
amounted to EUR 133.869 million.
-
The Group’s capacity to increase its financial borrowing, given that the financial leverage ratio stood at 0.64 at 31 December 2013 (Note 16).
On 22 March 2010, NH Hoteles, S.A. entered into an agreement with Banco Bilbao Vizcaya Argentaria, S.A. in order to increase liquidity of shares in the subsidiary
company Sotogrande, S.A. and advertising them in the market. Thus, an undertaking was made to respond to purchase orders for shares in the above-mentioned
company. Likewise, liquidity and advertising shares will be fostered when there are purchase or sale positions in the market.
Lastly, the Group makes cash position forecasts on a systematic basis for each business unit and geographical area in order to assess their needs. This liquidity policy
followed by the Group ensures payment undertakings are fulfilled without having to request funds at onerous conditions and allows its liquidity position to bemonitored
on a continuous basis.
Market risks
The Group is exposed to risks connected with the evolution of the share price in listed companies. This risk is materialised in the remuneration schemes linked to
the listed value of shares in the Parent Company. In order to mitigate this market risk arising from an increase in listed prices, the Group entered into the equity swap
arrangement described in Note 19 of this consolidated annual report. Likewise, Note 19 mentioned above describes the sensitivity analysis of this financial derivative
with regard to changes of
+
/- 10%
in Parent Company shares. In November 2013 and for the purpose of refinancing the Group’s debt, said derivative was fully cancelled.
At 31 December 2013, 68% of its borrowings was fixed-rate (basically, convertible bonds and guaranteed convertible senior bonds) and had accounts receivable
guaranteed by credit insurance with a limit of EUR 40 million. In addition, the Company does not consider necessary to implement an interest-rate risk mitigation
policy, as its exposure to such risks is low. Nonetheless, it maintains loan agreements in several currencies as a natural hedge (US dollar and Swiss franc).
REPORT ONTHE CONSOLIDATED FINANCIAL STATEMENTS
112
