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REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
Interest rate risk
The Group’s financial assets and liabilities are exposed to fluctuations in interest rates, which may have an adverse effect on its results and cash flows.
In order to mitigate this risk, the Group has established policies and has refinanced its debt at fixed interest rates through the issuance of convertible
bonds and guaranteed convertible senior notes. At 31 December 2015, approximately 59% of the gross borrowings was tied to fixed interest rates.
In accordance with reporting requirements set forth in IFRS 7, the Group has conducted a sensitivity analysis on possible interest-rate fluctuations
in the markets in which it operates, based on these requirements.
Lastly, the long-term financial assets set out in Note 10 of this annual report are also subject to interest-rate risks.
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, Colombia, Chile, Ecuador, the Dominican Republic, Panama and the United
States).
- Transactions made by Group companies operating in countries whose currency is other than the euro (essentially Mexico, Argentina, Colombia,
Chile, Ecuador, the Dominican Republic, Venezuela and the United States).
The NH Group 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:
Thousands of euros
Equity
Profit(Loss)
US dollar
(924)
67
Argentine peso
(1,652)
15
Mexican peso
(2,328)
(265)
Colombian peso
(2,404)
30
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 forecast cash needs to be met.
The Group’s liquidity position in 2015 is based on the following points:
- The group had cash and cash equivalents amounting to 77,699 thousands euros at 31 December 2015.
- Available undrawn credit facilities amounting to 30,833 thousands euros at 31 December 2015.
The Group’s business units have the capacity to generate cash flow from their operations. Cash flow from operations in 2015 amounted to 117,770
thousand euros, calculated as adjusted income collected in the Cash Flow Statement of 126,156 thousand euros plus/minus the following changes in
working capital: increase in inventories of 801 thousand euros, increased commercial debits and other accounts receivable of 17,937 thousand euros
and increased commercial credits of 10,352 thousand euros.
- The Group’s capacity to increase its financial borrowing; given that it has non-collateralised assets and meet the financial ratios required by
the financing agreements.
Lastly, the Group makes cash flow forecasts on a systematic basis for each business unit and geographical area in order to assess their needs. This
Group liquidity policy ensures payment undertakings are fulfilled without having to request funds at onerous conditions and allows its liquidity
position to be monitored on a continuous basis.
