38 Derivative financial instruments

 

 

 

 

 

 

Assets

Liabilities

€ million

2018

2017

2018

2017

Forward foreign exchange contracts – cash flow hedges

4

112

97

9

Forward foreign exchange contracts – fair value through profit and loss

7

19

10

20

Interest rate derivatives – cash flow hedges

1

0

0

1

Interest rate derivatives – fair value through profit and loss

37

45

3

4

Total

49

176

110

34

Of which:

 

 

 

 

Non-current (Notes 22 and 30)

38

45

3

5

Current (Notes 22 and 30)

11

131

107

29

 

 

 

 

 

The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability, if the maturity of the hedged item is less than 12 months.

The cash flow hedges entered into by the Group were assessed to be highly effective and over 2018, a net unrealized loss of € 141 million (2017: net unrealized gain of € 110 million) after deferred taxes was included in equity in respect of these contracts. These gains/losses will be recycled to the profit or loss in the period during which the hedged forecast transactions affect the profit or loss.

The ineffective portion recognized in the profit or loss that arises from cash flow hedges amounts to € 0 million (2017: € 0 million).

38.1 Foreign currency derivatives

The Group policy with respect to the use of financial derivative contracts is described in Note 4 “Financial Risk Management”.

The Group entered into several forward foreign exchange contracts in order to hedge a portion of highly probable future sales and royalty income, expected to occur in 2019 and 2020.

The fair values of the foreign currency derivative contracts are as follows:

 

 

 

 

 

 

Assets

Liabilities

€ million

2018

2017

2018

2017

USD

4

111

93

17

GBP

0

2

1

3

JPY

1

13

10

0

CHF

3

0

0

8

RUB

1

0

0

0

Other currencies

2

5

3

1

Total foreign currency derivatives

11

131

107

29

 

 

 

 

 

The net foreign currency derivatives maturity analysis is noted below:

 

 

 

€ million

2018

2017

1 year or less

-96

102

1-5 years

0

0

Beyond 5 years

0

0

Total foreign currency derivatives – net asset/net liability (-)

-96

102

 

 

 

The following table shows the split of foreign currency derivatives by currency of denomination (currencies sold view) as at 31 December 2018:

 

 

 

 

 

 

 

 

Notional amounts in € million

USD

GBP

EUR

JPY

CHF

Other currencies

Total

Forward contracts

1 002

5

418

171

2

202

1 800

Currency swaps

548

140

782

121

13

115

1 719

Option/collar

0

0

0

0

0

0

0

Total

1 550

145

1 200

292

15

317

3 519

 

 

 

 

 

 

 

 

38.2 Interest rate derivatives

The Group uses various interest rate derivative contracts to manage its exposure to interest rate movements on its borrowings. The re-pricing dates and amortization characteristics are aligned with those of the fixed rate bonds. The outstanding interest rate derivative contracts are as follows:

 

 

 

 

 

 

 

Contract type

Nominal values of contracts (million)

Average rate
(- is payer/
+ is receiver)

Plus margin of points
(- is payer/
+ is receiver)

For periods from/to

Floating interest receipts

IRS

EUR 200

1.53%

 

04-Oct-13

04-Jan-21

-EURIBOR 3M

IRS

EUR 150

1.59%

 

04-Oct-13

04-Jan-21

-EURIBOR 3M

IRS

EUR 250

1.36%

 

27-Nov-13

27-Mar-20

-EURIBOR 3M

IRS

EUR 175

1.91%

 

27-Nov-13

02-Oct-23

-EURIBOR 3M

IRS

EUR 150

-1.12%

 

27-Mar-14

27-Mar-20

EURIBOR 3M

IRS

USD 100

-1.97%

 

20-Nov-14

22-Nov-21

USD LIBOR 3M

IRS

EUR 100

0.44%

 

17-Dec-15

02-Apr-22

-EURIBOR 6M

IRS

EUR 100

0.45%

 

17-Dec-15

02-Apr-22

-EURIBOR 6M

CCIRS

USD 230

-USD LIBOR 3M

-0.16%

27-Nov-13

02-Oct-23

EURIBOR 3M

CCIRS

EUR 205

USD LIBOR 3M

0.45%

02-Apr-16

02-Oct-23

-EURIBOR 3M

 

 

 

 

 

 

 

38.3 Hedge of net investment in a foreign entity

Any unrealized cumulative foreign exchange gains or losses resulting from net investment hedges are taken up under Cumulative Translation Adjustments. These unrealized gains and losses will remain in equity and will only be recycled to profit or loss when the Group no longer holds the underlying assets.