38 Derivative financial instruments

38 Derivative financial instruments

 

 

 

 

 

 

Assets

Liabilities

€ million

2019

2018

2019

2018

Forward foreign exchange contracts – cash flow hedges

9

4

30

97

Forward foreign exchange contracts – fair value through profit and loss

13

7

11

10

Foreign exchange options – net investment hedges

2

0

0

0

Interest rate derivatives – cash flow hedges

0

1

0

0

Interest rate derivatives – fair value through profit and loss

26

37

1

3

Total

50

49

42

110

Of which:

 

 

 

 

Non-current (Notes 22 and 30)

26

38

1

3

Current (Notes 22 and 30)

24

11

41

107

 

 

 

 

 

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 2019, a net unrealized gain of € 55 million (2018: net unrealized loss of € 141 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 (2018: € 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 2020 and 2021.

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

 

 

 

 

 

 

Assets

Liabilities

€ million

2019

2018

2019

2018

USD

14

4

35

93

GBP

3

0

0

1

JPY

2

1

3

10

CHF

4

3

0

0

RUB

0

1

0

0

Other currencies

1

2

3

3

Total foreign currency derivatives

24

11

41

107

 

 

 

 

 

The net foreign currency derivatives maturity analysis is noted below:

 

 

 

€ million

2019

2018

1 year or less

−17

−96

1-5 years

0

0

Beyond 5 years

0

0

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

−17

−96

 

 

 

The following table shows the split of foreign currency derivatives by currency of denomination (currencies sold view) as at 31 December 2019:

 

 

 

 

 

 

 

 

Notional amounts in € million

USD

GBP

EUR

JPY

CHF

Other currencies

Total

Forward contracts

234

1

345

211

0

181

972

Currency swaps

1 935

26

1 107

144

6

120

3 338

Option/collar

0

0

845

0

0

0

845

Total

2 169

27

2 297

355

6

301

5 155

 

 

 

 

 

 

 

 

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 3 Months

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 3 Months

−0.16%

27-Nov-13

02-Oct-23

EURIBOR 3M

CCIRS

EUR 205

USD LIBOR 3 Months

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.