All amounts in SEKm unless otherwise stated
Additional and complementary information is presented in the following notes to the Annual Report: Note 2, Financial risk management, describes the Group’s risk policies in general and regarding the principal financial instruments of Electrolux in more detail. Note 17, Trade receivables, describes the trade receivables and related credit risks.
The information in this note highlights and describes the principal financial instruments of the Group regarding specific major terms and conditions when applicable, and the exposure to risk and the fair values at year-end.
The Group classifies its financial assets in the following categories:
The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition.
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either hedges of the fair value of recognized assets or liabilities or a firm commitment (fair-value hedges); hedges of highly probable forecast transactions (cash-flow hedges); or hedges of net investments in foreign operations.
Movements on the hedging reserve are shown in other comprehensive income in the consolidated income statement.
At year-end 2015, the Group’s net borrowings amounted to SEK 1,898m (4,869). The table below presents how the Group calculates net borrowings and what they consist of.
| December 31, | ||
|---|---|---|
| 2014 | 2015 | |
| Short-term loans | 1,419 | 1,498 |
| Short-term part of long-term loans | 2,595 | 2,677 |
| Trade receivables with recourse | 946 | 328 |
| Short-term borrowings | 4,960 | 4,503 |
| Derivatives | 152 | 215 |
| Accrued interest expenses and prepaid interest income | 63 | 55 |
| Total short-term borrowings | 5,175 | 4,773 |
| Long-term borrowings | 9,529 | 8,323 |
| Total borrowings | 14,704 | 13,096 |
| Cash and cash equivalents | 9,107 | 10,696 |
| Short-term investments | 99 | 108 |
| Derivatives | 356 | 141 |
| Prepaid interest expenses and accrued interest income | 273 | 254 |
| Liquid funds | 9,835 | 11,199 |
| Financial net debt | 4,869 | 1,898 |
| Net provision for post-employment benefits | 4,763 | 4,509 |
| Net debt | 9,632 | 6,407 |
| Revolving credit facility (EUR 500m, SEK 3,400m, USD 300m)1) | 8,137 | 10,517 |
| Committed bridge facility (USD 3,500m) | 27,271 | — |
1) The facilities are not included in net borrowings, but can, however, be used for short-term and long-term funding.
Liquid funds as defined by the Group consist of cash and cash equivalents, short-term investments, derivatives and prepaid interest expenses and accrued interest income. Cash and cash equivalents consist of cash on hand, bank deposits and other short-term highly liquid investments with a maturity of 3 months or less.
The table below presents the key data of liquid funds. The carrying amount of liquid funds is approximately equal to fair value.
| December 31, | ||
|---|---|---|
| 2014 | 2015 | |
| Cash and cash equivalents | 9,107 | 10,696 |
| Short-term investments | 99 | 108 |
| Derivatives | 356 | 141 |
| Prepaid interest expenses and accrued interest income | 273 | 254 |
| Liquid funds | 9,835 | 11,199 |
| % of annualized net sales1) | 14.1 | 17.5 |
| Net liquidity | 4,660 | 6,425 |
| Fixed interest term, days | 11 | 9 |
| Effective yield, % (average per annum) | 1.3 | 1.4 |
1) Liquid funds plus unused revolving credit facilities of EUR 500m, SEK 3,400m and USD 300m divided by annualized net sales.
For 2015, liquid funds, including unused revolving credit facilities of EUR 500m SEK 3,400m and USD 300m, amounted to 17.5% (14.1) of annualized net sales. The net liquidity is calculated by deducting short-term borrowings from liquid funds.
Borrowings are initially recognized at fair value net of transaction costs incurred. After initial recognition, borrowings are valued at amortized cost using the effective interest method.
In 2015, SEK 2,632m of long-term borrowings matured or were amortized. These maturities were refinanced with SEK 1,447m.
At year-end 2015, the Group’s total interest-bearing liabilities amounted to SEK 12,498m (13,543), of which SEK 11,000m (12,124) referred to long-term borrowings including maturities within 12 months. Long-term borrowings with maturities within 12 months amounted to SEK 2,677m (2,595). The outstanding long-term borrowings have mainly been made under the European Medium-Term Note Program and via bilateral loans. The majority of total long-term borrowings, SEK 10,520m (11,666), is taken up at the parent company level. Electrolux also has an unused committed multicurrency revolving credit facility of SEK 3,400m maturing 2017, an unused committed multicurrency revolving credit facility of EUR 500m maturing 2018 and an unused bilateral credit facility of USD 300m maturing 2018. These three facilities can be used as either long-term or short-term back-up facilities. However, Electrolux expects to meet any future requirements for short-term borrowings through bilateral bank facilities and capital-market programs such as commercial paper programs. In 2014 Electrolux signed a committed bridge facility of USD 3,500m to fund the planned acquisition of GE Appliances. Due to the cancellation of the bridge facility in December 2015, the SEK 187m capitalized fee was expensed.
At year-end 2015, the average interest-fixing period for long-term borrowings was 0.8 years (1.2). The calculation of the average interest-fixing period includes the effect of interest-rate swaps used to manage the interest-rate risk of the debt portfolio. The average interest rate for the total borrowings was 2.7% (2.4) at year end.
The fair value of the interest-bearing borrowings was SEK 12,433m. The fair value including swap transactions used to manage the interest fixing was approximately SEK 12,443m. The borrowings and the interest-rate swaps are valued marked-to-market in order to calculate the fair value.
The table below sets out the carrying amount of the Group’s borrowings.
| Carrying amount, |
||||||
|---|---|---|---|---|---|---|
| Issue/maturity date | Description of loan | Interest rate, % | Currency | Nominal value (in currency) |
2014 | 2015 |
| Bond loans1) | ||||||
| 2008-2016 | Euro MTN Program | Floating | USD | — | 779 | — |
| 2011-2016 | Euro MTN Program | Floating | SEK | — | 769 | — |
| 2011-2016 | Euro MTN Program | 4.500 | SEK | — | 1,084 | — |
| 2012-2017 | Euro MTN Program | 2.625 | SEK | 100 | 100 | 100 |
| 2012-2017 | Euro MTN Program | Floating | SEK | 400 | 400 | 400 |
| 2012-2018 | Euro MTN Program | 2.910 | SEK | 270 | 270 | 270 |
| 2012-2018 | Euro MTN Program | Floating | SEK | 730 | 730 | 730 |
| 2013-2020 | Euro MTN Program | 3.440 | SEK | 170 | 170 | 170 |
| 2013-2020 | Euro MTN Program | Floating | SEK | 830 | 830 | 830 |
| 2013-2018 | Euro MTN Program | Floating | SEK | 600 | 599 | 600 |
| 2013-2018 | Euro MTN Program | 2.875 | SEK | 400 | 398 | 399 |
| 2014–2019 | Euro MTN Program | Floating | SEK | 750 | 749 | 750 |
| 2014–2019 | Euro MTN Program | 2.340 | SEK | 250 | 250 | 250 |
| 2014–2019 | Euro MTN Program | 1.000 | EUR | 100 | 943 | 918 |
| Total bond loans | 8,071 | 5,417 | ||||
| Other long-term loans1) | ||||||
| 1996–2036 | Fixed rate loans in Germany | 7.870 | EUR | 39 | 367 | 355 |
| 2013–2021 | Long-term bank loans in Sweden | Floating | SEK | 1,000 | 1,000 | 1,000 |
| 2015–2021 | Long-term bank loans in Sweden | Floating | USD | 170 | — | 1,426 |
| Other long-term loans | 91 | 125 | ||||
| Total other long-term loans | 1,458 | 2,906 | ||||
| Long-term borrowings | 9,529 | 8,323 | ||||
| Short-term part of long-term loans2) | ||||||
| 2012-2015 | Euro MTN Program | 3.250 | SEK | — | 550 | — |
| 2012-2015 | Euro MTN Program | Floating | SEK | — | 164 | — |
| 2008–2015 | Long-term bank loans in Sweden | Floating | PLN | — | 744 | — |
| 2008–2015 | Long-term bank loans in Sweden | Floating | EUR | — | 1,137 | — |
| 2008-2016 | Euro MTN Program | Floating | USD | 100 | — | 841 |
| 2011-2016 | Euro MTN Program | Floating | SEK | 769 | — | 769 |
| 2011-2016 | Euro MTN Program | 4.500 | SEK | 1,067 | — | 1,067 |
| Total short-term part of long-term loans | 2,595 | 2,677 | ||||
| Other short-term loans | ||||||
| Short-term bank loans in Egypt | Floating | EGP | 335 | 746 | 359 | |
| Short-term bank loans in Brazil | Floating | BRR | 234 | 53 | 503 | |
| Other bank borrowings and commercial papers |
620 | 636 | ||||
| Total other short-term loans | 1,419 | 1,498 | ||||
| Trade receivables with recourse | 946 | 328 | ||||
| Short-term borrowings | 4,960 | 4,503 | ||||
| Fair value of derivative liabilities | 152 | 215 | ||||
| Accrued interest expenses and prepaid interest income | 63 | 55 | ||||
| Total borrowings | 14,704 | 13,096 | ||||
1) The interest-rate fixing profile of the borrowings has been adjusted with interest-rate swaps.
2) Long-term borrowings with maturities within 12 months are classified as short-term borrowings in the Group’s balance sheet.
Short-term borrowings pertain mainly to countries with capital restrictions. The average maturity of the Group’s long-term borrowings including long-term borrowings with maturities within 12 months was 2.8 years (2.8), at the end of 2015. The table below presents the repayment schedule of long-term borrowings.
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021— | Total | |
|---|---|---|---|---|---|---|---|
| Debenture and bond loans | — | 500 | 1,999 | 1,918 | 1,000 | — | 5,417 |
| Bank and other loans | — | 125 | 231 | 308 | 308 | 1,934 | 2,906 |
| Short-term part of long-term loans | 2,677 | — | — | — | — | — | 2,677 |
| Total | 2,677 | 625 | 2,230 | 2,226 | 1,308 | 1,934 | 11,000 |
Interest-bearing receivables from customer financing amounting to SEK 98m (100) are included in the item Trade receivables in the consolidated balance sheet. The Group’s customer-financing activities are performed in order to provide sales support and are directed mainly to independent retailers in Scandinavia. The majority of the financing is shorter than 12 months. There is no major concentration of credit risk related to customer financing. Collaterals and the right to repossess the inventory also reduce the credit risk in the financing operations. The income from customer financing is subject to interest-rate risk. This risk is immaterial to the Group.
The table below shows the forecasted transaction flows, imports and exports, for the 12-month period of 2016 and hedges at year-end 2015.
The hedged amounts are dependent on the hedging policy for each flow considering the existing risk exposure. Hedges with maturity above 12 months have a market value of SEK 0m (0) at year-end. The effect of hedging on operating income during 2015 amounted to SEK 192m (–25). At year-end 2015, the unrealized fair value of forward contracts for hedging of forecasted transaction flows amounted to SEK –18m (14).
| AUD | BRL | CAD | CHF | CLP | CNY | EUR | GBP | THB | USD | Other | Total | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Inflow of currency, long position | 2,987 | 2,936 | 2,627 | 1,657 | 1,077 | 311 | 5,723 | 2,978 | 990 | 4,795 | 10,416 | 36,498 |
| Outflow of currency, short position | –163 | — | — | –4 | — | –3,400 | –9,633 | — | –2,269 | –14,486 | –6,543 | –36,498 |
| Gross transaction flow | 2,824 | 2,936 | 2,627 | 1,653 | 1,077 | –3,089 | –3,910 | 2,978 | –1,278 | –9,691 | 3,873 | — |
| Hedges | –1,147 | –261 | –839 | –633 | –259 | 2,892 | 807 | –1,273 | 261 | 711 | –259 | — |
| Net transaction flow | 1,677 | 2,675 | 1,788 | 1,021 | 818 | –197 | –3,103 | 1,704 | –1,017 | –8,980 | 3,614 | — |
The table below presents the undiscounted cash flows of the Group’s contractual liabilities related to financial instruments based on the remaining period at the balance sheet to the contractual maturity date. Floating interest cash flows with future fixing dates are estimated using the forward–forward interest rates at year–end. Any cash flow in foreign currency is converted to Swedish krona using the FX spot rates at year–end.
| 1 year | > 1 year |
> 2 years |
> 5 years | Total | |
|---|---|---|---|---|---|
| Loans | –2,192 | –2,458 | –5,312 | –355 | –10,317 |
| Net settled derivatives | –10 | — | — | — | –10 |
| Gross settled derivatives | –10 | — | — | — | –10 |
| Outflow | –28,928 | — | — | — | –28,928 |
| Inflow | 28,918 | — | — | — | 28,918 |
| Accounts payable | –26,467 | — | — | — | –26,467 |
| Financial guarantees | –1,188 | — | — | — | –1,188 |
| Total | –29,867 | –2,458 | –5,312 | –355 | –37,992 |
The tables below present net gain/loss on financial instruments, the effect in the income statement and equity, and the fair value and carrying amount of financial assets and liabilities. Net gain/loss can include both exchange–rate differences and gain/loss due to changes in interest–rate levels.
| 2014 | 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| Gain/loss in profit and loss |
Gain/loss in OCI |
Income | Expense | Gain/loss in profit and loss |
Gain/loss in OCI |
Income | Expense | |
| Recognized in the operating income | ||||||||
| Financial assets and liabilities at fair value through profit and loss | –25 | — | — | — | 192 | — | — | — |
| Loans and receivables | –700 | — | — | — | -516 | — | — | — |
| Available–for–sale financial assets | — | 19 | — | — | — | -39 | — | — |
| Total net gain/loss, income and expense | –725 | 19 | — | — | -324 | -39 | — | — |
| Recognized in the financial items | ||||||||
| Financial assets and liabilities at fair value through profit and loss | 338 | –13 | — | 14 | -273 | -28 | — | 5 |
| Loans and receivables | –233 | — | 122 | — | 222 | — | 89 | — |
| Other financial liabilities | –235 | — | — | –578 | -1 | — | — | -654 |
| Total net gain/loss, income and expense | –130 | –13 | 122 | –564 | –52 | –28 | 89 | -649 |
| 2014 |
20151) |
|
| Financial assets | ||
| Financial assets | 312 | 284 |
| Financial assets at fair value through profit and loss | 135 | 147 |
| Available-for-sale | 177 | 137 |
| Trade receivables | 20,663 | 17,745 |
| Loans and receivables | 20,663 | 17,745 |
| Derivatives | 375 | 149 |
| Short-term investments | 99 | 108 |
| Financial assets at fair value through profit and loss | 96 | 105 |
| Loans and receivables | 3 | 3 |
| Cash and cash equivalents | 9,107 | 10,696 |
| Financial assets at fair value through profit and loss | 2,360 | 3,237 |
| Loans and receivables | 1,458 | 1,011 |
| Cash | 5,289 | 6,448 |
| Total financial assets | 30,556 | 28,982 |
| Financial liabilities | ||
| Long-term borrowings | 9,528 | 8,323 |
| Financial liabilities measured at amortized cost | 9,227 | 8,323 |
| Financial liabilities measured at amortized cost for which fair value hedge accounting is applied | 301 | — |
| Accounts payable | 25,705 | 26,467 |
| Financial liabilities at amortized cost | 25,705 | 26,467 |
| Short-term borrowings | 4,014 | 4,175 |
| Financial liabilities measured at amortized cost | 3,860 | 3,972 |
| Financial liabilities measured at amortized cost for which fair value hedge accounting is applied | 154 | 203 |
| Derivatives | 156 | 222 |
| Total financial liabilities | 39,403 | 39,187 |
1) Carrying amount equals fair value except for long and short-term borrowings where the fair value is SEK 138m (152), respectively SEK 47m (16) higher than the carrying amount.
Valuation of financial instruments at fair value is done at the most accurate market prices available. Instruments which are quoted on the market, e.g., the major bond and interest-rate future markets, are all marked-to-market with the current price. The foreign-exchange spot rate is used to convert the value into SEK. For instruments where no reliable price is available on the market, cash flows are discounted using the deposit/swap curve of the cash-flow currency. If no proper cash-flow schedule is available, e.g., as in the case with forward-rate agreements, the underlying schedule is used for valuation purposes. To the extent option instruments are used, the valuation is based on the Black & Scholes’ formula.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market-interest rate that is available to the Group for similar financial instruments. The Group’s financial assets and liabilities are measured according to the following hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities. At year-end 2015, the fair value for level 1 financial assets was SEK 3,626m (2,768) and for the total financial liabilities SEK 0m (0).
Level 2: Inputs other than quoted prices included in level 1 that are observable for assets or liabilities either directly or indirectly. At year-end 2015, the fair value for level 2 financial assets was SEK 148m (375) and for the total financial liabilities SEK 220 (157).
Level 3: Inputs for the assets or liabilities that are not entirely based on observable market date. Electrolux has no financial assets or liabilities qualifying for level 3.