Currency
Risk
The Group’s earnings are affected by fluctuations in exchange rates. Transaction exposure risk arises due to a significant portion of the Group’s sales income being in different currencies from costs. Translation exposure risk arises from the translation of foreign subsidiaries’ assets, liabilities and earnings into Swedish kronor.
Risk management
Transaction exposure. In order to reduce the impact on profit of changes in exchange rates, net flows are hedged using forward foreign exchange contracts. Net flows in euros, US dollars and pounds sterling for the coming four months are always hedged. These normally consist of trade receivables and outstanding orders. The Board may decide to hedge flows for a longer period if this is deemed to be appropriate in light of the products’ profitability and competitiveness and the currency situation. Currency exposure arising when investments are paid for in foreign currencies is distinguished from other transaction exposures. Normally,
90–100 per cent of the currency exposure associated with major investments is hedged
Translation exposure. The Group’s non-current assets are mainly Swedish, with the exception of the paperboard mill in the UK, which accounts for 2 per cent of the assets. The hedging of the exposure that arises when subsidiaries’ assets and liabilities are translated into Swedish kronor (known as equity hedging) is assessed on a case-by-case basis and is arranged based on the value of the net assets upon consolidation. The hedges take the form of foreign currency loans or forward foreign exchange contracts. The exposure that arises when the earnings of foreign subsidiaries are translated into Swedish kronor is not normally hedged.
Comment
Expected flows in EUR/SEK are hedged for just over two years at an average rate of 11.40. For other currencies, 4–5 months of flows are hedged.
Hedging of exposure to pounds sterling amounted to GBP 130 million at year-end. Net assets in other currencies are limited and are not usually hedged.
Interest rates
Risk
Changes in market interest rates affect the Group’s cost of borrowing.
Risk management
The fixed interest rate period for the Group’s net financial debt varies over time and is decided on by the Board of Directors. To limit the effects of a rise in interest rates, the interest rate on loans may be fixed, or interest rate swap agreements may be entered into without changing the interest rate on the underlying loans.
Comment
Holmen’s average borrowing rate in 2024 was 3.2 per cent.
The table below shows the Group’s fixed interest rate period by currency.
Credit risk relating to financial counterparties
Risk
The risk of financial transactions giving rise to credit risks in relation to financial counterparties.
Risk management
The creditworthiness of Holmen’s financial counterparties is assessed using reputable credit rating agencies or, where a counterparty has no credit rating,
the company’s own analyses. A maximum credit risk and settlement risk are established for each financial counterparty and are continually monitored. The calculation is based on the maturity and historical volatility of different types of derivatives. For cash and cash equivalents and current investments, the maximum
credit risk is deemed to correspond to the nominal amount.
Comment
At 31 December 2024, the Group had outstanding derivative contracts of a nominal amount of SEK 16 billion and a net fair value of SEK -0.2 billion.
Liquidity and refinancing
Risk
The risk that the need for future funding and refinancing of maturing loans may have to be met at a high cost.
Risk management
Holmen’s strategy is to have a strong financial position to give it room for manoeuvre when making long-term business decisions. The target is for net financial debt not to exceed 25 per cent of equity. Holmen’s financing usually mainly comprises bonds and the issuing of commercial paper. Holmen reduces the risk of future funding becoming difficult or expensive by using long-term contractually agreed credit facilities. The Group plans its financing by forecasting its financing needs over the coming years based on the Group’s budget and profit forecasts, which are regularly updated.
Comments
Net financial debt amounted to SEK 3 397 million, equal to 6 per cent of equity. Financial liabilities totalled SEK 3 694 million at the end of the year, of which SEK 1 048 million are due for payment in 2025, and financial assets totalled SEK 295 million, of which SEK 234 million consist of cash and cash equivalents and current investments.
The Group has an unused contractually agreed credit facility of SEK 4 billion that expires in 2027. The facility includes a limit stipulating that it cannot be used if the net liability to equity ratio exceeds 125 per cent.
Comment
The cash flow was strong in 2022 and net financial debt fell to SEK 2 145 million, which is equal to 4 per of equity. Financial liabilities totalled SEK 4 195 million at the end of the year, of which SEK 1 127 million are due for payment in 2023, and financial assets totalled SEK 2 050 million, of which SEK 1 935 million consist of cash and cash equivalents and short-term investments.
The Group has unutilised committed credit facilities of SEK 5 billion, of which SEK 1 billion matures in 2025 and SEK 4 billion in 2027. Both facilities include a limit stipulating that they cannot be used if net liability in relation to equity exceeds 125 per cent.
Read more