Risk management

ROTO uses derivative financial instruments to hedge its exchange, zinc price, steel price and interest rate risks.

Exchange risk

ROTO operates mainly in the European Union. Future foreign currency transactions are partly hedged on the basis of a risk analysis. This involves using forward exchange contracts.

Zinc and steel price risk

ROTO is exposed to a price risk associated with the zinc and steel stocks. The price risks for the zinc stocks are partly covered with hedging contracts. The price risk for part of the steel stocks is covered with sales contracts that have already been concluded.

“The ROTO risk policy can be described as risk-averse.

Interest rate risk

ROTO is exposed to an interest rate risk associated with the interest-bearing loans and current debt. The interest rate risks on long-term debt are partly hedged through interest rate swap

Credit risk

ROTO has no significant credit risks. The creditworthiness test is conducted on the basis of limit applications lodged with the credit insurer and on the basis of experience and internal assessments.

A periodical assessment is made of whether the insurance policies are still a good match for the nature and scope of the activities. In addition, a strict debtor policy is in place for outstanding accounts receivable, with credit risks being hedged through credit insurance. The risk mitigated by the insurance is therefore often limited to the deductible.

Liquidity and cash flow risk

Under its current credit facility, ROTO has enough credit to finance its operating and financing activities. Liquidity forecasts are drawn up to manage the short-term financing position. When necessary, scenario analyses are implemented.

The risk-averse approach and the hedging of the risks mentioned above have ensured that the impact on ROTO of undesirable changes in commodity and exchange markets was limited in 2018. The continuation of this policy will ensure that ROTO is adequately protected against this type of risk, insofar as that can be foreseen at present.

Risk management

ROTO uses derivative financial instruments to hedge its exchange, zinc price, steel price and interest rate risks.

Exchange risk

ROTO operates mainly in the European Union. Future foreign currency transactions are partly hedged on the basis of a risk analysis. This involves using forward exchange contracts.

Zinc and steel price risk

ROTO is exposed to a price risk associated with the zinc and steel stocks. The price risks for the zinc stocks are partly covered with hedging contracts. The price risk for part of the steel stocks is covered with sales contracts that have already been concluded.

“The ROTO risk policy can be described as
risk-averse.

Interest rate risk

ROTO is exposed to an interest rate risk associated with the interest-bearing loans and current debt. The interest rate risks on long-term debt are partly hedged through interest rate swaps.

Credit risk

ROTO has no significant credit risks. The creditworthiness test is conducted on the basis of limit applications lodged with the credit insurer and on the basis of experience and internal assessments.

A periodical assessment is made of whether the insurance policies are still a good match for the nature and scope of the activities.In addition, a strict debtor policy is in place for outstanding accounts receivable, with credit risks being hedged through credit insurance. The risk mitigated by the insurance is therefore often limited to the deductible.

Liquidity and cash flow risk

Under its current credit facility, ROTO has enough credit to finance its operating and financing activities. Liquidity forecasts are drawn up to manage the short-term financing position. When necessary, scenario analyses are implemented.

The risk-averse approach and the hedging of the risks mentioned above have ensured that the impact on ROTO of undesirable changes in commodity and exchange markets was limited in 2018. The continuation of this policy will ensure that ROTO is adequately protected against this type of risk, insofar as that can be foreseen at present.