Financial risks

Currency risk

Heineken operates internationally and reports in euros, which has proven to be a very strong currency over the past few years. Currency fluctuations, relating to the US Dollar, South African Rand and, to a lesser extent, the British Pound could materially affect overall Company results, considering the size of exports from the Euro-zone to mainly the USA and South Africa.

Heineken has a clear policy on hedging transactional exchange risks, which postpones the impact on financial results. Translation exchange risks are hedged to a limited extent. In 2008, operating results of operating companies in countries with currencies that devaluated versus the euro are translated into euro at lower rates. Since the Group attracts funding and pays interest in these currencies as well, the impact of devaluations of such currencies like Rouble, British Pound and Zloty on our results is mitigated to a certain extent.

The sensitivity of the financial results with regard to currency risks are explained here.

Capital availability

We have taken on new debt to finance our entry into 11 new markets in a short period of 18 months. Consequently, total Net debt increased significantly. The Company has a strong focus on cash generation to reduce our debt levels and improve our financing ratios. Financing and liquidity are explained further here. Given the current credit markets situation, the Company has a clear focus on ensuring sufficient access to capital markets to refinance maturing debt obligations and to finance long-term growth. The Company aims to further fine-tune the maturity profile of its long-term debts. Financing strategies are under continuous evaluation. Terms and conditions of additional refinancing may be impacted by the credit market situation. Strong cost and cash management and strong controls over investment proposals are in place to ensure effective and efficient allocation of financial resources.