Fiven Annual Report 2020

The sensitivity related to financial assets and liabilities poten- tial impact on Fiven's profit or loss, is based on a strengthening / weakening of main currencies by 10 per cent against the functional currencies of the subsidiaries. If all the main cur- rencies weakened against the functional currencies, the profit before tax would decrease by euro 334 thousand. 1.2 Price Risk Fiven is exposed to fluctuation in the market prices in the operating business related to individual contracts and products. The way Fiven mitigates the price risk is through innovation, product differentiation and through improved cost competitiveness. 1.3 Commodity prices Sand, electricity and pet coke are the main raw materials in the manufacturing of Silicon Carbide and account for a significant portion of the total production costs. Whilst there is a forward marked for energy enabling Fiven to secure future needs with contracts signed today, pet coke and sand are purchased in the spot markets as no forward market exists. This means Fiven is exposed to fluctuation in the commodity markets for these raw materials. Fiven tries to keep multiple source options to avoid being overly depended on any particular supplier. 1.4 Interest rate risk Fiven’s interest risks arises from interest bearing liabilities granted by external financial institutions and owners. Fiven liabilities are drawn in EUR and USD (export credit facility in Brazil). Fiven financing have four pillars; a bond, a shareholder loan, a factoring facility and an export credit facility. All four facilities have in common that they have floating interest, and hence are exposed to fluctuating interest rates. With floating interest rates the group will normally be in a position to benefit from lower interest rates in an economic downturn, but a floating rate policy will also leave the group exposed to higher future interest rates. An increase of interest rates by 0.5 points per annum would impact the Group’s financials expenses nega- tively by 520 TEUR. A reduction of interest rates would have limited impact. If relevant base interest rates are negative as is currently the case, the bases rates will be deemed to be zero. 2 Trading partner risk Credit risk is the risk of financial losses to the group if a cus- tomer or counterparty fails to meet contractual obligations. For Fiven this arises mainly to trade receivables. Trade receivables are generally secured by credit insurance from a reputable credit insurance company. Credit limits for each customer and overdue receivables are monitored and built into the ERP systems and for customers where credit insurance cannot be obtained, other methods are generally used to secure the sales proceeds, such as prepayment or documentary credit. During the second half of 2019, a non-recourse factoring agreement for Fiven Norge and Fiven Belgium was implemented, enabling the two entities to sell up to 90 per cent of the total ‘allowable receivables’ to the FACTOFRANCE. 3 Liquidity Risk Liquidity risk is the risk that the group will encounter difficulty in meeting the obligations associated with its financial liabili- ties. Fiven is exposed to liquidity risk related to its operations and financing. Fiven’s cash flow will fluctuate due to economic conditions and financial performance. In order to assess its future operational liquidity risk, short-term and long-term cash flow forecasts are provided. The short-term forecast is updated each week, and the long-term cash flow projection is updated as part of the planning cycles. Fiven has a non-recourse factoring facility which allows a fund- ing of up to 90 per cent of the total receivables transferred to the factoring company for a total amount not exceeding 13 MEUR for entities in Fiven Norge and Fiven Belgium. As per 31 December 2020, the utilization of the factoring facility was 5.0 MEUR. In Brazil, Fiven has an export credit facility based on confirmed export order intake to finance cost of production. The credit facility is covering up to 210 days, and at the end of December 2020 the total of the facility was 4.8 MEUR. The bond has maturity date 5 April 2022 and the un-secured shareholder loan, 6 April 2022. Trade payables are payable in 2020. The factoring liabilities at 31 December 2020 matures in Q1 2021 and the export credit facility in Brazil in 1H 2021. The bond contains financial covenants further described in note 22 Interest Bearing liabilities. The group is in compliance with all covenants as of the reporting date 68   Kapittelnavn Fiven Annual Report 2020