Boskalis jaarverslagen 2011

Currency risk

A large proportion of projects, particularly dredging projects, are not contracted in euros. Generally, positions in non-euro currencies are fully hedged as soon as they occur, usually with forward exchange contracts. The US dollar exchange rate in relation to the euro is particularly relevant. A large proportion of the projects are contracted in US dollars or in currencies that are linked, to a greater or lesser extent, to the US dollar. Within the dredging industry most of our major international competitors also have a cost structure largely based on the euro. This means that exchange rate fluctuations have no major impact on our relative competitive position. In a number of market segments there is competition from parties whose cost structures are not based on the euro. The competitive impact of currency fluctuations is greater in these market segments. However, on balance, exchange rate fluctuations only have a limited impact on the company’s competitive position.

Several important affiliated companies of Boskalis (Archirodon, Smit Lamnalco, Keppel Smit Towage, Asian Lift) are largely or entirely based on the US dollar or Singapore dollar. However, both the revenue structure and the cost structure of these companies are also largely or entirely based on these same currencies. These holdings are viewed from a long-term perspective. Exchange rate risks related to the investments in these holdings are not hedged. It is assumed that currency fluctuations and developments in interest rates and inflation will offset each other in the long term. The income statements of these affiliates are translated at average exchange rates. Translation differences are charged or credited directly to shareholders’ equity.

 

Added to My report add to My report Source: Annual review 2011, Report of the Board of Management, page 51