30. Financial instruments
Back to the list(a) Foreign currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities. The currencies giving rise to this risk are primarily USD and EUR.
The Group has the following foreign-currency-denominated financial assets and liabilities:
| RUB Million | 31 December 2012 USD denominated |
31 December 2012 EUR denominated |
31 December 2011 USD denominated |
31 December 2011 EUR denominated |
|---|---|---|---|---|
| Current assets | ||||
| Receivables | 2,530 | 41 | 2,909 | 31 |
| Cash and cash equivalents | 2,912 | 49 | 4,058 | 86 |
| Non-current liabilities | ||||
| Loans and borrowings | (13,748) | (681) | (15,148) | (1,330) |
| Current liabilities | ||||
| Payables | (673) | (87) | (84) | (371) |
| Loans and borrowings | (20,701) | (283) | (14,088) | (148) |
| (29,680) | (961) | (22,353) | (1,732) |
Management estimate that a 10% strengthening/(weakening) of the USD and EUR against Russian Ruble, based on the Group’s exposure as at the reporting date would have decreased/(increased) the Group’s net profit for the year by RUB 3,064 million, before any tax effect (2011: RUB 2,409 million). This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2011.
(b) Interest rate risk
Interest rate risk is the risk that changes in interest rates will adversely impact the financial results of the Group. The interest rate profile of the Group’s interest-bearing financial instruments is as follows:
| 31 December 2012 RUB million |
31 December 2011 RUB million |
|
|---|---|---|
| Fixed rate instruments | ||
| Long-term loans issued at amortised cost | 363 | 176 |
| Short-term promissory notes | — | 669 |
| Finance lease receivable | 79 | 350 |
| Short-term deposits | 2,404 | 5,173 |
| Short-term loans issued at amortised cost | 833 | 1,454 |
| Long-term borrowings | (1,945) | (1,867) |
| Short-term borrowings | (1,439) | (1,730) |
| 295 | 4,225 | |
| Variable rate instruments | ||
| Long-term borrowings | (12,507) | (14,725) |
| Short-term borrowings | (20,578) | (13,831) |
| (33,085) | (28,556) | |
At 31 December 2012, a 1% increase/(decrease) in LIBOR/EURIBOR would have decreased/(increased) the Group’s profit or loss and equity by RUB 331 million (31 December 2011: RUB 286 million).
(c) Liquidity risk
The table below illustrates the contractual maturities of financial liabilities, including interest payments:
| 31 December 2012 | ||||||||
|---|---|---|---|---|---|---|---|---|
| RUB Million | Carrying value |
Contractual cash flows |
> 5 yrs | |||||
| Secured bank loans | 300 | 357 | 299 | 58 | — | — | — | — |
| Unsecured bank loans | 32,104 | 33,858 | 21,259 | 8,111 | 3,628 | 860 | — | — |
| Letters of credit | 1,500 | 1,548 | 516 | 224 | 355 | 15 | 438 | — |
| Interest payable | 37 | 37 | 37 | — | — | — | — | — |
| Secured finance leases | 2,528 | 3,232 | 833 | 596 | 549 | 510 | 386 | 358 |
| Trade and other payables | 8,226 | 8,226 | 8,226 | — | — | — | — | — |
| Financial guarantees issued for related parties |
609 | 609 | 609 | — | — | — | — | — |
| 45,304 | 47,867 | 31,779 | 8,989 | 4,532 | 1,385 | 824 | 358 | |
| 31 December 2011 | ||||||||
|---|---|---|---|---|---|---|---|---|
| RUB Million | Carrying value |
Contractual cash flows |
> 5 yrs | |||||
| Secured bank loans | 1,219 | 1,321 | 1,205 | 2 | 114 | — | — | — |
| Unsecured bank loans | 26,861 | 27,889 | 14,361 | 6,720 | 4,944 | 53 | 1,811 | — |
| Letters of credit | 1,900 | 2,203 | 267 | 538 | 408 | 381 | 21 | 588 |
| Interest payable | 15 | 15 | 15 | — | — | — | — | — |
| Secured finance leases | 2,158 | 2,766 | 594 | 524 | 455 | 439 | 424 | 330 |
| Trade and other payables | 7,654 | 7,654 | 7,654 | — | — | — | — | — |
| Derivative financial liabilities |
446 | 446 | 446 | — | — | — | — | — |
| Financial guarantees issued for related parties |
1,704 | 1,704 | 1,704 | — | — | — | — | — |
| 41,957 | 43,998 | 26,246 | 7,784 | 5,921 | 873 | 2,256 | 918 | |
(d) Fair values
Management believes that the fair value of the Group’s financial assets and liabilities approximates their carrying amounts.