Vetoquinol - Universal Registration Document - 2021

CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements Vetoquinol Universal Registration Document 2020 Financial report 71 6 6.5.4 Financial risk management 6.5.4.1 Currency risk management The Group focuses foreign exchange risk on the subsi- diaries with production facilities and, as far as possible, on the parent company, Vetoquinol SA, by having its sales subsidiaries send and receive invoices that are denomi- nated in their respective functioning currencies. Accordingly, the distribution subsidiaries are not exposed to exchange rate risk. Foreign currency movements are centralized at the level of Vetoquinol SA and hedging ins- truments may be put in place. These instruments usually have a term of less than one year. At the balance sheet date, there were no hedging instruments outstanding. For this reason, IAS 39 rules pertaining to such instru- ments were not found to apply to 2020 or the prior year. The Group is a net buyer of USD amounting to around $12 million a year excluding significant acquisitions. The Group is net seller of other currencies in circulation in the Group, such as CAD (c. CAD 20 million) and GBP (c. GBP 13 million). As described above, the currency risk related to subsi- diaries’ operations largely involves only a presentation risk in the consolidated income statement. On the basis of the 2020 financial statements, solely with regard to the foreign subsidiaries, a 10% increase in the value of the euro compared to all other foreign curren- cies would have resulted in a €22.0 million decrease in consolidated sales (2019: €21.1 million) and a €2.5 million decrease in consolidated operating income (2019: €2.1 million). Conversely, a 10% reduction in the value of the euro compared to other currencies would have resulted in a €26.9 million increase in sales (2019: €25.8 million) and a €3.0 million increase in consolidated operating income (2019: €2.6 million). On account of its sales in foreign currencies, the Company is exposed to currency risk between the invoice date and the date payment is received and the sale of currency on the market. Currency gains or losses and any gains or losses arising from hedging transactions are recognized under net financial income/(expense). Most of these transactions are entered into and closed during the year, over very short periods, and therefore there are no outstanding items recorded in the closing balance sheet.