Financial risks are risks with a potential impact on earnings and the financial position.
The retail market in general is adversely affected by a weak economy and although Clas Ohlson sells products for everyday use, a weak retail market will have a negative impact on sales.
Our broad and affordable product range is less sensitive to cyclical fluctuations than that of many other competitors.
More than 80 per cent of our products are priced at less than SEK 300. Clas Ohlson’s broad product range, with five different product categories, entails lower risk since demand in one product category could increase while demand in another category falls.
The company’s currency exposure is high, primarily due to sales in Norway and the Group’s purchasing. About 50 per cent of the company’s purchases are made in currencies other than SEK. The principal currencies for purchasing are the US dollar (USD), Hong Kong dollar (HKD) and euro (EUR). Movement of the SEK against the Norwegian krone (NOK) is also important for the Group, since Norway accounts for approximately 40 per cent of sales. Net exposure to EUR is low, since the company brings in currency through sales in the Finnish and German markets.
The Group is also exposed to the pound sterling (GBP) via sales in the UK.
Futures hedging is performed monthly in NOK and USD, with a maturity of six months, against half of the expected flow in each currency.
In this way, the company is guaranteed the forward rate on a major proportion of its purchases, but also acquires the opportunity/risk of paying for the remaining purchases at the current rate.
Freight shipping prices can vary considerably depending on the global market price, and currency fluctuations.
Clas Ohlson handles changes in freight shipping prices by actively monitoring and assessing the market.
Raw material prices
Purchase prices for the company’s products are largely determined by the price of individual raw materials in global markets. This applies particularly to electronics (copper), batteries (zinc), lighting (aluminium) and plastic products (oil). Hedging against raw material prices is not carried out directly by the company. This entails a risk since the purchase price of the products concerned is affected by the price trend for raw materials.
Clas Ohlson has a broad portfolio of products and is therefore less impacted by changes to a specific raw material.
Some of Clas Ohlson’s suppliers purchase commodities/materials at fixed contract prices, which entails some indirect hedging.
Clas Ohlson is affected by wage-level changes in countries where the company’s products are manufactured. This can vary between products depending on how much labour is involved in the manufacturing process.
Clas Ohlson works continuously to find new purchasing markets, both in Europe and Asia.
Financing and liquidity
Liquidity in the group follows the given structure for seasonal payments, resulting in lower levels of liquidity during fall in connection with stock build-up for Christmas sales and dividend payment.
A continuous work is performed in order to govern and balance the cash flow to the set goals through sales, purchase, costs, capital balance etc. Dividend for the financial year 2018/19 is proposed to the AGM in 2019, to be split into two separate occasions.