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Boskalis jaarverslagen 2012

Currency risks

The functional currency of Boskalis is the euro. A number of business units, especially in Heavy Marine Transport, as well as several substantial associated companies (Smit Lamnalco, Keppel Smit Towage, Asian Lift, Saam Smit Towage) have a functional currency other than the euro. The most important of these is the US dollar, followed by the Singapore dollar. Most of the revenues and expenses of these entities are largely or entirely based on these same non-euro currencies. The holdings in these entities are viewed from a long-term perspective. Exchange rate risks related to these entities are not hedged as it is assumed that currency fluctuations and developments in interest rates and inflation will offset each other in the long term.

A large proportion of the activities of the group companies that have the euro as their functional currency are not contracted in euros. This particularly applies to the group companies that are involved in dredging and related projects. The costs of these entities, however, are largely based on the euro. Generally, the net cash flows in non-euro currencies within these entities are fully hedged straight away, usually by means of forward exchange contracts. The US dollar exchange rate in relation to the euro is particularly relevant in this context. A large proportion of the projects are contracted in US dollars or in currencies that are to a greater or lesser extent linked to the US dollar. Most of our major international competitors in the dredging industry also have cost structures largely based on the euro. This implies that exchange rate fluctuations have no major impact on our relative competitive position. In a number of market segments, in particular in Offshore Energy, there is competition from parties whose cost structures are not based on the euro, meaning that the competitive impact of currency fluctuations in these market segments is greater. On balance, exchange rate fluctuations only have a limited impact on the company’s competitive position in these activities.

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