Boskalis_Annual Report_2017

report of the board of management ANNUAL REPORT 2017 – BOSKALIS 56 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 incurred in euros. Generally, the net cash flows in non-euro currencies within these entities are fully hedged, 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 is 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 do not have a material impact on our relative competitive position. In several market segments, particularly 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. However, on balance, exchange rate fluctuations only have limited impact on the company’s competitive position in these activities. TAX RISKS Because of the (constantly changing) mix of project and operational results in a large number of countries and entities, various kinds of taxes, such as income tax, wage tax, VAT and import duties, are assessed and then paid in various countries. Profts are attributed to countries where value is created in accordance with national and international rules and standards, which can be extremely complex. Beach replenishment work near Heemskerk in the Netherlands.

Knowledge in this domain, along with related compliance and application, are embedded in procedures within the Tax Management function. In cases where insuffcient knowledge is available in-house, external advisors are used. INTEREST RATE RISKS Our long-term fnancial liabilities are predominantly based on fxed long-term interest rates, meaning that our exposure to interest rate fluctuations on these is limited. FUEL PRICE RISKS In a substantial part of its activities, Boskalis is exposed to risks arising from changes in fuel prices. Fuel costs are hedged in a number of different ways. Where possible, contracts include fuel price variation clauses. Also, contracts are sometimes based on fuel being supplied by the client. In other cases, where the fuel price presents a substantial risk, exposure can be hedged by means of fnancial instruments, such as forward contracts or fxed fuel supply contracts. DERIVATIVES Financial derivatives are only used to hedge underlying currency risks, fuel cost risks or other risks where there is a physical underlying transaction. There is, however, a risk of losses arising from the unwinding or settlement of such fnancial derivatives due to cancellation of a contract or substantial reduction in the scope of a contract.