Boskalis_Annual_Report_2016

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The US private placements and some of the cash and cash equivalents, short-term deposits and other interest bearing loans have fixed interest rates.

Sensitivity analysis In managing interest rate risks the Group aims to reduce the impact of short-term fluctuations on Group earnings. In the long term, however, permanent changes in interest rates will have an impact on profit.

At the reporting date and taking into account the corresponding effective hedge instruments, the interest rate profile of the Group’s interest-bearing financial instruments was:

2015

2016

FIXED RATE INSTRUMENTS Financial assets

293,442 - 717,306 - 423,864

264,093 - 761,431 - 497,338

Financial liabilities

VARIABLE RATE INSTRUMENTS Financial assets

500,278 - 245,661 254,617

701,238 - 1,188 700,050

Financial liabilities

A drop of 100 basis points, insofar as possible, in interest rates at 31 December 2016 would have no material impact on the Group’s profit before income tax (2015: increase of approximately EUR 0.9 million), with all other variables, in particular currency exchange rates, remaining constant. A rise of 100 basis points in interest rates at 31 December 2016 would have increased the Group’s profit before income tax by a maximum of EUR 7.0 million (2015: increase by a maximum of EUR 2.5 million), with all other variables, in particular currency exchange rates, remaining constant. Price risks Risks related to price developments on the purchasing side which are usually borne by the Group, for example developments in wages, costs of materials, sub-contracting costs and fuel, are also taken into account when preparing cost price calculations and tenders. Price index clauses are included in contracts wherever possible, especially on projects that extend over a long period of time. The Board of Management has established a fuel price risk management policy stipulating approved fuel price risk management instruments. These include: delivery of fuel by the client, price escalation clauses, fixed price supply contracts and financial derivatives (forward, future and swap contracts). ON-BALANCE FINANCIAL INSTRUMENTS AND FAIR VALUE 28.2 Financial instruments accounted for under assets and liabilities are financial fixed assets, cash and cash equivalents, receivables, and current and non-current liabilities. Derivatives are mainly future cash flows hedged by forward contracts to which hedge accounting is applied. Furthermore, the Group holds a number of interest rate swaps. These are recognized under other derivatives. The fair value of the forward exchange contracts is based on their listed market price (unadjusted market prices in active markets for identical assets and liabilities) or discounted cash flows based on relevant conditions and durations of the contracts and including public interest rates for comparable instruments as at the balance sheet date, taking into account the credit risk of the counterparty. The fair value of other financial instruments is based on quoted prices or on the actual interest rate as at the balance sheet date, taking into account terms and maturity. The fair value of non-interest-bearing financial instruments with a maturity of twelve months or less is supposed to be equal to their book value.

ANNUAL REPORT 2016 – BOSKALIS FINANCIAL STATEMENTS 2016