7.5.1.4 Interest rate risk
in PLN millions, unless otherwise stated
In 2021 the Group was exposed to the risk of changes in interest rates due to loans granted to joint ventures, investing cash, the reverse factoring program and using borrowings.
Positions with variable interest rates expose the Group to the risk of changes in cash flow from a given position as a result of changes in interest rates (i.e. it has an impact on the interest costs or income recognised in profit or loss). Positions with fixed interest rates expose the Group to the risk of fair value changes of a given position, excluding positions measured at amortised cost, for which the change in fair value does not affect their measurement and profit or loss.
The main items which are exposed to interest rate risk are presented below:
|
As at 31 December 2021 |
As at 31 December 2020 |
|||||
|---|---|---|---|---|---|---|
| Cash flow risk |
Fair value risk |
Total | Cash flow risk |
Fair value risk |
Total | |
| Cash and cash equivalents* | 2 333 | – | 2 333 | 2 924 | – | 2 924 |
| Loans granted | – | 22 | 22 | – | 18 | 18 |
| Note 7.1 Borrowings | (2 153) | (3 796) | (5 949) | (3 463) | (3 872) | (7 335) |
| Similar payables** | (55) | – | (55) | (1 264) | – | (1 264) |
** In suppliers on time, during the period ended 31 December 2021, the Parent Entity performed reverse factoring agreements entered into in 2019 and 2020. Consequently, for a part of the portfolio of trade payables, an extension of payment dates was agreed upon in exchange for additional consideration in the form of interest. Interest is calculated with a variable rate, based on a fixed margin increased by a specified reference rate determined for individual currencies. Details on reverse factoring may be found in note 8.4.1, note 10.3 and note 10.4.
As part of the strategic management of interest rate risk, in 2019 the Parent Entity entered into Cross Currency Interest Rate Swap (CIRS) transactions for the notional amount of PLN 2 billion, hedging against the market risk connected with the issue of bonds in PLN with a variable interest rate. CIRS transactions opened as at 31 December 2021 and 31 December 2020 are presented in note 7.5.1.3.
An analysis of the Group’s sensitivity to interest rates risk in relation to items with a variable interest rate is presented in the following table.
An analysis of the Company’s sensitivity to interest rate risk, assuming changes in interest rates for the balance sheet items in PLN, USD and EUR (presented in basis points, bps) is presented in the following table. An expert method including recommendations of the ARMA model was used to determine the potential volatility of interest rates.
|
31 December 2021 |
31 December 2020 |
|||||||
| +250 bps (PLN) +150 bps (USD, EUR) |
-100 bps(PLN) -50 bps(USD, EUR) |
+100 bps (PLN, USD, EUR) |
-50 bps (PLN, EUR, USD) |
|||||
| profit or loss | other comprehensive income | profit or loss | other comprehensive income | profit or loss | other comprehensive income | profit or loss | other comprehensive income | |
| Cash and cash equivalents | 32 | (11) | – | 25 | – | (13) | – | |
| Borrowings | (54) | 21 | – | (34) | – | 17 | – | |
| Financial derivatives – interest rate | – | 186 | – | (66) | – | 150 | – | (80) |
| Similar payables | – | – | – | (1) | – | – | – | |
| Impact on profit or loss | (22) | 10 | – | (10) | – | 4 | – | |
| Impact on other comprehensive income | – | 186 | – | (66) | – | 150 | – | (80) |