Risk & uncertainty factors

Elanders divides risks into business risks (customer concentration, operational risk, risks in operating expenses, contracts and disputes), financial risks (currency, interest, financing/liquidity and credit risk) as well as circumstantial risks (business cycle sensitivity and the future of the services/products).

Elanders encounters risks in operations daily and normally these are within the Group’s control. Group Management’s close collaboration with the different group operations is a key factor in controlling these risks.

Customer concentration


Risks and uncertainty factors
The Group’s major customers are primarily active in the manufacturing industry and agreements with these customers normally run over two or three years. Elanders’ ten largest customers represent 58 (56) percent of net sales in 2019. Sales to the Group’s largest customer represent 16 (16) percent of the total net sales. Sales to this customer is made to several of its divisions, on three continents and is based on multiple stand-alone agreements.

What Elanders does
Elanders’ strategy is not only to be a supplier to our larger customers but to be a strategic partner which builds the basis for long-term business relations. Elanders has worked together with several of the Group’s largest customers for many years.


 

Operational risk


Risks and uncertainty factors
The risk that the Group will suffer a major stop in production is relatively small. There are now critical interdependencies between the units within the respective business area or between the business areas. There are only a few cases where there are no alternative suppliers of critical input goods.

What Elanders does
Elanders work to identify and prevent risks that can lead to disturbances in production. The work involves regular controls of the production sites where identified improvement areas are the basis for action plans. The Group also has business interruption insurance that covers the loss of margins for up to twelve months.


 

Risks in operating expenses


Risks and uncertainty factors
Elanders’ main operating costs are personnel costs and cost for goods for resale and other production material. These two categories represent 49 (49) percent of total operating costs in 2019.

What Elanders does
The Group does not see any direct risk that any of these costs will rise in the near future to such a degree that it would have a material effect on group results. Elanders has also the possibility within some agreements to pass on increased costs to the customers.


 

Contracts and disputes


Risks and uncertainty factors
In business daily operations can give rise to disputes.

What Elanders does
Elanders is not aware of any dispute that may have any significant effect on the Group’s financial position. The Group’s insurance program contains global liability insurance that covers general liability, product liability, crime fidelity, business interruption and limited protection against environmental damage. The Group also has liability insurance for members of the Board and officers.

The greatest financial risks for Elanders are currency risk, interest risk and financing/liquidity risk.

Currency risk


Risks and uncertainty factors
The Group runs into currency risk through transactions in currencies other than the companies local currency (transaction exposure) or when converting net result and net assets from foreign subsidiaries (translation exposure).

What Elanders does
Receivables and liabilities as well as in some cases purchase and sales orders are partly hedged by using forward exchange contracts. Exposure of net assets in foreign subsidiaries is mainly connected to EUR and USD and hedging has been made in part through loans in EUR and USD. Apart from this hedging no other hedging has been made to counter the translation risk.


 

Interest risk


Risks and uncertainty factors
Exposure in the form of changes in the interest rate stems mainly from group interest-bearing liabilities with floating interest. Outstanding liabilities are primarily in EUR and USD.

What Elanders does
Elanders strives to achieve a balance between cost-effective financing and the risk exposure of a negative influence in the result if interest levels suddenly changed significantly. In light of the low interest rates expected by the market, no hedging have been made regarding interest rates. Elanders is following developments closely and may enter into hedging arrangements.


 

Financing/liquidity risk


Risks and uncertainty factors
Elanders is dependent on obtaining financing from credit institutions. The Group’s financing needs comprises current operations and preparedness for possible future investments. The availability of financing depends on factors such as the general availability of capital and Elanders’ credit rating.

What Elanders does
The Group currently has a three year credit agreement with two Swedish banks regarding operational financing that expires in January 2022.


 

Credit risk


Risks and uncertainty factors
The Group is exposed to losses through the risk of a counterparty not meeting their obligations. Credit risk can be divided into financial credit risk and commercial credit risk where the financial risk primarily concerns investing surplus liquidity and trading exchange derivative instruments and the commercial risk concerns accounts receivable. Elanders’ commercial credit risk is spread out over a large number of customers and at the same time a few customers represent a large part of the Group’s accounts receivable.

What Elanders does
The financial credit risk is limited and controlled by the fact that financial transactions may only be carried out with financial institutions that are approved of by Group Finance. The commercial credit risk is primarily handled by each subsidiary through external checks on credit ratings, regular communication with customers, monitoring their ability to pay and following up their financial reports.

The external factors that have the greatest impact on Elanders operations are global economy and the future for the Group’s products and services. Since these factors are outside of group control we continuously work to adjust operations to meet the new conditions.

Business cycle sensitivity


Risks and uncertainty factors
The most tangible business cycle sensitivity is in group operations that supply our customers in the manufacturing industry, particularly in automotive and consumer electronics. Sales to customers in food stuffs, cosmetics, pharmaceuticals and the public sector as well as to consumers are less affected by the general economic situation.

What Elanders does
We work consciously to reduce the influence of business cycles by increasing sales to customers in less sensitive trades and customer groups as well as by increasing the geographic spread of sales. In most cases the expansions in supply chain do not involve significant investments in fixed assets and lease agreements are signed to match the customer contracts. A large part of the running costs in new projects are variable and can be adjusted in case of volumes changes.


 

The future of the services/products


Risks and uncertainty factors
Increased outsourcing generates a demand for effective supply chain solutions. The automotive industry and global companies in consumer electronics have long outsourced a large part of their operations in order to focus on product development, production and marketing and other industries are following. Printed matter is going through a transition from traditional demand for large editions in offset print to shorter series in digital print and from printed to digital media.

What Elanders does
Elanders’ position as a supplier of global solutions in supply chain management and print & packaging balances the challenges that occur in certain sections of the Group’s markets, both geographically as well as for some Group services and products.

Financial overview

Financial overview

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