Procurement Risks
Limited availability of certain raw materials or substantial raw
materials price increases that we cannot or can only par-
tially pass on to the markets in the short term constitute the
primary procurement risks. These can have a negative im-
pact on the Group’s earnings situation.
We continually analyze the situation on the raw materials
markets that are relevant for ALTANA. By doing so, we can
identify price trends and structural shifts on the part of suppli-
ers at an early stage and devise suitable measures. We take
this knowledge into account when we arrange supply contracts.
In addition, we take account of the volatility of raw
materials prices in our customer relations. To be able to pass
on price increases to the markets in the short term, we use
the flexibility of price mechanisms and price lockup periods.
Financial Market Risks
Financial market risks primarily concern short-term and sig-
nificant changes in exchange-rate relations and interest
rates, as well as default risks and the covering of financial-
resource needs.
Due to exchange rate fluctuations, the translation of
foreign currency positions into the Group currency, the euro,
can have a negative effect on the Group’s sales and earn-
ings performance (translation risks). Such negative effects can
also result from business conducted in a foreign currency
(transaction risks). As in the previous year, we categorize trans-
lation risk as being a medium risk. Interest rate changes
influence financing costs. Defaults on trade accounts receiv-
able or financial receivables can also have a negative effect
on the Group’s earnings situation and its financial resources.
If there is a lack of availability of financial resources for
the implementation of acquisitions or major investment proj-
ects, we might not reach our strategic targets.
We safeguard against material transaction risks by concluding
forward foreign-exchange contracts in cases where
we assume that the underlying business can be realized with
a sufficient degree of certainty. The total amount expected
is safeguarded in different tranches to offset short-term ex-
change rate fluctuations.
More information on our evaluation and accounting
procedures for hedges can be found in the online Consoli-
dated Financial Statements on page 55 ff. (note 28).
To minimize credit default risks, we systematically
examine the credit rating and payment behavior of our counterparties.
The latter include customers, the banks we do
business with, and other business partners where payment
default can have an influence on our financial situation.
We safeguard availability of financial resources through
central control and monitoring of our Group-wide finan-
cial resources. In addition, by utilizing various financing instru-
ments, we centrally provide a financial resources framework
that covers medium-term needs going beyond the planned
financial cash inflow from our operating business.
We assess financial market risks to be higher than in the
previous year due, in particular, to the increased volatility
on the currency markets. Continued high cash inflows from
operating business activity and the existing general finan-
cial resources framework suffice to cover the expected cash
outflows for investments, repayments, and dividends.
Innovation Risks
ALTANA’s position as an innovation and technology leader is
a major success factor for the company. It is important for
a supplier of highly specialized chemical products to contin-
ually introduce new products on the market and to be
perceived by our customers as a competent and innovative
partner. If this was no longer the case in the future, risks
could result for our sustainable growth, the attainment of
our profitability targets, and ALTANA’s positioning in the
relevant markets. The same applies if competitors patent
knowhow that we use but have not protected, as we
72 Expected Developments